Failure rate = λ = number of failures  / (units tested) x (number of hours tested)        

 Note that some care should be exercised in using this function as there is no distinction as to whether the hours of testing are continuous or performed at separate times.  For example, there is no difference in testing hours if 5 units are tested for 100 hours each or if 1 unit is tested for 500 hours. 

Example

Problem: Suppose we tested 25 ski exercise machines under strenuous conditions for 100 hours per machine.  Of the machines tested, 3 experienced malfunctions during the test.  What is the failure rate for the exercise machines?

 Solution:

            Failure rate = 3 / (25) x (100) = .0012 failures per operating hour. 

Since reliability can be defined as the probability a product will not fail over a defined product life, if λ is the product failure rate, the function representing failure can be modeled using the following exponential function:

R(T) = 1 – F(T) = e^{- λT}                                                                                                                                (7.3)

            where:

                        R(T) is the reliability of the product

                        F(T) is the unreliability of a product

                        λ is the failure rate

                        T is product’s useful life expressed as a function of time

             Using another useful function, 1/ λ is called the meantime to failure (MTTF).  This is the average time before the product will fail. 

Example 

Problem: Suppose a product is designed to operate for 100 hours continuously with a 1% chance of failure. Find the number of failure per hour incurred by this product and the MTTF. 

Solution:

            0.99 = e^{- λ(100)}

            ln 0.99 = -100 λ 

            λ = -(ln 0.99)/100

               =  .01005/100

               =  .0001005

            MTTF = 1/.0001005 = 9950.25

This means that the failure rate for this product is .0001005 and the average time before failing is 9950.25 hours. 

            Another function of interest is the meantime between failures (MTBF).   This tells us the average time from one failure to the next when a product can be repaired.  The formula is:

            MTBF = Total operating hours / number of failures                                       

            This formula is important in scheduling service calls.  Consider the plight of Otis Elevator company in trying to determine the number of service representatives needed in New York City.  If they know their MTBF, the number of elevators in service, and the hours those elevators are in use, they can calculate how many service reps are needed. 

Example 

Problem: A product has been operated for 10,000 hours and has experienced 4 failures.  What is the MTBF?

             MTBF = 10,000 / 4 = 2500 hours between failures. 

The failure rate is then calculated as λ = 1/2500 = .0004 failure per hour. 

Note:  We are proud to announce that the Freequality website has been awarded the prestigious Decision Sciences Institute Instructional Innovation Award.  This is a national award.  This is a credit to our students who continue to develop content.  

As quality professionals, the current weak world economy provides the perfect opportunity for increasing emphasis on quality.  The thing is that you need to do an effective job of selling quality improvement to upper management.  For this reason, I am pointing to some of the less-discussed tangible benefits from quality improvement efforts. 

 1.             Quality increases capacity      By eliminating the causes of poor quality, we eliminate rework, wasted time, and bottlenecks that limit our productive capacity.  When demand for our products is low, we can work on improvement efforts to increase capacity.  Face it, when demand is high, you don’t have time to emphasize quality improvement.  Seize the moment.

 2.              Quality improves productivity     I think that the linkage between quality and productivity cannot be emphasized enough.  It became out of vogue to link the two for a while.  However, it seems that productivity improvement is what will lift the world economy out of its present doldrums.  By improving processes, we improve our ability to do more with less.  That is productivity improvement. 

 3.              Quality increases customer retention    Customer retention is an important predictor of profitability.  I fear that one of the side effects of Six Sigma improvement is to take the focus off of the customer as most Six Sigma projects are internally focused.  We need to aid in our customer outreach and marketing efforts through quality improvement.  There is no better time to work on these processes than when the economy is weak.  Service is still the order winner for the new century.

 4.             Quality reduces the space needed to do your work.   One company I worked with reduced the amount of space they needed to perform work by over 50%.  Once we simplified processes, it became obvious that inventory would go away.  When we reconfigured the processes, we found that we had a great deal of empty space where inventory had been stored.  You can do this too through quality improvement and process simplification.

 5.                  Quality reduces the need for new equipment.   We already discussed how improving processes reduces the need for new plant.  The same can also happen with equipment.  By better maintaining and using our old equipment, replacement becomes less frequent.  As some needless tasks are eliminated from processes, the amount of equipment needed is reduced.  I have seen this happen many times.

 6.                  Quality improves morale.   When times are rough, morale worsens.  People need something to galvanize them into action.  The survival ethic needed for successful firms can be solidified into action.  As people focus on quality improvement efforts, they get a sense of mission that is difficult to create artificially.  We have all experienced this. 

 What a great time to be able to work in the quality management field!  Please send me your success stories about how you are increasing your firm’s emphasis on quality. 

Managing Quality in the Supply Chain

Today, customers need much faster response times.  So NSC  resorted to globalized logistics.  However, the company’s  logistical system was poorly suited to the demands of globalized logistics.  The company’s   network was a tangle of unnecessary interchanges, propped up by 44 different international freight forwarders and 18 different air carriers.    What NSC realized was that its primary competence was making semiconductors.  It was not in logistics of transporting them.   

To compensate for the poorly developed logistics systems, NSC maintained “just-in-case” inventory centers around the world.  In the existing system, delivery could vary between 5 and 18 days.  This was too much variation and made NSC unresponsive to customer requirements because of the poor response times. 

After analyzing the logistics marketplace, NSC decided to partner with Business Logistics Service, a subsidiary of Federal Express.  Since logistics was not the primary competence of NSC, Federal Express could provide the support needed for NSC to improve its customer service.  Therefore, the partnership lowered costs for NSC and provided income for Federal Express.  This was important because with semiconductors, the time from production to purchase can be three times faster than for the normal product.  Therefore, a repeatable, reliable distribution system is needed to meet customer requirements for dependable delivery.

