Facilitate continuous

BSBMGT516A

Facilitate

continuous

improvement

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BSBMGT516A – Facilitate continuous improvement

Learner’s Guide

Author: John Bailey

Copyright

Text copyright © 2009 by John N Bailey.

Illustration, layout and design copyright © 2009 by John N Bailey.

Under Australia’s Copyright Act 1968 (the Act), except for any fair dealing for the purposes of study, research, criticism or review, no part of this book may be reproduced, stored in a retrieval system, or transmitted in any form or by any means without prior written permission from John N Bailey. All inquiries should be directed in the first instance to the publisher at the address below.

Copying for Education Purposes

The Act allows a maximum of one chapter or 10% of this book, whichever is the greater, to be copied by an education institution for its educational purposes provided that that educational institution (or the body that administers it) has given a remuneration notice to JNB Publications.

Disclaimer

All reasonable efforts have been made to ensure the quality and accuracy of this publication. JNB Publications assumes no responsibility for any errors or omissions and no warranties are made with regard to this publication. Neither JNB Publications nor any authorized distributors shall be held responsible for any direct, incidental or consequential damages resulting from the use of this publication.

Published in Australia by:

JNB Publications

PO Box, 268,

Macarthur Square NSW 2560

Australia.

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BSBMGT516A – Facilitate continuous improvement

Contents Description: …………………………………………………………………………………………………………………………….. 6 Introduction ……………………………………………………………………………………………………………………………. 6 This Learning Guide covers: ………………………………………………………………………………………………………. 6 Learning Program ……………………………………………………………………………………………………………………. 6 Additional Learning Support ……………………………………………………………………………………………………… 7 Facilitation ……………………………………………………………………………………………………………………………… 7 Flexible Learning ……………………………………………………………………………………………………………………… 8 Space ……………………………………………………………………………………………………………………………………… 8 Study Resources ………………………………………………………………………………………………………………………. 8 Time ………………………………………………………………………………………………………………………………………. 8 Study Strategies ………………………………………………………………………………………………………………………. 9 Using this learning guide: …………………………………………………………………………………………………………. 9

THE ICON KEY………………………………………………………………………………………………………………………….. 10

How to get the most out of your learning guide …………………………………………………………………………. 11

PERFORMANCE CRITERIA ………………………………………………………………………………………………………….. 12

SKILLS AND KNOWLEDGE ………………………………………………………………………………………………………….. 13

Required knowledge ………………………………………………………………………………………………………………. 13 Required Skills ……………………………………………………………………………………………………………………….. 13

RANGE STATEMENT …………………………………………………………………………………………………………………. 14

EVIDENCE GUIDE ……………………………………………………………………………………………………………………… 16

1. LEAD CONTINUOUS IMPROVEMENT SYSTEMS AND PROCESSES ………………………………………………….. 17

Quality and continuous improvement ………………………………………………………………………………………. 17 Integration is the key ……………………………………………………………………………………………………………… 17 Continuous improvement requires the management of quality ……………………………………………………. 18 The evolution of quality thinking and philosophies …………………………………………………………………….. 18 Table 1: Transitioning continuous quality improvement (Derived from Francis 1991:12) …………………. 21 Table 2: Early quality ‘gurus’ compared …………………………………………………………………………………….. 22 Table 3: Quality ‘Gurus’ Compared (continued) ………………………………………………………………………….. 23 Total Quality Management……………………………………………………………………………………………………… 24 The search for quality …………………………………………………………………………………………………………….. 25 Figure 4: Deming PDCA Cycle (based on Shewhart Model) ………………………………………………………….. 25 Figure 5: Plan, Do, Check, Act Problem Solving Cycle for Continuous Improvement ………………………… 26 Continual Improvement ………………………………………………………………………………………………………….. 27 Table 6: The six quality principles …………………………………………………………………………………………….. 27 Implementing continuous quality improvement …………………………………………………………………………. 28 Improvement teams ……………………………………………………………………………………………………………….. 30 Breaking Down the “Them” and “Us”. ………………………………………………………………………………………. 30 Figure 7: Quality Triangle ……………………………………………………………………………………………………….. 30 Figure 8: Quality teams …………………………………………………………………………………………………………… 32 Examples of team processes that focus on quality ……………………………………………………………………… 33 Just-in-Time – On time every time improvement …………………………………………………………………………. 33 Figure 9: The Five Zeros of JIT ………………………………………………………………………………………………….. 35 Improvement by reducing complexity……………………………………………………………………………………….. 35 Figure 10: The Original Process ………………………………………………………………………………………………… 36

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Figure 11: The Improvements Suggested by Staff ……………………………………………………………………….. 36 Figure 12: The Improved (Re-engineered) Process ………………………………………………………………………. 37 Removing variation – A precondition to continuous improvement …………………………………………………. 37 Figure 13: Variation as a barrier to continuous improvement ………………………………………………………. 38 Documenting non-conformance ……………………………………………………………………………………………….. 39 Figure 14: Editions Register ……………………………………………………………………………………………………… 39 Figure 15: Page Amendments ………………………………………………………………………………………………….. 40 Figure 16: Distribution Register ………………………………………………………………………………………………… 40 Figure 17: Cross Referenced Index to Quality Criteria ………………………………………………………………….. 41 Figure 18: Procedures Listing……………………………………………………………………………………………………. 41 Documenting non-conformance ……………………………………………………………………………………………….. 42

2. MONITOR AND ADJUST PERFORMANCE STRATEGIES …………………………………………………………………. 43

Table 19: Six steps for quality analysis and improvement …………………………………………………………….. 43 Figure 20: Six Step Continuous Improvement Cycle ……………………………………………………………………… 44 Measuring quality ………………………………………………………………………………………………………………….. 44 The costs of quality …………………………………………………………………………………………………………………. 45 Figure 21: Costs of quality ………………………………………………………………………………………………………. 45 Measuring competitors and external quality – benchmarking for quality improvement …………………… 48 Benchmarking phases……………………………………………………………………………………………………………… 50 Measuring process improvement – The seven tools of quality ………………………………………………………. 51 Figure 22: Basic flowchart symbols …………………………………………………………………………………………… 51 Figure 23: Flowchart for order receipt and inventory placement process ……………………………………….. 52 Figure 24: Depiction of defects in production using Pareto diagram ……………………………………………… 52 Figure 25: Control chart …………………………………………………………………………………………………………… 53 Figure 26: Histogram ………………………………………………………………………………………………………………. 53 Figure 27:Scatter diagram ……………………………………………………………………………………………………….. 54 Figure 28: Check sheets …………………………………………………………………………………………………………… 54 Figure 29: Ishigawa’s ‘fish bone’ or ’cause and effect’ diagram …………………………………………………….. 55 Table 30: Using Measurement Tools for Quality Communication ………………………………………………….. 55

3. MANAGE OPPORTUNITIES FOR FURTHER IMPROVEMENT ………………………………………………………….. 56

QUALITY ASSURANCE AND QUALITY AUDITS ……………………………………………………………………………………………… 56 Auditing and reporting quality …………………………………………………………………………………………………. 56 Figure 31: Role of auditing quality in a continuous improvement process ………………………………………. 57 Quality assurance versus quality audits …………………………………………………………………………………….. 58 Table 32: Traditional Quality Assurance Checks versus Quality Auditing………………………………………… 59 Installing an internal quality audit ……………………………………………………………………………………………. 60 Completing the audit follow up processes ………………………………………………………………………………….. 60 Figure 33: Quality audit scorecard ……………………………………………………………………………………………. 62 Innovation …………………………………………………………………………………………………………………………….. 63 Types of change solutions and their impact ……………………………………………………………………………….. 64 Figure 34: Matrix of change solutions ……………………………………………………………………………………….. 64 Table 35: Alignment of change typologies to specific managerial approaches ……………………………….. 65 Innovation …………………………………………………………………………………………………………………………….. 66 Improvement …………………………………………………………………………………………………………………………. 66 Re-engineering ………………………………………………………………………………………………………………………. 67 Reinventing ……………………………………………………………………………………………………………………………. 67 Re-engineering ………………………………………………………………………………………………………………………. 68 Figure 36: 7 principles for reengineering ……………………………………………………………………………………. 69 Dangers ………………………………………………………………………………………………………………………………… 71 Identifying when to re-engineer processes …………………………………………………………………………………. 72 Reading…………………………………………………………………………………………………………………………………. 72 To evolve or to reengineer? ……………………………………………………………………………………………………… 74 The need for speed …………………………………………………………………………………………………………………. 74 Figure 37: S-curve of innovation in a service context …………………………………………………………………… 75 Figure 38: Reducing cycle time in traditional training and development (Fred, 2002:81) …………………. 76

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RESOURCE EVALUATION FORM …………………………………………………………………………………………………. 77

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BSBMGT516A – Facilitate continuous improvement

Description:

This unit describes the performance outcomes, skills and knowledge required to lead and manage continuous improvement systems and processes. Particular emphasis is on the development of systems and the analysis of information to monitor and adjust performance strategies, and to manage opportunities for further improvements. No licensing, legislative, regulatory or certification requirements apply to this unit at the time of endorsement.

Employability skills:

This unit contains employability skills.

Application of unit:

This unit applies to managers who take an active role in managing the continuous improvement process in order to achieve the organisation’s objectives. Particularly where managers are closely associated with the creation and delivery of products and services, they play an important part in influencing the ongoing development and betterment of the organisation.

At this level, work will normally be carried out within complex and diverse methods and procedures which require the exercise of considerable discretion and judgement, using a range of problem solving and decision making strategies.

Introduction

As a worker, a trainee or a future worker you want to enjoy your work and become known as a valuable team member. This unit of competency will help you acquire the knowledge and skills to work effectively as an individual and in groups. It will give you the basis to contribute to the goals of the organization which employs you.

It is essential that you begin your training by becoming familiar with the industry standards to which organizations must conform.

This unit of competency introduces you to some of the key issues and responsibilities of workers and organizations in this area. The unit also provides you with opportunities to develop the competencies necessary for employees to operate as team members.

This Learning Guide covers:

 Lead continuous improvement systems and processes

 Monitor and adjust performance strategies

 Manage opportunities for further improvement

Learning Program

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As you progress through this unit you will develop skills in locating and understanding an organizations policies and procedures. You will build up a sound knowledge of the industry standards within which organizations must operate. You should also become more aware of the effect that your own skills in dealing with people has on your success, or otherwise, in the workplace.