Customer Resource Management Systems

What Are Customer Resource Management Systems (CRM)

With business information systems – especially over the internet, companies are receiving volumes of customer-related data.  This data includes personal, internet process, and customer preference information.  As a result, systems have been created to mine this data to improve customer service and retention.  These systems are called customer relationship management systems (CRM).  CRM systems use data to manage the three phases of customer relationship management.  These three phases are acquisition, retention, and enhancement.

CRM technologies are used in customer data acquisition efforts.  All firms desire profitable customers.  Customer self-service and product customization are ways to acquire new customer data.  Another means is to provide customer access to IT systems for configuring orders or researching information on-line.  Customer retention is enhanced through a variety of activities.  Since it costs 10 times as much to acquire customers, it is cost effective to retain customers.  Frequent flier programs and grocery discount cards are examples of information-based methods for retaining customers.  Enhancement involves improving service to the customer through the use of information systems.  On Amazon.com, users can now customize their desktops and advertisements for new books in the area of interest for the customer are now created based on the customers’ historical purchase patterns.  The is accomplished through CRM.

In terms of functionality, CRM allows for providing customer contact, product configuration, campaign management, dealer/distribution management, pipeline management, telemarketing, customer interaction centers, customer analysis, field service management, self-service, personalization, and supply chain management.  Following are some of the functions by category: 

Customer-centric Activities

-                      Consolidate customer information from multiple channels – including e-mail, call centers, mobile devices, internet, and in-person encounters.

-                      Give all departments a composite image of the customers’ purchasing and service history, as well as their buying, delivery, and contact preferences.

-                      Support coordinated interactions throughout all customer touch points, including field sales, telesales, customer service, billing and order fulfillment.

-                      Analyze data to determine your most valuable customer, target services to them, and use their behavior to predict new products that will succeed in the marketplace.  

Enterprise Capabilities

-                      Marketing automation to let marketers analyze customer purchasing trends, design targeted sales and marketing campaigns, and then measure results.

-                      Customer service software to create customer profiles and to provide scripts to help representatives solve customer’s problems and cross-sell to promote new purchases.

-                      Sales automation tools to help the team manage accounts and prospects, plus check metrics and inventories.

-                      Partner relationship management solutions that link together vendors and other partners with your systems.

 Customer Acquisition

-                      Marketing automation

-                      Campaign management

-                      Customer analysis

-                      Web measurement tools

-                      Advertising management

Sales Management

-                      Sales process automation

-                      Configuration tools

-                      Order management

-                      Sales compensation

-                      Channel management

-                      Sales planning and analysis

-                      Wireless device support

  Customer Retention and Enhancement

-                      Customer contact center

-                      Web/telephone self-service

-                      E-mail management

-                      Web/interactive chat

-                      Workflow analysis

-                      Field service

Source: Microsoft Corporation, 2002

Developing Employees

Developing Employees

            With many organizations, focus on empowerment has degenerated to bureaucratic processes and paperwork that is unfocused.  Developing employees means giving power to people who previously had little control over their jobs and providing them the training and tools they need to do those jobs.  When such power is given, management must follow through and give up a reasonable amount of control.

            Implicit in employee development is a series of promises to employees.  These implicit promises include:

- You will have greater control over your own work.

- You will not be penalized for making decisions that don’t pan out.

- Management is changing and becoming more contemporary.

- Management is committed to quality improvement over the long haul.

- Management will concede more control over company systems to you.

- Management values your ideas and opinions and will give them serious consideration.

- Management trusts you and is worthy of trust in return.

- You will be rewarded for making decisions that benefit the company.

- Labor is capable of decision making concerning its own jobs and company processes.

            This approach to managing labor is probably an important factor in improving employee morale.   It means a lot to employees to be told that their thoughts and ideas are valued.   The Baldrige Criteria encourages employee participation adding that:

“A company’s success depends increasingly on the knowledge, skills and motivation of its work force.  Employee success depends increasingly on having opportunities to learn and to practice new skills.  Companies need to invest in the development of the work force through education, training, and opportunities for continuing growth.  Opportunities might include classroom and on-the-job training, job rotation, and pay for demonstrated knowledge in skills.  On-the-job training offers a cost-effective way to train and to better link training to work processes.  Workforce education and training programs may need to utilize advanced technologies, such as computer-based learning and satellite broadcasts.  Increasingly, training, development, and work units need to be tailored to a diverse workforce and to more flexible, high-performance work practices.

Major challenges in the area of workforce development include: (1) integration of human resources practices--selection, performance, recognition, training, and career advancement and the alignment of human resource management with strategic change processes.  Addressing these challenges requires use of employee-related data on knowledge, skills, satisfaction, motivation, safety, and well-being.  Such data need to be tied to indicators of company or unit performance such as customer satisfaction, customer retention, and productivity.  Through this approach, human resource management may be better integrated and aligned with business directions[1][1].”

A number of preconditions are necessary for employee development.  These are:

·        Clear authority and accountability – employees must know what is expected of them and be given authority over their own work.

·        Participation in planning at all levels – employees should be involved in planning related to their jobs.  They should be provided planning tools.

·        Adequate communication and information for decision making – If employees are to make decisions relating to their jobs, they need the right managerial information.

·        Responsibility with authority - a definition of power that focuses on getting things done rather than exerting influence over people.

                Of course, granting authority to employees doesn’t guarantee that people will work well together or necessarily achieve all of the lofty goals that are espoused in this approach.  Many issues surround empowerment and team work that must be addressed.  These issues span the range from operations and behavior to organizational design.  For example, if the existing culture does not reward this type of activity, it is doubtful that participatory approaches will work until the cultural issues are sorted out.  On the other hand, using teams can lead to cultural changes that facilitate improvement.