Knowledge of your skills and capabilities will help you make informed choices about your further study and career options.

Additional Learning Support

To obtain additional support you may:

 Search for other resources in the Learning Resource Centres of your learning institution. You may find books, journals, videos and other materials which provide extra information for topics in this unit.

 Search in your local library. Most libraries keep information about government departments and other organizations, services and programs.

 Contact information services such as Infolink, Equal Opportunity Commission, and Commissioner of Workplace Agreements. Union organizations, and public relations and information services provided by various government departments. Many of these services are listed in the telephone directory.

 Contact your local shire or council office. Many councils have a community development or welfare officer as well as an information and referral service.

 Contact the relevant facilitator by telephone, mail or facsimile.

Facilitation

Your training organization will provide you with a flexible learning facilitator. Your facilitator will play an active role in supporting your learning, will make regular contact with you and if you have face to face access, should arrange to see you at least once. After you have enrolled your facilitator will contact you by telephone or letter as soon as possible to let you know:

 How and when to make contact

 What you need to do to complete this unit of study

 What support will be provided.

Here are some of the things your facilitator can do to make your study easier.

 Give you a clear visual timetable of events for the semester or term in which you are enrolled, including any deadlines for assessments.

 Check that you know how to access library facilities and services.

 Conduct small ‘interest groups’ for some of the topics.

 Use ‘action sheets’ and website updates to remind you about tasks you need to complete.

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 Set up a ‘chat line”. If you have access to telephone conferencing or video conferencing, your facilitator can use these for specific topics or discussion sessions.

 Circulate a newsletter to keep you informed of events, topics and resources of interest to you.

 Keep in touch with you by telephone or email during your studies.

Flexible Learning

Studying to become a competent worker and learning about current issues in this area, is an interesting and exciting thing to do. You will establish relationships with other candidates, fellow workers and clients. You will also learn about your own ideas, attitudes and values. You will also have fun – most of the time.

At other times, study can seem overwhelming and impossibly demanding, particularly when you have an assignment to do and you aren’t sure how to tackle it…..and your family and friends want you to spend time with them……and a movie you want to watch is on television….and…. Sometimes being a candidate can be hard.

Here are some ideas to help you through the hard times. To study effectively, you need space, resources and time.

Space

Try to set up a place at home or at work where:

 You can keep your study materials

 You can be reasonably quiet and free from interruptions, and

 You can be reasonably comfortable, with good lighting, seating and a flat surface for writing.

If it is impossible for you to set up a study space, perhaps you could use your local library. You will not be able to store your study materials there, but you will have quiet, a desk and chair, and easy access to the other facilities.

Study Resources

The most basic resources you will need are:

 a chair

 a desk or table

 a reading lamp or good light

 a folder or file to keep your notes and study materials together

 materials to record information (pen and paper or notebooks, or a computer and printer)

 reference materials, including a dictionary

Do not forget that other people can be valuable study resources. Your fellow workers, work supervisor, other candidates, your flexible learning facilitator, your local librarian, and workers in this area can also help you.

Time

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It is important to plan your study time. Work out a time that suits you and plan around it. Most people find that studying in short, concentrated blocks of time (an hour or two) at regular intervals (daily, every second day, once a week) is more effective than trying to cram a lot of learning into a whole day. You need time to “digest” the information in one section before you move on to the next, and everyone needs regular breaks from study to avoid overload. Be realistic in allocating time for study. Look at what is required for the unit and look at your other commitments.

Make up a study timetable and stick to it. Build in “deadlines” and set yourself goals for completing study tasks. Allow time for reading and completing activities. Remember that it is the quality of the time you spend studying rather than the quantity that is important.

Study Strategies

Different people have different learning ‘styles’. Some people learn best by listening or repeating things out loud. Some learn best by doing, some by reading and making notes. Assess your own learning style, and try to identify any barriers to learning which might affect you. Are you easily distracted? Are you afraid you will fail? Are you taking study too seriously? Not seriously enough? Do you have supportive friends and family? Here are some ideas for effective study strategies.

Make notes. This often helps you to remember new or unfamiliar information. Do not worry about spelling or neatness, as long as you can read your own notes. Keep your notes with the rest of your study materials and add to them as you go. Use pictures and diagrams if this helps.

Underline key words when you are reading the materials in this learning guide. (Do not underline things in other people’s books). This also helps you to remember important points.

Talk to other people (fellow workers, fellow candidates, friends, family, your facilitator) about what you are learning. As well as helping you to clarify and understand new ideas, talking also gives you a chance to find out extra information and to get fresh ideas and different points of view.

Using this learning guide:

A learning guide is just that, a guide to help you learn. A learning guide is not a text book. Your learning guide will

 describe the skills you need to demonstrate to achieve competency for this unit

 provide information and knowledge to help you develop your skills

 direct you to other sources of additional knowledge and information about topics for this unit.

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The Icon Key

Key Points

Explains the actions taken by a competent person.

Example

Illustrates the concept or competency by providing examples.

Chart

Provides images that represent data symbolically. They are used to present complex information and numerical data in a simple, compact format.

Intended Outcomes or Objectives

Statements of intended outcomes or objectives are descriptions of the work that will be done.

Assessment

Strategies with which information will be collected in order to validate each intended outcome or objective.

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How to get the most out of your learning guide

1. Read through the information in the learning guide carefully. Make sure you understand the material.

Some sections are quite long and cover complex ideas and information. If you come across anything you do not understand:

 talk to your facilitator

 research the area using the books and materials listed under Resources

 discuss the issue with other people (your workplace supervisor, fellow workers, fellow candidates)

 try to relate the information presented in this learning guide to your own experience and to what you already know.

Ask yourself questions as you go: For example “Have I seen this happening anywhere?” “Could this apply to me?” “What if….?” This will help you to make sense of new material and to build on your existing knowledge.

2. Talk to people about your study.

Talking is a great way to reinforce what you are learning.

3. Make notes.

4. Additional research, reading and note taking.

If you are using the additional references and resources suggested in the learning guide to take your knowledge a step further, there are a few simple things to keep in mind to make this kind of research easier.

Always make a note of the author’s name, the title of the book or article, the edition, when it was published, where it was published, and the name of the publisher. If you are taking notes about specific ideas or information, you will need to put the page number as well. This is called the reference information. You will need this for some assessment tasks and it will help you to find the book again if needed.

Keep your notes short and to the point. Relate your notes to the material in your learning guide. Put things into your own words. This will give you a better understanding of the material.

Start off with a question you want answered when you are exploring additional resource materials. This will structure your reading and save you time.

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BSBMGT516A – Facilitate continuous improvement

Element Performance Criteria

1. Lead continuous improvement systems and processes

1.1

Develop strategies to ensure that team members are actively encouraged and supported to participate in decision making processes, and to assume responsibility and exercise initiative as appropriate

1.2 Establish systems to ensure that the organisation’s continuous improvement processes are communicated to all stakeholders

1.3 Develop effective mentoring and coaching processes to ensure that individuals and teams are able to implement and support the organisation’s continuous improvement processes

2. Monitor and adjust performance strategies

2.1 Develop strategies to ensure that systems and processes are used to monitor operational progress and to identify ways in which planning and operations could be improved

2.2 Adjust and communicate strategies to all stakeholders according to organisational procedures

3. Manage opportunities for further improvement

3.1 Establish processes to ensure that team members are informed of outcomes of continuous improvement efforts

3.2 Ensure processes include documentation of work team performance to aid the identification of further opportunities for improvement

3.3 Consider areas identified for further improvement when undertaking future planning

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Skills and Knowledge

Required knowledge

 continuous improvement models  quality systems.

Required Skills

 innovation and lateral thinking skills to design better ways for achieving work outcomes

 leadership skills to gain the confidence and trust of others  communication skills to communicate opportunities for improvement, and to coach

and mentor staff.

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Range Statement The range statement relates to the unit of competency as a whole. It allows for different work environments and situations that may affect performance. Bold italicised wording, if used in the performance criteria, is detailed below. Essential operating conditions that may be present with training and assessment (depending on the work situation, needs of the candidate, accessibility of the item, and local industry and regional contexts) may also be included.

Strategies may refer to:

 clarification of roles and expectations  communication devices and processes, such as

intranet and email communication systems, to facilitate input into workplace decisions

 long-term or short-term plans factoring in opportunities for team input

 mentoring and ‘buddy’ systems to support team members to participate in decision making

 performance plans  reward/recognition programs for high performing staff  training and development activities

Systems may refer to:

 forums, meetings  newsletters and reports  policies and procedures  web-based communication devices

Continuous improvement processes may include:

 cyclical audits and reviews of workplace, team and individual performance

 evaluations and monitoring of effectiveness  modifications and improvements to systems,

processes, services and products  policies and procedures which allow an organisation

to systematically review and improve the quality of its products, services and procedures

 seeking and considering feedback from a range of stakeholders

Stakeholders may include:

 business or government contacts  funding bodies  individuals within the work team  internal and external contacts  organisation’s clients and customers  professional associations  senior management and board members  unions/employee groups

Operational progress may refer to:

 customer service indicators  occupational health and safety indicators  productivity gains  success in meeting agreed goals and performance

indicators

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Documentation of work team performance may include:

 annotated performance plans  quantitative data such as production figures  recommendations for improvement  records and reports

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Evidence Guide The evidence guide provides advice on assessment and must be read in conjunction with the performance criteria, required skills and knowledge, range statement and the Assessment Guidelines for the Training Package.

Critical aspects for assessment and evidence required to demonstrate competency in this unit

Evidence of the following is essential:

 examples of strategies and approaches to improve work outcomes or organisational functioning

 methods for monitoring performance and customer service

 knowledge of continuous improvement models.

Context of and specific resources for assessment

Assessment must ensure:

 access to appropriate documentation and resources normally used in the workplace.

Method of assessment

A range of assessment methods should be used to assess practical skills and knowledge. The following examples are appropriate for this unit:

 analysis of responses to case studies and scenarios  assessment of written reports  direct questioning combined with review of portfolios

of evidence and third party workplace reports of on- the-job performance by the candidate

 observation of presentations  oral or written questioning to assess knowledge of

quality systems  review of strategies developed to ensure that team

members are actively encouraged and supported to participate in decision making processes, and to assume responsibility and exercise initiative

 evaluation of how customer service strategies were communicated to all stakeholders

 review of documentation outlining work team performance.