                 Employee development has been used in a number of companies very successfully.  These include Springfield Remanufacturing of Springfield, MO.  This company, founded by Jack Stack, has successfully applied empowerment principles among its employees.  Mr. Stack uses surprising openness with his employees, sharing all financial information with employees each month.  Mr. Stack tells how a janitor persuaded him to expand into a new product line.  Beginning in 1983, the company experienced difficult times.  In order to avoid bankruptcy, Mr. Stack persuaded his employees to invest in the company.  Since that time, monthly bank reports have been distributed to all employees, including cash flow projections.  During this period, the company has experienced 15 percent annual growth.   

The company uses the following credo:  

As employees of SRC, we are more than just operators--we’re owners.  This gives us the incentive to be disciplined and determined to make SRC the best remanufacturer of engines and components.  Each department has a healthy competitive spirit, but we’re all in the game together.  Our sole objective is to produce the best remanufactured engines and components that money can buy.  As an employee-owned corporation, we at Springfield Remanufacturing Corporation can account our success to the commitment of each SRC employee.  Our philosophy is simply, “providing the customer with the highest quality product possible at a competitive price.”

            Englehard Corporation of Huntsville, Alabama has 270 employees.  The company was losing money, morale was low, employee turnover was 150 percent, and one in five products was returned to be scrapped or reworked.  After empowerment, employees have taken responsibility for completing work.  Productivity has increased by 324 percent and employee turnover has been reduced from 150 percent to 2 percent per year.  In the process of developing employees, time clocks were eliminated, performance was emphasized, and employees received pay increases.  Safety was emphasized with the hiring of a full-time nurse and vacation and pension benefits were improved.  The company focused on training managers, and supervisors were given time to join the process.  In order to accept change, workers were given counseling and coaching to speak up in meetings and express themselves openly.  According to their human resources manager, "when workers feel listened to, they put more energy into their work.    

            From a behavioral perspective, employee development is a tool to enhance organizational learning.  Organizational learning implies change in organizational behavior in a way that improves performance.  This type of learning takes place through a network of interrelated components.  These components include teamwork, strategies, structures, cultures, systems, and their interactions.  Corporate learning relies on an open culture where no one feels threatened to expose opinions or beliefs--a culture where individuals can engage in learning, questioning, and not remain constrained by “taboos” or existing norms.  This strategy includes continuous improvement projects as a governing principle for all team members.

Finance in Quality

Information and Finance in Quality    Information systems provide the core of the support system for satisfying the customer.  Well-designed information systems, such as those found at Ritz-Carlton hotels  become the institutional memory for customer needs.  If information systems are not well designed and information is difficult or slow to obtain, customers will go elsewhere.  Banks that do not provide ready account information over the internet or by phone will find that customers go elsewhere for their banking.

Electronic data interchange (EDI) is of increasing importance for satisfying customer needs.  These systems allow customers and suppliers to tie their systems together to enhance planning, purchasing, and coordination. The objective of a quality information system is to gather information relating to the key variables that affect customer services and product quality.  The scope of the information system includes the entire organization, linkages to customers, and linkages to suppliers.  Better information leads to better customer service.  The actions required to make the information system effective are problem identification, analysis, and corrective action. 

Finances are a building block for quality as financial resources are needed to provide the infrastructure and services that customers want.  It takes money for doctors to decorate their offices in a way that is pleasing to patients, to have state-of-the-art technology that will result in state-of-the-art care, and to provide the equipment needed to achieve customer satisfaction.  It is interesting to note that most firms that are world-class examples of quality are also financially successful.  Research has shown that high quality can improve bottom-line results and enhance financial stability.  Therefore, finance is a two-way road.  Companies that are financially successful are able to invest in systems that will satisfy customers; and high-quality processes, products, and services lead to financial success.

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Culture Culture refers to the norms and beliefs that lead to decision-making patterns and actions in an organization.  Experienced quality practitioners and consultants claim that some organizations have cultures conducive to quality improvement, and others make quality improvement very difficult.  Some of the key aspects of culture include attitudes toward change; presence or absence of fear; degree of openness, fairness, and trust; and employee behavior at all levels.  Companies that play the so-called "blame game" end up with cultures where trust is absent and employees act in ways that appear self-defensive.  Companies that work in an environment of fear find that distrust takes root between labor and management, between mid-managers and vice presidents, and between departments.  Such distrust is the opposite of the open and trusting culture that is required to be able to respond rapidly to changing customer needs.  When distrust is present, control systems are put into place that result in lost time, capacity, and flexibility.  (Traditional cost accounting systems have been criticized for these reasons.)

Companies that respond quickly to customers needs have cultures where decision-making is open, information is present to everyone, and risks are rewarded.  Some companies have cultures that are very control-oriented, and a large number of younger companies foster quite different environments, including "granola cultures" where managers and employees view the company as a means of achieving happiness for all employees.  

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Organizational Learning and Knowledge Knowledge is the capital that fuels outstanding quality results.  Business leaders report that life-long learning is a key attribute for employees.  These same CEOs and presidents of companies should also carefully consider the organizational and cultural aspects of their companies that either inhibit or reward life-long learning. 

A visitor to a manufacturer of components for automobiles heard from the employees that they felt as if they were hired from the "neck down" to do a job and did not feel that management valued their knowledge or opinions.  One of the by-products of a quality improvement effort is the realization by managers that rank and file employees are primary sources for in-depth knowledge relating to processes and that organizational learning is the sum of the learning of individual employees.

Learning needs assessment, training design, and delivery of training are important for competitiveness.  Outstanding customer service results from providing employees  with  outstanding knowledge and training.  Organizational learning is required for consistency in operations, approaches, and customer contact.  After developing a new database system to tie together customer information with production planning, financial planning, and other functions, a service firm recently found the database system was not yielding the expected integration and the desired results.  Upon studying the problem, management found that employees were inputting customer-related information on the system using inconsistent methods.  Therefore, customer information would be found in inconsistent places in the system.  A cause and effect study revealed that employees had received minimal and ineffective training on the new system during implementation.  Such costly lack of attention to employee needs resulted in greater cost and poor usage of information resources.