Guidance information for assessment

Holistic assessment with other units relevant to the industry sector, workplace and job role is recommended, for example:

 other units from the Diploma of Management.

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1. Lead continuous improvement systems and processes

1.1

Develop strategies to ensure that team members are actively encouraged and supported to participate in decision making processes, and to assume responsibility and exercise initiative as appropriate

1.2 Establish systems to ensure that the organisation’s continuous improvement processes are communicated to all stakeholders

1.3

Develop effective mentoring and coaching processes to ensure that individuals and teams are able to implement and support the organisation’s continuous improvement processes

Quality and continuous improvement

The world of quality and continuous improvement are filled with acronyms. There are acronyms that represent fields of both academic and professional endeavour that attempt to formalise approaches to quality and improvement. Acronyms that represent such diverse approaches as:

TQM – Total quality management

TQC – Total Quality Control

CQI – Continuous quality improvement

CQM – Continuous quality management

And so on.

This learner’s guide will visit the foundation concepts in quality through a study of TQM. It will then extend this study to examine continuous improvement. Along the way other aspects and fields of endeavour will be introduced and studied to construct a large mosaic that has come to represent different approaches to the management of quality and continuous improvement in organisations

As we will come to examine, the implementation of continuous improvement requires integration of quality processes and systems across all facets of an organisation. This requires a significant shift in management thinking and practices.

Integration is the key

Stand-alone measures in specific business functions such as process quality improvement, internal customer service regimes or quality information management will not achieve long-term results. Quality and continuous improvement initiatives must be integrated and form part of the overall corporate strategy.

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Continuous improvement requires the management of quality

Quality Management is an important ingredient within continuous improvement. It was the early platform that gave genesis to many quality theories and especially the focus on continuous improvement. Early approaches such as TQM were aimed at achieving this ‘tie in’. TQM was founded on three elements:

 Total employee involvement: all employees must be focused on the pursuit of quality

 Fact based decision making: decisions must be made on facts not on assumptions

 Leadership: TQM thinking requires all members of the organisation to be on the same track and this can only occur if leaders communicate this in an effective manner.

There are many quality experts who advocate different methods for achieving quality and continuous improvement in an organisation. However, there are several themes which are consistent:

 Plans must be based around systems thinking, not actions to be conducted in isolation.

 Any quality initiative needs to be tied into overall corporate strategy and then broken down into specific goals.

 Company-wide participation is essential.

 The organisational structure must reflect the desire for participation.

 Training and education are essential.

 A continuous improvement loop is needed so that problems can be identified and corrective action taken.

 The process needs to be audited so that the cost of quality can be accurately assessed.

The evolution of quality thinking and philosophies

During World War II, the United States had employed a young statistician, W. Edwards Deming, in the manufacture of military equipment. Deming applied statistical control to the manufacture of US military equipment thereby eliminating waste and increasing productivity. At the end of the war Deming’s statistical control methods were dismissed in favour of a wave of industrial growth and renewed industrial optimism. The fact the US piloted and then lost Deming’s principles of statistical control of manufacturing was to its ultimate disadvantage. Following World War II, the US provided economic aid to Japan in the form of industrial advice. In the early 1950’s the US sent Deming to Japan recognising his ability to improve manufacturing but seeing no further advantage in a peace time context. Deming’s statistical control had a seemingly incomprehensible vision – to build quality control into production before a commodity was manufactured. Put simply, Deming defied the paradigm that governed mass production in the West. (Deming, 1986)

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Deming’s system of building quality control into an item before it was manufactured thus provided the Japanese with an opportunity for market gain which the US and the industrial West failed to see. Deming’s methodology for pre-production quality control had three essential components. First, he maintained that 80 percent of all product faults were routine and could be eliminated by standardising input. Second, the process of production could be broken into component parts and improved continuously. Third, the re-orientation of the workforce to accept responsibility for quality standards and continuous process improvement would take a generation, which is about thirty years. Deming’s notion of quality is not about high quality or low quality. It is about a product performing to the standard to which it is designed – first time, every time.

Deming’s eighty-twenty rule (eighty percent of impediments in manufacturing are routine, twenty percent are special causes which require a process focus but can still be eliminated) implies that items manufactured to quality standards do not require routine checking (resulting in cost reduction), do not require returns and repairs (resulting in cost reduction) and do reinforce consumer confidence in brand (resulting in increased profit). The increase in profit as the volume of consumer purchase increases leads in turn to the ability of the manufacturer to lower the unit cost. This in turn makes the product more competitive on the market – consumers retain confidence in the reliability of the product and are attracted to purchase more (or change from other brand allegiance) based on the lower unit price.

Once quality management systems were implemented, Deming believed, process improvement would continue to reduce the cost of production. (Deming, 1982:12) The aim of the Deming method was to find improvements continuously so that the cost of goods was reduced, making them more affordable, at the same time as their reliability was increased by building in the quality. When Motorola US adopted the quality improvement method in the 1980s, they became the top cellular phone telecommunications company in the world and the largest selling manufacturer of mobile phones in Japan! This was a result of a deliberate action by the President of Motorola, John Garvin, to send his executives to Japan to learn how quality improvement could beat the Japanese. So successful is quality improvement for Motorola that Garvin established the Motorola University dedicated to teaching quality methodologies. The concept of process improvement is best summed up by Garvin who states that Motorola has shifted from the industrial philosophy of “If it ain’t broke, don’t fix it!” to the quality improvement concept of “If it ain’t broke, you haven’t looked hard enough!” implying there is always a better way of doing something. There is no end to the continuous quality improvement process because human values (consumer priorities) change continuously, thereby creating the demand for new products.

Measuring the performance of machines is easy, but measuring people, in the industrial mindset, smacks of management supervision in which unsatisfactory performance usually leads to dismissal. In order to eradicate this connotation, leaders in Japanese quality businesses introduced a non-dismissal policy in which redundancy in the job could be no reason for dismissal. Then there was the difficulty of introducing the radical shift from human control to human empowerment on which

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quality improvement is predicated. To an industrial workforce, the notion of individual responsibility without supervision is almost absurd, but the quality method required this and more – the contribution of each worker to suggest ways to improve their processes of operation. Essentially this requires a commitment to change continuously – a notion contrary to the uniformity of labour established in the industrial west (and reinforced by industrial awards in Australia). Workers operate in teams with managers as members and together decide how they can improve their work. Initially, workers were neither interested nor forthcoming with suggestions, while managers were intent on dominating and controlling. This process had to be eradicated via a structural methodology. Rules were made to elicit suggestions and eventually responsibility from the workforce for their actions and support and coaching from managers to enhance worker responsibility.

Subsequent theorists have developed variations of Deming’s Total Quality Management. Misaaki Imai (1986) crystallised a Japanese variation known as Kaizen (ie. gradual, unending improvement) which Toyota implemented to become the world’s leading car manufacturer. This was achieved in a slow growing world economy using Just in Time Production, Autonomous Defect Control, a flexible workforce and creative thinking. Most recently, Karl Albrecht (1988) has promoted a service variation called Total Quality Service which focuses on meeting customer expectation via a quality methodology. All quality improvement methodologies are premised on standards and measures, flexible work structures, continuous improvement (involving rapid, constant change which the British theorist Tom Peters refers to as “Thriving on Chaos” (1990)), and creative thinking (involving autonomy, responsibility and problem solving). These factors underpinning quality philosophies are the anathema of western industrialism. It was the quality improvement methodology, devised by an American, Deming, which significantly shifted the industrial advantage of the western nations to the Japanese. For it was the quality system which allowed the Japanese to maximise their greatest natural strength, their manpower (Halberstam, 1986).

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Table 1: Transitioning continuous quality improvement (Derived from Francis 1991:12)

Manufacturing and Operations Management

 Optimise tasks productivity

 Best practice direction from management

 Employee compliance

 Improve evolving tasks

 Decision making at coal face

 Employee satisfaction

Role of the workforce

 Narrow job descriptions

 Physical effort

 Technical skills valued

 Jobs to fit structure

 Broad jobs with specific process measures for individual/ team activities

 Teams

 Mental effort

 Increased competencies with Knowledge valued

Process quality and decisions based on data

 As required – when, where, what

 Clear sequence of actions based on need to know

 Staff-centred

 Anticipate problems and change through workplace feedback

 Cooperative communication

 Quality cycles

 Feedback at all stages of PDCA

Management control

 Boss-centred

 Direct control

 Hierarchy of decision making

 Boss supports team

 Management by objectives/outcomes

Continuous improvement

 Customer-centred

 Distributed decision making

 Leadership ‘shared’/ delegated to team focused on customer outcomes

 Empower people and teams

 Agreed values

Regardless of the quality improvement theorist, the above transformation in the general principles of management must be addressed.

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Quality in recent times has been seen to be an important component in any organisation’s attempt to achieve international competitiveness. Fundamentally quality management systems attempt to minimise the amount of variation from established process standards when products or services are produced. This has required a significant shift in management practices.

Table 2: Early quality ‘gurus’ compared

Factors Deming (1982, 1986)

Juran (1988) Crosby (1979)

Role of Top Management

Leadership participation

Varied Stress Zero defects

Scope All activities Product Product

Program Motivation Long-term competitive position

Decrease cost of quality

Decrease costs

Program Goal Improve competitive position

Short-term profits, quality of life

Short-term profits

Management Style Participatory Varied Authoritarian

Use of Incentives Nil Varied Individual recognition

Quality Goal Zero Defects Minimise cost of quality

Zero defects

Definition of Quality Uniformity about a correct target

Fitness for use Conformance to specifications

Project Selection Pareto error analysis

Cost analysis Cost analysis

How to Measure Improvement

Direct Measurement

Cost of quality data

COQ data & direct measurement

Role of Quality Control Department

Initially high eventually low

Extremely high Moderate

Role of Workers Maintenance & Improvement

Limited Limited

Cost of Quality emphasis

Low Very high Moderate

Statistical Analysis High use by all For lower management

Mixed

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Table 3: Quality ‘Gurus’ Compared (continued)

Factors Taguchi (1986) Ishikawa (1985) Shingo (1986)

Role of Top Management

Leadership participation

Participate at all levels

Leadership

Scope Initially process All activities All activities

Program Motivation Process & Product insensitive to variation

Competitive niche – Respect for humanity

Long-term Competitive position

Program Goal Continual Improvement to target

Continual, incremental improvement

“pokayoke” fail safe prevention of variation

Management Style Participatory Participatory Participatory

Use of Incentives Team recognition Team recognition Does vary

Quality Goal Quality through design

Avoid waste and Zero Defects

Zero Quality Control – Just in Time

Definition of Quality Variation incurs a cost

Participation by everyone (in teams)

No variation leaves plant or recurs

Project Selection Cost analysis Begins with customer

Cost analysis

How to Measure Improvement

Direct measures Use of 7 Tools 100% Inspection

Role of Quality Control Department

Low but off-line testing used

Reduced by Quality Circles

Low

Role of Workers Identify variation from target

Great role at all stages

Stop plant if error detected

Cost of Quality emphasis

Low Traded off in short term against participation

Low

Statistical Analysis High High – SPC by all For lower managers

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Total Quality Management

TQM can be applied to any organisation, whether large or small, public or private, profit or non-profit, or manufacturing or service oriented. Because early practitioners of TQM emphasised the role of management in 80 per cent of all errors and defects related to systems and processes established by management (Crosby, 1979; Juran, 1988), the emphasis is placed on leadership for a total quality management solution. This requires a systems level solution that spans all employees, processes and instills a culture of quality.