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People-based Improvement

Another people-related issue involves corporate restructuring and re-engineering.  Often, these efforts result in mass layoffs and much turmoil among employees.  While companies must necessarily take these measures to respond to economic realities such as downturns in sales or the national economy, layoffs should never be associated with quality improvement efforts. 

Also, layoffs should be only a "last resort."  Quality improvement efforts, when performed properly, are associated with improved morale and improved confidence among employees that the company is becoming more competitive and the employees’ personal security is improving.  Many managers have forgotten that human beings desire security.  At the same time, some managers feel that insecurity results in better job performance.  However, the opposite is most likely true.  At times of high insecurity, the best employees leave and the unmarketable employees remain.  As a result, the ability for organizational learning to take place is lessened, and even  the ability of the firm to attract top talent in the future is impaired. 

Recently, a major military contractor announced the layoffs of several hundred engineers in a large metropolitan city.  At the same time, the company was recruiting engineers from a nearby engineering school at a major university.  Needless to say, the best engineering graduates were disinterested in interviewing with this firm.  They knew the obvious.  This firm did not care about employees’ personal needs over the long term.  Therefore, they would not interview nor accept employment with such a firm.

Note: I hope you like the new website.  We are putting up new content in the next few days.  I enjoy hearing from you.  Not a day goes by that I don't receive an e-mail from somewhere around the world.  Have a happy new year. 

Customer Closeness

Closeness to customers describes the firm's understanding of the customers, their needs, and their wants. The building block of "closeness to customers" is built upon people, organizational learning, knowledge, and culture. All these things result in a supportive environment in which employees can be close to customers. Companies that value knowledge will gather data about customers and will study and understand changing customer needs. Companies that are close to their customers retain those customers. And, as we have seen, customer retention is closely related to profitability. For customer closeness to be achieved, systems must be put into place for gathering data about customers, analyzing data, and implementing change systems based on the analysis. Not only is an understanding of customers required, but also an understanding of the competitor's customers. When you understand the customers of your competitors, you'll be able to put into place marketing methods that will attract those customers away from your competitors. Customer closeness engenders loyalty. People who drive Harley-Davidson's and Mercedes' products identify with those products. As a result, these customers return to buy newer products, replacement components, accessories, and service. Brand loyalty may become less important as time passes and consumers move to an ethos where product choices are valued above brands. This is particularly true with e-commerce. In this environment, personal relationships between vendors, suppliers, and customers become important differentiators. Consider the example of a doctor. Once patients find a doctor they feel is competent and trustworthy, they will remain with that doctor for many years. How does one achieve such loyalty? The answers are different for different markets. However, close, empathic service appears to be one way to achieve closeness to customers. Customer closeness is especially key in services. The level of customer contact achieved in services requires an understanding not only of customers' current wants but also of their emerging wants. Sensitivity to changing needs, moods, stages in life, and environmental conditions are possible only when supported by knowledgeable employees and a culture that values people. This means that a company should be focused in whom it chooses to serve. An understanding of the types of customers that a firm will serve and a focus on key capabilities are important in determining which customers to become close to.

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Quality Thoughts

Please allow me to share some personal thoughts.  I waited  a month before I shared my quality perspective on recent occurrences in the United States and abroad.  I am going to be careful to share my inner thoughts and I realize that we have a large international audience that has rather diverse views on these issues. The attack on the world trade center came as quite a shock.  As a military site, it had no strategic value.  Therefore, the purpose was to shock, dismay, and to terrorize.  The view from here is that people in America are shocked and angered.  Very few that I know are terrorized outside of the media and Washington D.C.  We live in a media rich world where everything happens on TV and nothing is ever going to happen to me. I have pursued a career in quality management over the last 17 years because I have seen that as a way to improve the world.  Great good has been created over the last 25 years - not by savaging scarce resources - but by learning to do things better.  It started in Japan, caught hold in America, and is gaining more acceptance in Europe.  Other parts of the world are catching up.  They have a long way to go. When I talk with other quality professionals, they express a similar sense of mission. Here's the rub.  A lot of us are working extremely hard to make the world better.  At the same time, there are the evil among us who work to make things worse.  Good v. evil.  It's as old as time. We will continue to improve the world - in a small way - through quality improvement.  We will try to move these efforts into the public sectors, health care, education, and throughout the world.  This is an inherently good and uplifting activity.  It certainly gets me out of bed in the morning and makes me excited about writing, teaching, consulting, and researching.  I hope it does the same for you. In the meantime.  Keep things in perspective.  I have spent time thinking about what is important - It is ultimately people.  This freequality website came about because I care about my students and the world quality community.  It is just our little contribution. People are important.  Take time to tell a friend you appreciate him/her.  Call your mother and tell her that she is beautiful.  Rekindle an old friendship.  Take your children in your arms and hug them a little more resolutely. If you do that, the terrorists have lost. I'll talk more about quality management next month.

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Effective Story Telling

Analogies, metaphors, and stories often go a long way towards helping workers to understand quality principles. One excellent example is Brain Joiner's whack-a-mole story. I'll repeat part of the story here to amplify this point. "A beautifully simple example of the link between quality and productivity comes from Tim Fuller, who managed a large department that assembled electronic devices. An assembly operation was supposed to work as follows: get a kit of parts, put them together, then move the assembled product to the stock area. (The real assembly had 100 parts.) Tim knew that each of the 100 parts had a 98% chance of being there when needed. That sounds pretty good, doesn't it? Well, as Tim found out, at least 75% of the time one or more parts would be missing; in other words, 75% of the kits were incomplete when the employees began the assembly operation. Employees would use what parts they had, complete a partial assembly, log it into the computer, and then store it on a shelf. When a part arrived, they'd go to the computer, find all the partial assemblies that were missing that component, retrieve them from the shelves, and complete the assemblies-or return them to the shelves if other parts were still missing. They are the only steps that are necessary when everything works perfectly. Tim came to see all the steps below the dashed line as complexity, work that would never have to happen if complete kits were always available. That led Tim to a radical idea: He asked his employees to pretend there was a curtain between the beginning of their assembly operation and everything that came before it. They were not to take any kits past that curtain, into the assembly process, until they were complete. Referring to the rework and fire-fighting that was caused by these defects: What do you call this work? Some people call it busy work, fire-fighting. I call it whack-a-mole: In many carnival arcades, you'll find a game where you take a big mallet and whack the moles as they pop out of their holes. Every time you whack one down, another one pops up somewhere else. The more moles you hit, the better your score. Isn't that what most of us do all day? Take care of one mole only to have another pop up somewhere else. Isn't that whack-a-mole? The difference of course, is that when you go to a carnival, you have to pay them to play whack-a-mole. When you come to work, your company pays you to play![1]" The whack-a-mole story is an excellent parable for actual work life. The experienced quality professional will see many issues that can be discussed, e.g.: reliability theory, plan-do-check-act, motivation, variation, process improvement, flowcharting, random variability, team work, and many other topics. Not everyone will understand the statistical topic of variation and the problems caused by variation. However, Joiner's whack-a-mole story makes this subject understandable. Notes: We are still in the process of moving over to a new host. We are excited about some of the new tools we will be adding this semester. Keep in touch!

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Making Guarantees Work

I have had some requests for more services-related articles. Here are some thoughts about guarantees. A guarantee outlines the customer's rights. Even with high quality companies such as Motorola, there are product and service failures. To design a process that ignores this fact is a form of denial. The guarantee is both a design and an economic issue that must be addressed by all companies before the first sale occurs. Guarantees should be designed prior to beginning business so that employees can be trained to implement the guarantee and marketing can properly advertise the guarantee. This is an important economic issue because of the sales potential that is created by a guarantee and the costs associated with fulfillment of the guarantee. High Street Emporium sells products on United Airlines flights via catalog and extends a simple guarantee: "The Best Products From the Best Catalogs at the Best Prices- Guaranteed." This is a nice example of a simple, understandable guarantee. To be effective, a guarantee should be: - Unconditional: No "small print" or inconsistent adherence can make the guarantee less compelling. - Meaningful: To be meaningful customer grievances must be fully addressed. For example, any financial loss must be fully recovered by the complainant. - Understandable: The customer must be able to easily understand the parameters of the guarantee and how to achieve resolution quickly. - Communicate: The phrasing of a guarantee should resonate with the customer. "The best quality at the lowest - prices - I guarantee it," is the famous motto at the Men's Wearhouse. Not only is this a great guarantee, but also it is a great marketing line. - Painless to invoke: The customer must not be inconvenienced too much. Wal Mart has a "no questions asked" return policy that allows customers to return or exchange merchandise with a minimum of hassle. This return policy was an early service linchpin that differentiated its service from other retailers. It is important to provide realistic guarantees that meet these criteria. If your guarantees fall short in any of these areas, it is time to return to the drawing board.

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Focusing Quality Efforts

During the past couple of months we discussed the contingency approach to quality. It is not enough to just say that different companies do things differently. Companies need to focus their efforts and plan effectively. Here are a few thoughts on how to focus your quality efforts. These are drawn from my experiences consulting with some of America's great companies. I use the terms "tool" or "approach" broadly. The basic 7 tools would count as a tool. Six sigma is a tool. Balanced scorecard is a tool -- lean, SQC, teams, etc. 1. Start with a foundation of knowledge. Make sure that your people know the basics of quality management. This includes training and developing your employees. A working knowledge of Deming's points, statistics, change management, and human resources management is still necessary for everyone. You can't make change in ignorance. Even companies with mature quality-related systems should constantly reinforce the basics. I have seen companies with well-developed quality systems that have strayed so far from the basics that all of the activity has overwhelmed its effectiveness. The mere passage of time is a contributor to lack of focus. 2. Make sure you have an effective strategy. Strategy is made up of two components: process and content. Content is what makes up the strategy. Strategic planning should consider quality as a major concern and integrate quality into every aspect of the company. Organization, teams, and improvement objectives should be included in content. Process is how the strategy is deployed. To be effective, firms should have a repetitive, continually reviewed, annualized (where appropriate) strategy development process. Continual review is necessary because the competitive world is changing so rapidly. 3. Document what you are doing in your quality improvement efforts. Interview plant managers/department heads/team leaders and anyone else you can think of to see what is currently happening in the quality area. Work with company management to document what quality-related directives, efforts, implementations, and approaches have been deployed over recent years. Calculate the ratio of (#of tools)/(years) to estimate how many tools/approaches per year have been implemented. Here are the rules of thumb: Small companies (100 or less employees) can implement 2-3 new tools per year. Medium-size companies (1000 or less employees) can implement up to 1 tool per year. Large companies (over 1000) can implement less than 1 tool/approach per year. If you are exceeding these ratios, you likely have unfocused quality implementation. 4. Perform a quality effectiveness study (QEF): The QEF is a tailored study involving surveys, interviews, and focus groups to gauge the effectiveness of tools you are using. The purpose of the QEF is to determine what tools really are being used, what tools are being ignored, and which tools have been effective or ineffective. This is provided as input to planning to focus quality initiatives.

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Contingent Quality: What is it (PART II)?