Dr W Edwards Deming is widely acknowledged as a founder of the quality management movement. He suggests:

“Quality does not necessarily mean high quality. It means a predictable degree of uniformity and dependability at low cost with a quality suited to the market. Quality provides important customer benefits while increasing productivity. As quality goes up so does productivity, as productivity goes up so costs come down “(1986).

Why does quality management mean to organisations? Let’s examine organisational statements on quality and continuous improvement. We have sorted them in a time chronology to give a sense as to how such statements have evolved.

“Quality is defined as conformance to customer needs through conceiving, designing, manufacturing and marketing products and services with superior performance and reliability” (Kodak Australia, 1993)

“Quality focuses on impediment removal in processes to effect new and better ways to produce goods and services “(Clive Graham in Bowles & Graham, 1993:2).

“Quality is the degree of variation around a correctly defined target” (BHP Steel, 1994)

“Meeting the requirements of our customers, both internal and external, for defect-free products and services. No level of defect is acceptable” (IBM Worldwide 1992-95).

“Excellence as determined by customers” (Government agency, 1999)

We recognise each employee and operation contributes to the quality of our products and the satisfaction of our customers. (Tubing manufacturer, 2003)

R.J. Schonberger stated that the words most often used in corporate statements would seem to define TQM as:

… a set of concepts and tools for getting all employees focused on continuous improvement, in the eyes of the customer – the next process as well as the final consumer. It requires collection of data, and employs multi-functional teams, brainstorming, the “seven basic tools”, advanced experimental methods, and broadly based reward and recognition (1992:17).

TQM was the most prominent quality management system in the 1990s and concentrates on preventing defects in the production process. This has caused the focus for management to alter from screening of

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defective products after the completion of the production process to the implementation of preventative measures to ensure defects do not occur.

The tools used have been based upon the statistical measurement of product variation and this is assisted by the management of a culture of quality and through employee involvement in developing strategies for improvement.

TQM is still seen as a way of integrating the control of quality into the production process so that everyone is responsible for the quality of goods or services produced. However, the heart of quality control is now more likely to be the search for continuous improvement, that is, incremental change to bring about an improvement in the processes used. The major focus is on the reduction in variability. As our study will show, this builds upon and extends beyond the initial focus of the TQM approach.

As we progress through this unit of study we will investigate the foundations established by TQM and its evolution onto continuous improvement approaches to quality and management. With all quality systems, nevertheless, competitive advantage rests on the reputation of the product or organisation and this is best measured by the ability of the goods or services to satisfy customer expectations.

The search for quality

In 1954 W Edwards Deming shifted quality checks on manufactured items from post-production to quality control of pre-production. Deming became a leading ‘guru’ on quality. He and later colleagues placed a lot of emphasis on decision making at both the individual level and the corporate level being systematic. One such decision making or quality implementation model is the Plan, Do, Check, and Act cycle.

Figure 4: Deming PDCA Cycle (based on Shewhart Model)

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The above model for decision making reflects the emphasis on continually seeking to improve current processes and how we serve our customers. Deming suggested quality improvement resided in fourteen actions (Deming’s Fourteen Points):

1. There should be a consistent message about quality throughout the enterprise

2. The new age of quality requires a commitment continuously to improve

3. Focus on the process and work to reduce variations

4. Build partnerships with suppliers

5. Use the P-D-C-A Cycle

6. Make everyone responsible for their own work

7. Change management from chasing (control) to support and coaching people

8. Drive out fear that quality somehow penalises employees

9. Remove barriers (physical partitions) that limit a total (holistic) enterprise

10. Management has the power to make change

11. Measure

12. Remove barriers that prevent employees having pride in their work

13. Train

14. Create a quality culture and realise quality is a long-term philosophy

Figure 5: Plan, Do, Check, Act Problem Solving Cycle for Continuous Improvement

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Continual Improvement

Continual Improvement is not about working harder, nor necessarily smarter, it is about continually improving those things we do that achieve better OUTCOMES for customers.

Success in business today is measured by a company’s ability to achieve a competitive advantage over other organisations in the marketplace. Further, this marketplace has expanded for most companies to encompass global competition. Operating in this global marketplace has also become more difficult as trade barriers are reduced and new technology alters the factors determining competitiveness.

In the past, performance in business was measured by the ability of a specific organisation to provide its specialised product or service at a competitive rate; that is at a competitive price where service was measured by the availability of the product. Customers today have a greater access than in the past and are not restricted by geographical boundaries. This has meant that the focus for production has shifted from volume and cost of production to the ability to build processes that can continually satisfy individual customer’s needs and expectations.

Table 6: The six quality principles

1. Our Customer Comes First Customer satisfaction is our major concern. We focus on the needs and expectations of our customers.

2. We Lead NOT Control We communicate a vision of how to work to attain the enterprise goals and we are committed to these.

3. We Are Partners Management and employees work in teams and discuss options and improvements in honest, open, two-way communication to involve and empower people to assume responsibility for their work.

4. We Measure Our Performance All decisions are based on facts NOT opinion. Measures enable us to identify impediments accurately and thereby make informed decisions to improve.

5. We Focus on Process We examine the relationship between internal supplier and customer in order to improve the process by which we achieve results.

6. We Continuously Improve There is no such thing as the “status quo” because we are continuously improving. We add-value, benchmark and follow “Best Practice”.

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Traditionally, achieving a competitive advantage for an organisation meant the most efficient use of resources in the production of goods or services. This has seen the use of scientific management principles in the analysis of the way resources were used, e.g. businesses endeavoured to find the most efficient way of serving the most customers in the shortest period of time. Accounting principles that were used focused on unit prices and attempted to reduce these. There was a focus on each of the steps used in the production process, and it was seen that if each step could be made efficient then this would bring about an efficient production process. Quality management systems have shifted the focus from the processes used to focus on the outcomes that need to be achieved. The shift in our banking example is from serving the most customers, to meeting customer requirements from the service or product provided.

Quality systems therefore place an emphasis on the end users of products and services and relate the ability of the processes used in production to meet the expectations of the customer or end user.

In early attempts to improve quality certain measures and tools were used such as quality assurance. These tools and measures have led to a focus and an improvement in the outputs of organisations. Further, the development of a focus on quality has led to the development of quality programs that engender a whole management system. This is because the development of quality is seen as a holistic process that involves the interaction of all the steps in the production of goods and services to achieve a quality result.

Implementing continuous quality improvement

A number of common phases that underpin the implementation of quality management systems can be identified. They include the following:

A. Diagnosis and Preparation

To gather data on where the organisation is now so that:

 Subsequent phases can be tailored to the organisation’s needs

 Senior management agrees there is a real problem/opportunity to be tackled

 Commitment to improve is based on a real understanding of the size of the problem/opportunity

 A basic level of understanding of the TQM process is achieved

B. Commitment and Planning

 To develop commitment to an implementation plan based on the vision

 To review the vision when necessary

 To develop the overall implementation plan

 To develop leadership improvement plans to support the implementation plan.

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C. Implementation

 To develop local improvement plans and the promotion and monitoring of these through the Quality Council

 To train in the new skills needed

 To get teams at various levels making improvement via the Quality Improvement Process

 To communicate via the Commitment Cascade

D. Audit and Preparation

 To collect data to shape and plan the following year’s improvement

 To identify and understand the lessons from the current year’s implementation

 To identify any external changes in the external environment that may have an impact on the following year’s implementation plan.

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Improvement teams

Making quality work means breaking down the “Them” and “Us” syndrome between management and employees that has arisen because of the Top-Down method of Taylorist bureaucracy (divisive) which resulted in the adversarial approach to industrial relations. In a quality enterprise focus, both managers and employees are “Us”. “We” are sustained by the enterprise and the enterprise sustains “Us”. The enterprise is a living organism. The organisation is the lifeblood without which neither managers nor employees can survive.

Breaking Down the “Them” and “Us”.

The Strategy – A Quality organisation will have a Total Quality strategy that is a plan to make changes to the way we work in order to make customers satisfied and therefore to generate more business.

The People – The organisation will be staffed by customer-oriented front- line people who are backed by supporting staff and managers who all focus on the customer output.

The Systems – Systems of work will be designed for the convenience of the customer NOT the convenience of managers or for staff. Systems will say to the customer “All our work processes are designed to meet your needs!”

Figure 7: Quality Triangle

Because quality is now our number one driving force we must work as “Us” rather than as rivals. This means we have to build a partnership between managers and employees. This necessitates a fundamental shift in the perceptions of both groups. The economic imperatives that are currently forcing organisations and those who work in them either to

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do things differently or to perish require us to open our minds to the possibility of a partnership between managers and employees.

As has been seen, teamwork, decision-making and participation are vital to the success of an organisation in today’s competitive environment.

Within TQM the main dimensions of focus during implementation can be distilled down to:

 Continuous improvement

 Total employee involvement & empowerment

 Decisions based on facts, not emotions

 Leadership

 Competitive benchmarking

 Team approach

 Knowledge of tools

 Supplier quality

Implementing quality requires that ALL people in the organisation to know what the goal is and take responsibility for achieving it. Fundamental to the achievement of this is that leaders in the organisation communicate with and involve people in the decision making process.

Quality Circles, as advocated by many of the gurus, need to be set up and implemented by teams. However, these ‘Quality Teams’ need to have the following characteristics:

1. They must be focused on specific quality standards – zero defects, six sigma etc as defined by the senior management.

2. They must be cross functional and focus on quality not tasks derived through the organisational structure.

3. They must have a clear communication line to decision makers high in the organisation – preferably the Chief Executive Officer.

4. They must have permission to ‘get outside the box’.

Quality Improvement Teams can have a variety of functions including:

 To discuss issues of concern

 To provide feedback on change/transformation strategies

 To respond to current customer attitudes and changing needs

 To provide mutual support and dialogue

 To identify support needed by staff from management (resources, training, etc.)

 To structure reviews on measures and targets

 To report to management on the improvement process and target attainment

In addition to ‘Quality Teams’ all individuals must feel that they can participate in the pursuit of quality.

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Figure 8: Quality teams

Teams should be value adding by being:

Strategically Oriented

 System Aware

 Improving to Achieve Future Targets

 Effect Driven

Organisationally Competent

 Know the Process

 Understand Financial Targets

 Integrate Business Plan Goals with Corporate Objectives

Impact and Outcome Focused

 Integrate Business Indicators with Individual of Performance Standards

Data Driven

 Tangibles, Reliability, Timeliness, Responsiveness,

 Accuracy/Assurance, and Empathy

– (Modified from Jac Fitz-Enz, 1991)

Teams should own quality improvement. Therefore, teams must be able to identify and resolve barriers to improvement. Teams should have the authority to identify concerns and the power to initiate responses. There also should be an ownership statement that reflects the process level quality the team members ‘own’. A team leader should be able to express a direct interest in the operations of members working towards a process outcome and be able to use data to assist team activities.

In a larger organisation, or one undertaking a rapid transformation of process, management may sit on Quality Management Councils or Guidance Teams that are drawn from representatives of Project Teams.

When an artist creates a piece of art its intrinsic value is derived from the unique talents and combination of circumstances that enables the

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individual to complete the piece. In many ways the concept of quality improvement is about harnessing the unique talents and competitive advantages an organisation possesses in its individual employees through designing processes and teams that can bring to bear everyone’s capabilities when transforming inputs into outputs that satisfy customers.

Examples of team processes that focus on quality

General Electric

GE creates ‘internal discomfort’ through a process called ‘work out’. Groups of employees meet to discuss opportunities for improvement and make concrete proposals. Senior Management are not allowed to participate in the discussions but must make on the spot decisions regarding implementation (‘Built to Last’, p188).

Boeing

Boeing undergoes a planning process called ‘eyes of the enemy’ where they encourage employees to develop a strategy as if they were competing companies. They consider what aspects of Boeing they would exploit. Other teams then determine how to overcome these weaknesses and make improvements (‘Built to Last, p.188).

Just-in-Time – On time every time improvement

Just in Time (JIT) has as a core concept the reduction of inventory to reduce the material investment in inventory at any given point in time and this can be seen to be very different to the way inventory systems were planned in the past. Simply stated Just In Time relies upon:

Producing the minimum number of units in the smallest possible quantities at the latest possible time therefore reducing the need for inventory (Hay, 1988, pp vi ).

In the past the identification that organisational performance has been affected by fluctuations in factors external to them has led to an attempt to control the level of uncertainty experienced through the accumulation of raw materials and resources. The term that has been used to describe traditional inventory management is the holding of insurance stocks. In this case materials provide a backup in case of uncertainty or to facilitate the protection and maintenance of production systems. In such cases financial and operational plans centred on economies of scale. Good examples of this process can be seen in the manufacture of motor vehicles in the United States where the manufacturing process was defined in relation to the optimum capacity of units in relation to the production methods and organisational structures that were in place.

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The big U.S. car producers Chrysler, General Motors Holden and the Ford motor company were characterised by large unwieldy centralised structures, with costly systems of protection including factors as:

 Stockpiling large amounts of raw materials

 The involvement in the political process through lobbying

 Investment in technology to reduce the impact of the labour market etc.

 These systems measured performance by cost per unit

What was wrong with this method and what were the underlying assumptions that supported it?

There was an assumption that there has been an identification of the most efficient way of producing products. This assumption is true up to a point there has been an identification of the most efficient way of producing resources given the organisation processes and the organisational structures that exist. However, stockpiles cost money to buy and hold. When sales dropped and volumes of production decreased the efficient production processes were weighed down by inefficient capacity plans and inventory management. The resulting lesson was – large scale manufacturing firms that focuses on efficient large scale batch production and centralised administration needed new management solutions to control batch production and match capacity to utilisation to effect more economical production. Yet press announcements and stories still confirm these changes take time and cannot cover all contingencies.

The figure below indicates the five factors JIT seeks to eliminate to achieve zero variance from target. This basis then serves as a ‘launching point’ for continuous improvement exercises. This strategy was employed by Japanese companies competing with larger US forms. By controlling the five factors to a zero variance (i.e. planned targets equalled achieved targets) ‘efficiency’ was achieved as well as quality outputs.

With the increase in the pace of change and the change in organisational structure the inventory management system of developing a buffer to uncertainty that is ‘insurance stocks’ has given way to an inventory management system that focuses on adaptability and efficient small batch production.

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Figure 9: The Five Zeros of JIT

The second type of stock accumulation that causes problems is queuing stocks; that is the buildup of stock during the production process caused by bottlenecks. Two major causes of bottlenecks in the production process can be due to the complexity of the processes being carried out or through different levels of capacity throughout the process.

Improvement by reducing complexity

Delivery of precise standards of service and quality without variation is not enhanced while processes have unnecessary complexity . Two major impediments to quality that are most often a result of excessive complexity are:

 Time (e.g. queuing, down time, wait time, start up lags); and

 Opportunity for variation (e.g. rework, human error, poor cycle time)

Examine the scenario outlined below. The medical imaging centre of a pathology business handles claims in a process that is too complex. The staff who had experience with the process (one of whom had actually been a customer of the process as well) were asked to make it simpler and reduce the number of complaints from customers over delays.

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Figure 10: The Original Process

Figure 11: The Improvements Suggested by Staff

Those completing the task undertook to eliminate complexity. They had to address how best to ‘design out’ activities that were the ‘root cause’ of complaints. This revolved around addressing how the forms were processed and transmitted to each staff member in the service chain. Once the most effective process was identified the team then sought the technology and tools required to achieve the desired process. In this

case it required the purchase of an electronic scanner. The claims were scanned and the individual completing the scan was then able to save the file onto the main server accessible by both the processing and administration areas. These claims had to be processed within a given time frame by the medical processing area otherwise a reminder signal was sent by the computer to the operator.

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Figure 12: The Improved (Re-engineered) Process

Improvement through reduction in complexity requires cooperation between people who have an interest in working to benefit internal customers while ultimately delivering better outcomes to the end-user of their combined efforts.

Removing variation – A precondition to continuous improvement

The major barrier to achieving quality and thence continuous improvement is variation from agreed targets. The quality system may be implemented but progress forward is uncertain due to a lack of process control. Variation may be simply defined as the undesired deviation from specifications that result in error and a diminished ability to attain improved customer satisfaction. Variation is usually grouped into two forms:

Chance Variation – this is basically random in nature and has to be managed by designing systems to prevent it, but it is virtually impossible to remove.

Assignable Variation – this is non-random in nature and as such can be identified, removed or at least reduced.

The forms of variation respectively parallel the two fundamental causes:

Common Causes – such as variations inherent in the process that are basically chance or random and can only be eliminated through improving the process design, tools or skills.

Special Causes – such as variations caused by identifiable or assignable causes (seasonal, time or place, etc) that can be managed through actions at the process level.

The process is under a quality regime, however, the process is continuous subject to variations that cause uncertain conformance to desired targets. The management of variation is one point where many contemporary approaches to quality improvement diverge from past TQM approaches. Under TQM the focus was more often upon a team seeking to pull a process under quality control. In some regimes Total Quality Control (TQC), the focus on process measurement and control,

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and later the evolution to Continuous Quality Management, in fact supplanted TQM.

Figure 13: Variation as a barrier to continuous improvement

The sense of continuous quality improvement and the Japanese school of thought called “Kaizen” extended the TQM approach by suggesting teams could not address quality improvement until the organisation introduced improvement policies and procedures which addressed major causes of variation (Imai, 1986). Such strategies to improve on a continuous basis meant locking in improvements across business processes and throughout the supply chain (from suppliers to distributors and customers). Using the image already introduced earlier in the study guide the figure above depicts how the process may have a target and be introducing process improvement (in this case the PDCA cycle), but variation can impact the actual improvement process. The aim of an organisation seeking to implement quality must be to remove such variation.

To remove variation it is not sufficient just to have quality teams address improvement at a process level. Variation must be addressed through integrated effort of all staff, and especially through the planning and management systems adopted and implemented by the organisation. The causes of variation must be removed before the error rate in one process can move to very high levels of quality.

One of the quality ‘schools of thought’ that predominated in the late 1980s through the 1990s was one promoting Statistical Process Control (SPC). As we will see in the later section on the seven core quality measurement tools, SPC argued in favour of establishing a target for an ‘acceptable quality level’ and then developing measurement systems, tools and reporting mechanisms to ensure there existed no deviation away from target (Variance). It also provided the means to identify where critical variables were consistently impacting quality control and had to be removed. Such schools of thought also led to specific approaches to quality such as the Sigma approach where the aim was to achieve zero variation from target (100% compliance) and bring

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processes under control by moving them into a Sigma 3 control limit (ie. 99.7% attainment of target at all times).

Managing variation ensures service and products are delivered to what is termed ‘conformance’. Conformance is the delivery of product and service to specification. It is dependent on control of variation in:

 Design of production process

 Performance of machinery

 Materials

 Training

Documenting non-conformance

Quality improvement system reports and documents

Below are some examples of document control forms within a Quality Management Manual/ System. Such reports and how the data is collected will vary across different quality management systems and the quality regime.

Figure 14: Editions Register

Document No. ……….

Date Authorised

Document

Name

Prepared By

Authorised (Signature)

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Figure 15: Page Amendments

Document No. ………. Page No. ……….

Quality System Manual Edition

Section Reference/Title Amendments A B C D E

Figure 16: Distribution Register

Personnel issued with a Quality System Manual

Document Type ……………………………………………………………………

Edition No.