Contingency theory presupposes that there is no single method for operating a business that can be applied in all instances. Clearly, approaches to quality that are effective in the manufacture of semiconductors might not be appropriate for hospitality management. Also, that is not to say that semiconductor quality management approaches might not be effective in hospitality management. Contingency theorists would simply argue that differences in operating environmental variables necessitate flexibility in developing correct strategies. Businesses differ in key areas such as mission, core competence, customer attributes, target markets, technology employed, employee knowledge, management style, culture, and a myriad of other environmental variables. A coherent quality strategy will need to address these key environmental variables. For example, a company that defines part of its mission as "valuing and satisfying our customers through personalized service," will likely pursue a different technological approach towards its customers than a company with the mission of "applying technology to solving customer problems." One approach implies more personalized service in interacting with customers while the second company will focus on electronic-data interchange interfaces with the customer. Both companies are focused on satisfying the customer. The difference is that they pursue different path and strategies to achieve customer service. The contingency approach to quality also helps to settle the differing perceptions concerning the definition of quality. By adopting a contingency philosophy, we find that the definitions and dimensions of quality applied within organizations will, and should vary. The definitions of quality utilized by the Department of Agriculture, Ford Motor Company, and the University of Missouri at Columbia will not be the same. Different definitions of quality might also exist within an organization. Although, within an organization, there should be consistency between quality definitions. By adopting the contingency approach, the dimensions of quality adopted will depend on the environment in which the company operates. This approach provides useful flexibility to managers in pursuing quality. The current state of confusion in the quality field is more difficult to address. The body of quality knowledge is large and very contradictory. Unfortunately, much of the prescriptive information concerning quality improvement has been espoused by various concerns who have particular products to sell. Also, much of the literature concerning quality is anecdotal and overly positive. This results in a skewed perception of the efficacy of different approaches to quality. Next month I will talk about how to focus your efforts. Note: Since we are moving the residence of the freequality.org website in the next month, there may be some variability in when the July thought for the month gets posted. Keep looking and we will send you an e-mail when the work gets completed. This month we have added over 25 short articles on quality-related topics in the knowledgebase. It is great that so many of you are using the listbot facility to receive monthly updates about the website. If you want to join, you do not need to leave a lot of the intrusive information that listbot requests to join. I do appreciate seeing your name, country of origin, company, and address. Have a nice summer (northern hemisphere) and winter (southern hemisphere)!

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Contingency Approach to Quality (Part I)

I recently received a phone call from a representative of a large consulting firm. The purpose of his call was to ask me what I thought were emerging trends in the quality field. After talking for a while and sharing some ideas, he said that his company was interested in creating new products and trying to decide where to go next with their quality improvement consultation. I won't name the company but it appears that they are looking for the next big thing. If you look at manufacturing, it is clear that the current flavor of quality is six-sigma. Although six sigma has been around a long time, companies have repackaged statistical tools and continuous improvement approaches in a package called six sigma. Training firms especially like the phased-belt approach to training so that they can not only sell one training course, but more than one in sequence. The purpose of this thought for the month is not to berate six sigma. The approach is sound and has been tested. Go for it. What is worrisome is that specialists in the quality field have not learned their lesson. The TQM craze of the eighties and re-engineering in the nineties left many feeling that the quality industry is intellectually dishonest and marketing driven. I liked Deming's response to those who attributed TQM to him. He said that he was not an advocate of TQM because the term itself had no meaning and it was just a jumble of acronyms. If the quality field continues to be driven by the search for new hot tools and approaches, the quality movement will continue to decrease in influence. Contingent quality is a response to these current quality movement problems. In introducing contingent quality, I will begin with two points. First, there are many different approaches to quality improvement that are espoused by different quality experts. Some of these approaches are more control-oriented, assurance-oriented, or management- oriented. Unfortunately, some of these experts have proposed lists of approaches or series of steps that they claim will help all organizations to improve quality. Second, this diffusion of quality approaches can lead to great confusion as to what is best for your organization. Imagine the plight of the average CEO or manager who is too busy to ingest all of the literature that has been written about quality. Some would likely blame the CEO as being uncommitted to quality improvement. However, using systems thinking, more CEOs would be more enlightened about quality management if the quality-related body of knowledge were in a more accessible form. The quality field has not done a good job of creating a solid body of quality knowledge. The best efforts were Joseph Juran's quality control handbook (although it is biased and doesn't acknowledge Deming, Crosby, or anyone else) and the ASQ series of certifications. The premise of contingent quality is that there is no one best way to improve quality that works in all situations. At best, there are fundamental principles that when applied to organizations, seem to work in a variety of circumstances. For example, a focus on learning, if implemented properly, can lead to better organizational performance. Note that I do not propose a single best way to achieve learning. Since I am going long here, I will stop for this month and encourage you to return in May to learn more about contingent quality in "Contingent Quality - Part II." A few notes: Since starting the web-site in January, we have had over 11,000 hits. Thank you so much. We also have over 500 people subscribing to the thought of the month. If you want to join this list, just click on "join us" below. Note that Listbot asks for a lot of personal information. You should know that you do not need to provide this information to join. I do like seeing your names and where you are from. We currently have people from over 15 different countries worldwide. This has exceeded our expectations by a factor of 3. During the last month, we added over 40 sets of training slide for you to download and to use in training. These were developed by undergraduate Operations and Information Systems Management majors at Penn State. We will soon be adding short tutorials on different quality-related topics. The site content keeps growing and growing. Thank you for visiting us. Come back often to see what is new.

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Reinvigorating Quality Training