Organisation Name/Address of Holder

Pages Transmittal Acceptance Received

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Figure 17: Cross Referenced Index to Quality Criteria

Quality System Elements

Sect’n Heading/Item in this Manual

Clause No.

Corresponding Quality Criteria

Comments

Figure 18: Procedures Listing

Procedure Listing

Sect’n

Quality System Element Heading

Clause No.

Related Procedures in the Procedures Manual

Procedure No.

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Documenting non-conformance

Put simply the aim of any quality audit system is to identify non- conformance with required specifications and fix causes of the identified problem. There are four critical steps to the control and removal of non- conforming products, processes or services:

1. Identification

2. Documentation

3. Evaluation

4. Removal or segregation

To address these issues a rational, lock-step set of actions can be documented to map and control non-conformance. These follow the broad list of headings set out below.

1. Corrective and Preventative Action

2. Non-conformance

3. . Document what the non-conformance is with regard to the set standards. Does it not conform to part or all of the standard?

4. Previous actions

5. Is this a problem which has been addressed previously? If so, what action was taken and why?

6. Appraisal of actions

7. Did the action have a positive or a negative effect? Did the action solve all or part of the problem?

8. Failure of actions

9. If the action failed, document why it failed.

10. Proposal for corrective action/ prevention

11. Develop new ideas for corrective actions and prevention.

Step 5 is critical. It is at the heart of any quality assurance component of a quality management system. The corrective action involves eliminating the causes of the problem, not just the focus on the problems evidencing the non-conformance. However, in some cases the causes may not be able to be removed (ie. supplier problems, technological constraints, etc.). In such cases preventative actions need to be completed to reduce the impact these problems have on product, service and process variation.

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2. Monitor and adjust performance strategies

2.1 Develop strategies to ensure that systems and processes are used to monitor operational progress and to identify ways in which planning and operations could be improved

2.2 Adjust and communicate strategies to all stakeholders according to organisational procedures

Measurement is fundamental to the introduction and continuous improvement of quality management systems. Listed below are the key steps in implementing a process improvement exercise.

Table 19: Six steps for quality analysis and improvement

1. Identify the product you create or the service you provide

2. Identify the customer(s) for your product or service, and their expectations

3. Identify strategic target (to provide product/service so that it satisfies the customer)

4. Define the process for providing service

5. Mistake-proof the process and eliminate waste

6. Ensure continuous improvement by measuring, analysing, and controlling the improvement process

– (Motorola University, 1993)

Measurement is listed at the end of the above list but it underpins all steps. We have to measure how the process is currently performing before we can suggest improvements. When we implement quality as a continuous improvement cycle, data collection and measurement tools must underpin all actions.

While the element of study will confirm how to monitor and report quality within the six-step process, the following sections will emphasise how to measure and use tools such as the seven tools of quality. While the notes provided will lend more detail to our analysis, this element of our study will give a broad overview of the imperatives and the tools that impact the implementation of a continuous improvement process.

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Figure 20: Six Step Continuous Improvement Cycle

Measuring quality

It may seem obvious but one should always ensure that the time, cost and effort undertaken to improve process outcomes can be justified. Often management interventions in a quality management system have been accused of increasing management workload and interventions in operations, but without subsequent improvements that warrant the original effort.

Any organisation introducing continuous improvement should not wait for somebody to come up with ideas for improving the quality of the service, product or process. Waiting for improvement to occur can lead to an organisation’s survival being threatened by a competitor implementing a radical innovation. Therefore, management needs to set and monitor targets for continuously improving the process of operation.

Improvement targets are usually integrated into business, strategic and other forms of formal planning. Employees can then (depending on the technology available), access the plans and work with managers to confirm how they will meet the targets together within specified time frames . Every member of staff is then allocated a role in the process, trained for that role and takes responsibility for working to achieve the targets. Management and staff monitor the progress and the process to make sure everything is on target. Depending on technology (ie. intranet, manual hardcopy reports, etc.), reports are published and regularly up-dated so as to let all relevant individuals know how the improved process is working. The constant up-dates help the organisation maintain the improvement targets. We each may be working in many teams to achieve many different improvement targets. Of course, continuous improvement means there is no end to setting and maintaining targets.

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The costs of quality

In addition to looking at quality from the perspective of what needs to be right – it also has to be considered a long-term investment. Implementing continuous improvement under any quality regime has associated costs. Deming (1982) identified the four kinds of cost of quality:

1. Costs of appraisal, verification and inspection of work

2. Cost of internal failure – i.e. rework

3. Costs of external failure – i.e. errors that get to the customer and results in investigations, loss of customers and penalties.

4. Cost of prevention – the systematic control of quality.

These ‘costs’ are depicted in the figure below. Other authors have their own definition for the cost of quality but it is also worthwhile to note the long term nature of quality programs, as pointed out by Ishikawa (1985), who offers this advice:

“if executives seek only short term cost advantage, which Quality Control cannot provide, and allow lowering of quality and reliability to occur, it will result in the loss of long term customer trust in the company” (Ishikawa, 1985:10).

As an investment the costs of quality need to derive a return and be used to seize opportunities for further improvement and competitive advantage.

Figure 21: Costs of quality

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The cost of not introducing quality improvement has also been discussed and it will typically include:

 Loss of customers , (contract services, client base or market position lost to efficient commercial provider)

 Inability to respond to changing customer needs Failure to identify what you do and who are the customers

 Lack of focus in corporate training or cross-functional decision making

 Decreased reliability and increased service variability.

When setting service and quality measures the measures relating to product delivery therefore tend to focus on:

1. Performance – basic operating characteristics

2. Features – “extra” items added to basic features

3. Reliability – probability product will operate over time

4. Conformance – meeting pre-established standards

5. Durability – life span before replacement

6. Serviceability – speed, ease of access and competence of repairs

7. Aesthetics – look, feel, sound, smell or taste

8. Safety – freedom from injury or harm

9. Other perceptions – subjective perceptions based on brand name, advertising, etc

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The measures relating to service delivery in turn tend to be differentiated by a focus on:

 Friendliness of your service staff

 Speed

 Accuracy of information you provide

 Technical expertise and knowledge

 Quality of the equipment/service

 Access and control over dealings with you

 Being treated as an individual

 Being recognised as important

 Flexibility in responding to unusual requests

 Ability to communicate

 Accuracy of information provided

 Market price

 Supply cost

To build on progress made in quality programs, the advances made need to be celebrated and reinforced. This is where some creative thinking is required to reward excellence. Examples cited by Crosby (1996) in ‘Quality is still free’ include:

 The Ring of Quality Program – ITT has a quality program which involves managers nominating people who are recognised as examples of quality performance. Each year the president presents about 25 rings at a dinner in the United States (Crosby, 1996:112).

 The BAD Program – BAD stands for ‘Buck a Day’ and it is awarded to anyone at ITT who comes up with a ‘BAD’ idea that will save the company at least a buck a day (Crosby, 1996:116).

 The Zero Fingerprints Program – a telecommunications company noticed that after some of their switches had been in use for a year of more, fingerprints started showing up on them due to production errors. As a result they started the ‘Zero Fingerprints’ program and the operations manager became known as ‘Mr Fingerprints’ (Crosby, 1996:117).

 A campaign which rewards excellence and is visible to the people within the organisation can have a lasting effect on the culture of the organisation and this is where long term benefits can be reaped.

Other ways of changing the culture and consolidating progress include:

 Entering Best Practice awards; and

 Obtaining accreditation for ISO standards

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Many organisations pursue quality certification because it is a requirement for them to conduct business, i.e. To supply or complete transactions with another organisation. For any organisation the key is to make it known to all within the organisation that quality is important and quality progress will be recognised and rewarded. Formal recognition through certification by quality bodies can also provide an independent confirmation of that organisation’s success within a global framework.

Measuring competitors and external quality – benchmarking for quality improvement

One way of measuring quality is to compare the standards within the organisation with the standards set by other organisations. Benchmarking is the search for industry best practices that lead to superior performance.

Best Practice is best defined as:

“The way in which leading-edge companies are able to manage and organise their operations to deliver world class standards of performance in such areas as cost, quality and timeliness” ( Report of the Overseas Mission on International Best Practice , 1991:3).

Competition involves risk, including the risk of failure. Benchmarking has been expanded from the recent concentration on just comparing the organisation’s goods and services to a competitor, to include all aspects of the leading competitor’s operations. While many early writers suggested Benchmarking was a separate and distinct new management approach it has increasingly become a scientific and systematic process for increasing competitiveness within quality improvement systems. In the mid-1990s benchmarking was beginning to be seen as a direct adjunct to continuous improvement:

“Benchmarking is an external focus on internal activities, functions, or operations in order to achieve continuous improvement” (McNair & Leibfried, 1992:1).

The imperative to benchmark can be viewed as a means for managers seeking process improvement to cheat. Although a simplification of a complex exercise, benchmarking permits managers to ‘look around the blind corner’ before undertaking change. As we have previously established, innovation and continuous improvement involve a varying degree of risk and uncertainty. Benchmarking can reduce this through an organisation establishing how others have undertaken change and how best practices have been achieved.

Benchmarking therefore involves the identification of standards of quality, both internal and external and the determination of a company’s competitive position. While Total Quality Management and other quality management principles identify internal quality standards, benchmarking promotes an external focus. It concentrates on the comparison of externally identified standards with internal standards. This comparison may be conducted internally to identify the ‘best approach’ or it may reach as far as a comparison of internal standards with those organisations that are identified as having the world’s best practices or

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performance in an area related to the organisation’s operations or range of activities.

John Oakland (1995) identified four methods of benchmarking processes used for production. These included Internal, Competitive, Functional and Generic.

Internal benchmarking – involves a comparison of the performance of different units of an organisation. One of the disadvantages of this system is that internal competition may result in a deflection of focus from achieving performance to acquisition and control of company resources, hence reducing the sharing of information and communication within business units of the organisation.

Competitive Benchmarking – focuses on competitors or those competing in the same market, the advantages are that you have measures of performance against those operating under the same market conditions, eg. Coke vs. Pepsi. Some of the disadvantages of benchmarking competitors are the difficulties in obtaining accurate information and that it does not lead to innovative and creative solutions to improving processes, you are merely following industry standard practice.