Many quality improvement efforts either begin with or very soon involve massive training. Many times, this training involves quality tools and quality fundamentals such as Deming's 14 points or team building. This is usually comfortable to quality specialists as they remain within the bounds of their expertise. Although training is necessary, many firms and organizations find that their training efforts are insufficient to sustain quality efforts. The training gets bogged down with minimal marginal benefit to your organization. Following are some points to help you assess where your training efforts are and maybe find some ways to garner greater benefits from your training. - Training alone is not enough to sustain quality improvement momentum. Many quality departments get so tied up in training that they begin to measure their success based on how many people they have trained over a certain period of time. This is not a measure of success - it is a measure of trainer productivity only. Simply training people in large numbers does not mean that the training is effective or that your organization is benefiting from training. I recently visited a company where the training department had demonstrated that they had trained over 1000 employees in the last 1.5 years in basic quality tools. I later discovered that the company had only a few quality improvement teams operating and that employees generally felt that the training was a waste of time. Clearly, the focus of this company was not on quality improvement, it was on continuing training. Remember, in the field of quality, we often confuse activity with true improvement. One does not imply the other. - To be effective, training and teams need to be tied to strategy. There are many effective approaches to training. Hoshin strategic planning is effective in many organizations where quality improvement is closely linked with quality teams. When developing strategy, annual strategic objectives are identified. If these objectives can be aligned to quality improvement team efforts, including progress reporting , then quality improvement efforts gain momentum. This isn't that hard to do. - Perform training needs analysis on a regular basis. Training needs analysis or assessment involves studying job content, job requirements, current employee knowledge sets, and matching these with training to fill gaps. One company tried to train its employees in quality improvement and failed miserably. So they went back to square one. They did training assessment and found out that they had fundamental problems with literacy among their employees. They then undertook a literacy program until their employees could read, write, and use word processors. After a three year literacy effort, they restarted their quality improvement training and were much more successful. - Think hierarchically! When assessing needs, look at your organization and develop different training for employees at different levels in your organization. At the executive level, a strategic quality management overview is needed. At the manager and supervisor level, employees are trained to lead and facilitate quality improvement as well as how to work on tiger teams with company-wide impacts. At the rank-and-file level, employees are trained in quality fundamentals and in how to work on process improvement teams. Of course this is over simplified, but you get the idea. - Apply the learning. Remember, adult learners are different from high school or college students. They like to be self-directed and rate training most highly when it is directly applied to what they do. This means that training sessions should involve no more than 1/3 lecture. The rest of the time should be spent working on applied assignments (1/3) and sharing learning with their cohorts (1/3). If you keep this 1/3, 1/3, 1/3 rule, your training will be more effective. - Link training to costs of quality. Training, like other business pursuits, needs to be results oriented or else your organization will lose interest in training. As you train people and they begin to apply the training, you should see reductions in losses due to poor quality (failure costs). You should also see reductions in inspection costs (inspection) as inspection becomes more focused and economical. Remember that as you measure these costs, that the results will lag actual implementation. These were a few thoughts about training. Starting this month, we will be adding training slides to the www.freequality.org website. These are available for you to use in your training. They are in MS PowerPoint and are downloadable for your use. These slides were developed by undergraduate operations management students from Penn State University. Happy browsing!

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Improving Government Service

With the new administration in the White House, it seems a good time to discuss government customer service. While government service is still poor in many sectors, there have been impressive service initiatives at Federal, State, and Local levels throughout the country. I have personally witnessed strong efforts by the IRS, the US Department of Energy, the military, as well as departments in state and local governments to improve process and service quality in recent years. It might be instructive to review some of the efforts of past administrations. Under Reagan and later Bush (GHW), the federal government began to recognize some of the quality management gains in the private sector and determined that it would be important to improve public sector quality in the same way. There was an emphasis on Deming's 14 points and an effort to reinforce these points. As with other quality efforts such as sampling and SQC, the military led the way in implementing systems thinking for improvement. Reagan asked Malcolm Baldrige, then Secretary of Commerce to empanel a commission to find ways to improve competitiveness which led to the creation of the Malcolm Baldrige National Quality Award for Performance Excellence. The criteria for this award have been adapted and used throughout the public sector as other awards were created such as the Department of Energy Quality Award. The Clinton administration continued to support the Baldrige award. The major initiative during the Clinton years was called "reinventing government." This was led by Vice President Al Gore. This effort led to reduction in size in several federal agencies during the first Clinton term. Also inherent in this effort was a renewed emphasis on customer service in government. The current administration can build on the successes of the past administrations. Here are some thoughts on government service improvement: Competitive pressures are mounting for government agencies. There is a percentage of the voting public that believes that government, by definition, is so bureaucratic that it could never do anything as well as the private sector. As a result, there is a strong move towards privatizing government services. We see this in education (vouchers), in the postal service, and in many other sectors. As a result, government service, quality, and cost effectiveness must be on par with the private sector in order to justify perpetuating any government department's existence. Government employees should not be second-class citizens when it comes to quality and service. I believe this strongly. Because pay is sometimes lower and due to budget restrictions, sometimes equipment is not up to standard, many government employees begin to view themselves as second class citizens. This is reflected in poor service to the customer. This cannot be allowed to happen. On average, government workers are highly educated, motivated people. When I consult with government agencies, I find that I work with highly motivated people who sincerely want to perform a cost effective, high quality service for the public. I think we do a lot in the public sector to rob people of their pride of workmanship. We can't let this happen. Focus on the fundamentals. Every government department, agency, and division needs to better define its mission and stick to that mission. In the past, agencies have built power through mission expansion. In the competitive future, those agencies who stick to their missions and perform them effectively will have the most power. Also, there should be a reinvigoration of working on the fundamentals of quality management in government. Basic customer service approaches and a reaffirmation of Deming's 14 points would be very helpful. Reduce redundancy in government. Along with the refocusing on fundamental missions, there needs to be an overall look at the structures of departments and see where there are overlaps in mission. Where needed, government entities should be combined to produce synergies. For example, westerners are very frustrated with the overlapping missions of Interior, EPA, Energy, Parks Service, Bureau of Land Management, Forest Service, Nuclear Regulatory Agency, Army Corp of Engineers, and the many others who have authority over western lands. Many of these agencies have conflicting agendas and need to be combined. A similar problem is occurring in the military. These redundancies reduce the efficacy of government and create the impression that government leaders are not interested in service to the public. Increase emphasis on the Senate Quality Award and the Baldrige Criteria to improve government service. These are important models for improvement and have proven effective in guiding improvement. However, in the past, many agencies have focused on gaining recognition rather than using this as an improvement model that can enhance service and performance. Ways should be found to use these models as more than window dressing for awards banquets. Remember, the focus needs to be on results. Well, there are a few thoughts for February, 2001. I hope you are having a great year.

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e-Service Quality

Happy New Year: One of the best books I read while a youth was, "2001: A Space Odyssey" by Arthur C. Clarke. The ubiquitous theme of the book was the impact computers would have on our life by the year 2001. Although the computer, "HAL" came to resent its users and in the end control went from the users (astronauts) to the computer (HAL) leading to the catharsis at the end of the book, Clarke understood how computers would become important to our lives in the year 2001. More and more, commerce is (and will be) transacted over the internet. The internet holds great promise customer service and making our lives easier. However, my experience shows that at this time, internet customer service often falls short of expectations. Following are some short thoughts on e-quality" - The web can be a huge wall between you and your customer. Understand this and design web sites to create closeness rather than distance. Many commercial web sites don't even make it easy to find phone numbers and addresses of service and employees. If you can't afford to handle customer feedback generated by a web site, don't have a web site. Shut it down. People generally don't go to your web site to be entertained - especially if you have a B2B web site. - Customers want smooth, rapid transactions over the internet. Amazon.com is an example of a web site that is very quick to use (one touch purchasing). On the other hand, I recently used Cabelas.com to buy a pair of boots. I became frustrated with the site and called the 1-800 number, found what I wanted using a customer service helper and completed the transaction over the phone. Cabelas understands phone and catalog sales as that has been their core business for a long time. However, they have a web site that is difficult to navigate. Navigation should be smooth and easy. Don't ask customers for unnecessary information. Let them get in and out fast. - The issue of credit card security threatens the future of e-commerce. Even though the Amazon.coms and other large internet companies may have great security, when some mom-and-pop website gives away thousands of credit card numbers, it hurts the credibility of all e-commerce. Already, growth in web transactions has slowed due to poor security. A majority of Americans refuse to share credit card information over the internet and others have stopped. It is in the industry's best interest to make state-of-the-art security available to everyone for free. Hackers need to be found and vigorously prosecuted. Credit card security needs to get better. - Easy Returns and Guarantees: All items purchased over the internet should be easily returned (except in rare cases). The internet retailer should provide postage for returned items. - All e-commerce sites should provide facilities for feedback and real-time interaction. FAQ pages are usually generic and off-point. Intelligent answer mechanisms using neural networks (such as Ask Jeeves) where the software can learn could be very useful tools for answering customer service questions and garnering information. E-mail is not a helpful mode for getting customer service queries answered. Chat rooms might be better means for getting questions answered. It seems that a few customer service people might be able to answer any chat queries in real time without much trouble. - Web sites need to add value for the customer to justify their existence - information can be the key. With infobases and other tools, web sites have the potential to help customers in new and useful ways. Curiously, most companies are ignoring this. Web sites that provide information and help customers to solve problems are vastly preferred over web sites that dumbly provide transaction or advertising space. There are some simple examples of how web sites provide some marginal information. e-Toys not only sells toys, they tell you which toys are preferred nationally for certain age groups. This is useful information. Fender.com provides a tool for purchasers for used Fender guitars to determine the manufacture year of a guitar based on its model number (although it is hard to find on the site). Excellent web sites will help customers to solve problems. This may include data analysis. For example, for B2B, I want to know if your web site will help me minimize inventory costs, reduce inventory cycles and improve service to my customers. - Forget about SPAM! I am going to name names. I am sick of buy.com, delphi.com, harrispoll.com, VISA credit card companies (notice how American Express does not do this?) and others sending me endless junk e-mail. I set my filter so that these names are filtered out. I realize that they provide information on how to "un-subscribe." However, most of us don't have the patience to do that. On the other hand, there are others from whom I like to receive e-mails. These are limited to a few favorite ski areas and companies owned by friends. - Develop your sites from the customer's point of view. Most designers of web sites violate most rules of good customer service. This is reflected in their low profitability. A web site is a process. Pay close attention to navigation. Use focus groups and user groups to get comments on your web design. Use process maps to analyze and improve customer flows. In the future, we will discuss this important issue more. I would appreciate your comments on e-commerce quality.

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The Soft Side of Quality

When talking with other quality management professionals, you hear a lot about the "soft" and "hard" sides of managing quality. The hard side involves statistics, measurements, calibrations, and hypothesis tests. To successfully implement the hard side of quality management requires an understanding of math and statistics. The soft side of quality management relates to touchy-feely-people oriented issues such as teamwork, handling conflict, motivation, and organizational design. To tackle these issues, we often turn to our intuition and innate intelligence for solutions. However, intuition often falls short when resolving difficult human issues. Many scientifically founded approaches exist for dealing with conflict. For example, did you know that there are four recognizable stages that occur in resolving conflict among teams? These are: 1. Frustration: People are at odds and competition or aggression ensues. 2. Conceptualization and orientation: Opponents identify the issues that need to be resolved. 3. Interaction: Team members discuss and air their problems. 4. Outcome: The problem is resolved. This type of work is difficult and can be emotionally painful. It recognizes that for positive things to occur, we need to change. It requires a lot of work and humility to decide to change your behavior. What is it that is hurting your performance at work? To find this out, try to find out how others perceive you. Once you find out the negatives, find out why they perceive you this way. Next, develop a strategy for changing yourself and how you relate to others. Let others know what you are doing and how you are seeking to change. Monitor the change as time goes on by asking others how they think you are doing and whether they like the new "you." When managing the soft side of quality, you should rely on your intuition-coupled with an understanding of the best knowledge that is known relative to the human dimension. You can find this knowledge in books, magazines, and academic journals. There are societies such as the American Society for Quality and others who disseminate this information. Over time, I will talk about managing the human dimension of quality on this web site. Personally, I find it much easier to deal with the statistical "hard" side of quality management. The "soft" side is much more subtle. For instance, you can easily calculate a mean. However, it is not always clear how to motivate people to do a better quality job. This is the irony. The "soft" side is the hard side.

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