Functional benchmarking – examines similar activities carried out within your organisation and other organisations in the same industry, e.g. financial management processes within organisations. Within this benchmarking process you are not necessarily studying competitors therefore information is easier to obtain as there may be no direct threat to the market position of the company being benchmarked.

Generic benchmarking is an analysis along functional lines of any organisation where processes may be adapted to provide for an innovative way of carrying out processes that lead to a competitive advantage. Some of the difficulties seen in using this process are that it requires a greater effort to adapt processes from dissimilar organisations and markets and it is harder to identify the processes that it may be useful to benchmark.

Benchmarking focuses on those processes that provide a competitive advantage for market leaders. This in turn helps to:

 Overcome complacency within an organisation initiating a process of evaluation and change;

 Build and reinforce a commitment to the change process and resist the acceptance of satisfactory performance;

 Engender a focus on developing an industry-leading position through continual improvement; and

 Organisations to identify their position in relation to others in the market.

The benchmarking process therefore can be seen to be a pro-active rather than a reactive management strategy through the development of industry best practices within an organisation.

Benchmarking then creates an awareness of competitive disadvantage within an organisation. It establishes goals and objectives, and a customer focus in the attempt to reduce the performance gaps between the organisation’s performance and those organisations with the best

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performance in the industry. It provides a common focus for all those involved in the process, developing in all those involved an understanding of the competitive process.

Benchmarking phases

Planning

1. Determine the critical factors that yield sustainable market, productivity or service delivery advantage (Subject)

2. Identify (competitors’) critical advantages (Data Collection and Analysis)

Analysis

3. Identify best practices within the organisation

4. Identify gap to competitor and internal best practices

Response

5. Profile corporate vision and goals (especially critical Success Factors or Key Result Areas)

6. Identify performance measures and indicators

7. Identify current capacity (especially training needs)

Monitor and Improve

8. Build understanding of the process in the organisation at all levels (Develop and communicate Action Plan)

9. Implement Action Plan

10. Monitor and review process

11. Review and adjust Benchmark.

As mentioned earlier there has been a push worldwide for organisations to raise the level of productivity in both manufacturing and the service sector. For many the changes have been necessary if they are to be able to compete in an international marketplace. Ensuring a competitive business means matching and bettering performance of those who are the best in the world, or achieving international best practice. Those organisations seeking to compete in the world marketplace also demand that local suppliers or public agencies achieve a standard of performance that can support their efforts to be world competitive. This often sees a cascade effect whereby those organisations associated with companies seeking world’s best practice must themselves achieve significant improvement. In countries across the globe (for instance United States of America, United Kingdom, Korea, Singapore and Australia), this has led to national programs to educate, support and advance best practice programs that will make their countries ‘world competitive’.

Benchmarking initiates a change process that can orientate the organisation to an external focus. Benchmarking also identifies those practices that, when adapted to the organisations specific situation, form the basis for improvements in productivity. Benchmarking can provide a basis to ensure that a continual comparison between the processes

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being improved within an organisation is still competitive with the nominated industry leader.

Measuring process improvement – The seven tools of quality

A range of graphical representations is advocated to measure and convey quality improvement. There are seven so-called ‘tools of quality’. They include:

1. Process flow charting/analysis

2. Pareto analysis

3. Run/process control chart

4. Histograms

5. Scatter diagrams

6. Check sheets

7. Cause and effect diagrams

While the diagrams and charts may be adapted to suit particular purposes we have provided examples below.

Figure 22: Basic flowchart symbols

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Figure 23: Flowchart for order receipt and inventory placement process

Figure 24: Depiction of defects in production using Pareto diagram

Process charts and flow charts allow an organisation to analyse and shorten supply chains hence improving delivery times.

Pareto diagrams are a simple way of identifying and sharing areas where improvement is needed to reduce defects.

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Figure 25: Control chart

Control charts are widely used and especially prevalent in organisations using statistical process controls. They can be used to monitor ongoing process quality in service or manufacturing areas. They also give clear indication of quality conformance to stated standards of quality. Examine the report for event number 7. It falls below the Lower Control Limit. In effect the event is out of control and warrants investigation. However, as it occurs once, the variation is likely to be common cause or chance variation – one that is not due to specific problems that can be eliminated through intervention. They need to be mapped and controlled. But it is where multiple events (say all 6, 7 and 8) fell outside the Lower or Upper Control Limits that investigation would have to consider how to remove such variations. Using such charts also enables cross comparison of control charts for multiple periods. If the above was for the month of July and in August and September we also found event 7 fell outside control limits then the common cause may well be designed into the process. It may, for instance be a rostered day off for skilled staff, a day when the supplier delivers late, or such like. Investigation can, therefore, suggest the problem is worth fixing even if the process has to be redesigned.

Figure 26: Histogram

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Histograms are similar to Pareto diagrams except that instead of focusing on identifying specific problem areas, they identify the frequency of specific problems.

Figure 27:Scatter diagram

Scatter diagrams can be used to map relationships between variables and quality strategies. For instance the one above can be used to illustrate the relationships between quality outcomes (error rate) and training. Using the above chart, measurement seems to support the conclusion that training improves quality – the more investment in training, the better the individual or work group’s competence or behaviours support quality targets.

Figure 28: Check sheets

The above figure represents two simple examples of check sheets for the same activity – one a sheet of data, the other what is called a check sheet with a ‘defects or spot’ diagram. Check sheets or defects-spot diagrams are very simple means to collect data on services or products and to keep track of defects. They can also offer a visual confirmation to staff of what data to collect.

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Figure 29: Ishigawa’s ‘fish bone’ or ’cause and effect’ diagram

Fishbone diagrams allow for a graphic representation of the cause and effect of inputs in a particular process – for instance manufacturing a product or delivering a service.

Table 30: Using Measurement Tools for Quality Communication

Category Workplace Widely across corporate site

Limited

Pareto X

Defect Charts or spots charts

X X

Histogram X X

Ishikawa Diagram ( X ) X

Flowchart Diagram X

Control Charts ( X ) X

Scatter Charts X

Check Sheets X

Recognition (awards) for individuals and teams

X X

Secondary Result Charts (E.g. Output Rates)

X X

Bottom-Line Results (E.g. Sales per employee)

X X

Brackets suggest some problems have been encountered in their use in these ways in Australia.

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3. Manage opportunities for further improvement

3.1 Establish processes to ensure that team members are informed of outcomes of continuous improvement efforts

3.2 Ensure processes include documentation of work team performance to aid the identification of further opportunities for improvement

3.3 Consider areas identified for further improvement when undertaking future planning

Quality assurance and quality audits

Auditing and reporting quality

Any quality improvement initiative should target specific measurable customer needs alongside the needs of employees and shareholders. The most immediate step when establishing measures and indicators for a quality improvement transformation is to review existing performance measures that were used to establish current milestones and business goals. The measures likely to be used would include customer indicators of sales, service and repeat business, and financial performance figures. There is less likelihood of the measures indicating employee satisfaction than shareholder and consumer satisfaction.

Employee satisfaction indicators such as staff turnover, absenteeism, or accident rate are not specific and provide information when it is too late to do anything about identified problems. What is needed is a system of measuring quality using a consistent set of established criteria that directly relate to the attainment of the acceptable standard of quality.

Depicted below is the diagram previously used. Here the role of quality audits is clearly positioned. Measurement and audit of existing process improvement (depicted by the PDCA cycle) are being assured within the overall improvement process. If the target is customer satisfaction then the act of auditing is reporting on not just compliance with criteria and conformance to standards of quality, it is also measuring systems-level improvement.

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Figure 31: Role of auditing quality in a continuous improvement process

The control of quality records and all information that encompass the Quality Management System (QMS) is part of a formal quality assurance or improvement system. Documents measure what is happening now, as well as predict and evaluate future improvements.

The control of documents involves:

 Record access systems;

 Mechanisms for comparing documentation (data, information, knowledge, etc.);

 Codification and identification mechanisms;

 Indexing;

 Storage (including archiving);

 Storage (including back up); and

 Maintenance.

Requirements, criteria and means to report will vary under different quality frameworks.

The preparation for an audit should be seen as an opportunity for the organisation to present documents that support not just the QMS, but also the core operations. The focus on completing the audit, whether internal, by an external expert or a third party, must be on identifying opportunities for improvement.

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A typical audit cycle is:

 Planning and scheduling;

 Complete and verify compliance;

 Identify and plan improvement (address non-compliance);

 Implement PDCA cycle; and

 Report and evaluation documentation kept.

Part of the QMS will identify the documentation to be kept and what has to be prepared for an audit. This will vary under the prevailing quality framework and principles being applied.

Internal quality audits or what have often been called self-assessment, are on-going means for an organisation to identify opportunities for improvement. They also assist gauge readiness for a full audit.

Internal audits also are excellent mechanisms for the manager and staff to communicate issues, confirm shared understanding, coach and generally gain ownership of the quality system.

There are formal training courses and various levels of audit certification available to organisations and individuals under the major quality regimes.

Under the International Standards Organisation (ISO) regime the change in culture commences with a decision on how and who will determine how the standards are being achieved. Auditing for instance may be through:

First party: A firm audits itself against ISO 9000 standards

Second party: A customer audits its supplier.

Third party: A “qualified” national or international standards or certifying agency serves as auditor

Quality assurance versus quality audits

A Quality Audit is not a Quality Assurance exercise. A Quality Audit is a structured and scientific format for determining how a quality process or system is functioning. Unlike quality assurance that may involve measurement and improvement without due regard to what customers value, this section promotes quality audits as a ‘customer-driven’ component of an effective continuous improvement system. Audits will be shown to be as much about setting priorities, as they are about measuring conformance to quality targets.

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Table 32: Traditional Quality Assurance Checks versus Quality Auditing

Traditional Quality Assurance Quality Audit (Underpinning Quality)

More appropriate for a consistent product (manufacturing)

Quality relates to (Total) all business functions and activities

Quality defined by specifications Quality defined by key observable indicators in each process

Inspection will detect defects Quality becomes part of the specification of a product

Errors reduced to acceptable minimum Everyone has a responsibility for quality and feedback systems encourage employee suggestions

Waste & inefficiency can be built into price

Constantly attempt to reduce errors to a minimum

Higher quality = higher cost Identify waste and inefficiency & use it as an opportunity for improvement

Quality controlled by detecting and deleting problems

Higher Quality means lower long-term cost and higher productivity

Quality is a function (which reflects greater problems if management is functionally based)

Quality is planned as a positive and constructive tool for those in the workplace as well as senior management

Highlights discrepancies in individual and Section’s performance

Quality provides a focus for all and clarifies the true nature of the problem in the process (without individual sanction)

Manuals describe procedures and control factors to be checked

Continually raise the achieved minimum standards

Unilaterally applied off check lists Emphasise better communication with staff and use the Audit to confirm decentralised capacity to apply Quality Control in the Teams, Sections, Branches etc

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Installing an internal quality audit

1. Define Output Requirements

 Well trained people

 Capable leaders

 See visible progress

 Identify parts of the team effort

 Return clientele

 Recovered clientele

2. Develop Process Measures

 I am well trained

 I can do my job to specified requirements

 My ideas are heard and do count

 There are enough resources (eg. ‘phone lines) to do my job

 I offer the same consistent service to clients

 I have no disgruntled clientele

 All customer requests are recorded and we respond immediately

 We consistently solicit complaints

3. Audit the Process

 Opportunity for improving the process

 Service quality gaps are identified

 Individual performance and team performance are differentiated

4. Take Action to Solve Problems or Improve the Process

 Techniques and tools are used to solicit and act upon individual and team input

 Results form the base-line for improvement

5. Periodically Re-audit the Process and Tighten/Improve Measures

 Once is not enough so the review is on-going and undertaken again at critical intervals

You may note that the sub-points can be framed for an Audit with responses capable of being ranked on a 1 to 5 sliding scale.

Completing the audit follow up processes

Auditors, whether internal or external, will focus on compliance. They may check for:

 Audit schedules and past activities

 Compliance reports and action documentation

 Corrective action reports

 Preventative action reports

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 Management reviews and reports on systems

 Data security, integrity and accuracy

Depending on the prevailing quality regime, auditors work to known lists and against the quality principles or standards.

Generally, for a training provider audits tend to focus on:

 Identification of training needs (customer needs)

 Design and integrity of the product (training content, assessment, etc.)

 Commitment of staff to deliver products to required standard

 Competence of staff to deliver products and services to required standards

 Provision of service (training, coaching, assessment, recognition, etc.)

 Maintenance of records

 Effectiveness of products and services (training and assessment, etc.) to meet defined needs

All the above are nothing new in terms of well managed training organisations. In those aspiring to become learning organisations we would expect even greater emphasis upon the constant learning between supplier, service provider and customer and their contribution to continuous improvement of operational quality.

After an auditor or audit team has completed their review a report is prepared. This identifies areas for immediate action, areas where improvement is apparent and an overall suggestion of quality against the benchmark quality standards/ principles or criteria being used.

A typical report will have a report on the areas examined (the standards) and the rating against the relevant indicators (criteria). Noting that the categories of standards and criteria will vary across quality systems (while maintaining some sense of similarity) a reporting ‘score card’ could look like the one depicted below.

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Figure 33: Quality audit scorecard

The arrows mark scored positions on a continuum from very poor (never complied) to a score where they are best in class (level 5 where they always comply). In this case the organisation has best in class products but weaknesses in leadership and strategic frameworks. While strategic mechanisms are renewed, this audit report also identifies that the people dimension is actually slipping (reverse arrow). Such reports give the whole workforce non-conformance areas to target and also immediately signals where success has been achieved. Most quality certified organisations need to operate at level 3 and above.

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Innovation

The breadth, depth, velocity and persistency of change necessitates organisations be able to not only manage responses to change, but be proactive and shape change. Where it is related to systems, processes or technology managers need to comprehend how innovation is both a mechanism to response to rapid transformation and a trigger of change. The secret is to know who is in control, innovation or the manager!

This topic explores the historical foundations for the study of innovation within an organisation setting. We will establish a clear taxonomy for defining and differentiating innovation from such activities as:

 Invention

 Improvement

 Reengineering; and

 Reinvention.

The definitional parameters are necessary as the boundaries between these activities not only become blurred in the workplace, the interrelationship between the professional and academic study of these activities has increasingly become uncertain.

The purpose of this topic is therefore not to provide an exhaustive study of innovation in all its guises. Rather it is to revisit historical and proven definitions that permit the role of innovation within an organisation to be studied. From this point the relationship and overlap with the management of change can be defined. In addition, we will be able to isolate the relationship between innovation, change and more recent management ‘fads’/theories.

In the final section of this topic we will reconfirm how the speed of business and supply cycles has accelerated. Cycles of planning and responsiveness to changing customer demands have compressed. As we will see compressed cycle times necessitates development of appropriate capabilities to undertake organisational innovation, especially the individual’s capacity to learn and respond to new demands. People become assets not just for their skills but also for their ability to embrace change and enable organisations to meet changing customer and market needs. Adaptiveness or organisational agility is about the capacity of the organisation to innovate and transfer information to individuals and ensuring they have the capacity to quickly absorbed this information and deploy it as knowledge that enhances customer outcomes.

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Types of change solutions and their impact

The following section revisits the historical cornerstones that hold together the diverse fields of study associated with innovation and change within an organisational context. This will be completed to ensure we can define and differentiate some key terms associated with innovation.

As depicted below change can be managed using a mix of approaches dependent on considerations revolving around the rate and type of change. In each of the quadrants are placed broad styles of how innovation can be approached by a manager.

Figure 34: Matrix of change solutions

The above matrix can be aligned to specific management approaches (such as covered in other topics). This alignment is presented in the table below.

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Table 35: Alignment of change typologies to specific managerial approaches

Type Specific managerial approaches

Rapid-Top down  Business process re-engineering

 Re-engineering

 Rapid development

Rapid-participatory  Reinventing

 Participative team

 Mutual gains

Incremental-Top down

 Project management

 Decision modelling

 Organizational redesign

 Benchmarking

 SPC or Quality Control

Incremental- participatory

 Continuous improvement and quality management approaches in their many forms for both processes and services (TQM, CI, CQI, TCS, TQC), Sigma-six, Kaizan, ..

 Learning organisation

 Organisational learning

It is interesting to note the move to organisational agility cuts across all dimensions of the matrix (See the topic on change and agility). Agility can be any mix of rapid, incremental, top-down or participatory. Agility has evolved as a management focus because it emphasises the need to design innovative practices into all levels and aspects of an organisation.

Let us now extend our study to the component terminologies surrounding the world of innovation. The following definitions cover the ‘everyday’ concept of innovation and related terms.

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Innovation

Innovation is classically defined as the “process that begins with an inventor’s insight and ends with a new product or technique” being created (Lundstedt & Colglazier, 1982: xiii). Innovation is not just the practical improvement of hardware. It is also the reshaping of concepts or ideas. The innovation process forms the basis for individuals to inject ideas, insights, pure and applied research, scientific knowledge, and technical “know-how”.

Innovation is not held within this topic to be the same as discovery or invention where a new technical entity unlike any known previous technology, is produced. Discovery is the production of new technical or scientific knowledge. This is distinct from invention which is usually the result of pure research discovery, or the unique combination of established knowledge, to produce a novel technical entity.

Innovation involves the substantial change and development to identified technology, ideas or techniques. On a continuum of change or search for superior outcomes, innovation may be considered to sit below the high risk, uncertain efforts of those seeking inventions or discoveries, and above those undertaking improvements.

Improvement

Improvement is herein limited to focused change undertaken on an existing or known entity, component, technique or idea that incrementally generates superior outcomes.

A process may undergo cumulative evolution where the end process or product adds value, relative to its immediate predecessors and constitutes a major change from the starting point (Dawkins, 1986: 43).

The completed innovation or improvement produces a complex source of change that does not stop with the alteration of an existing technical entity. It may also provide a conceptual basis for addressing problems that have a cumulative impact on both an organisation and even a society. Thus the wider technological environment – social, political, economic or organisational factors – may be influenced by technology change and in turn produce secondary effects that are far from apparent immediately after the original innovation’s introduction (Kranzberg, 1986:545).

The impact of change may therefore be spread over an extended period of time with only minor incremental improvements to existing processes, technology or ideas (Lundstedt & Colglazier, 1982: xxiii). The impact and course of change may also be complicated by technical drift of the introduction of innovations from other countries or other organisations.

The incremental change to technology can be overtaken on occasions by radical or dynamic ‘breakthroughs’ in technology that quickly alter existing products or processes and may swiftly alter existing environmental conditions within which future technological innovation occurs (Hughes, 1982: 32 and Landau, 1982:54). The more radical a ‘breakthrough’, the wider is the base for new or novel innovative effort to accelerate technology change.

Because significant discoveries and technological change cannot be ordered or pre-ordained, the innovation that changes technology may be derived only long after the original ‘breakthrough’. Hence great periods

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of innovation can then be followed by stagnation. However, as organisations recognise the competitive advantage in quickly identifying and adopting conceptual breakthroughs, cross-fertilisation of ideas and practical usage have seen a quantum leap in improvement and innovation at an organisational level. Unlike the late Industrial Age, in the Information or Knowledge Age the impact of a final innovation is occurring sooner as organisations realise that the speed of converting conceptual ideas into applied realities is in fact an area of competitive advantage.

The search for a better product, procedure or idea is ongoing. As correctly identified by Foster (1986:102) “… rarely does a single technology meet all customer needs “.

In the area of competitive advantage in the Information Economy it is an organisation’s capacity to search for, and apply innovations and improvements made by others to their own processes, that can accelerate effective change. Management of such incremental change has become a far more complex practice as not only the hardware (equipment), but the advancement of processes and practices have profoundly impacted how organisations are structured and controlled.

Re-engineering

Process re-engineering is fundamentally the analysis of all activities associated with a process that results in the radical changing of that process to achieve breakthrough outcomes for the enterprise (Bowles, 1994:14). The change will generate results that are usually marked by a higher risk factor due to their aim to achieve ‘breakthrough’ results.

In the late 1990s re-engineering texts and literature were as popular and as numerous as Total Quality Management texts were in the late 1980s. Our study in this section revolves around what re-engineering is about, why it is seen as a valuable change management approach, and what this means for frontline managers.

What we must appreciate is the belief held by those advocating process re-engineering that organisations are failing to change rapidly enough.

Reinventing

While this topic will not cover it in depth, a concept called reinventing has been loosely associated with the drive to re-engineer organisations. Reinventing is a term often used in conjunction, or parallel with, re- engineering. Reinventing has been used to underpin the need to completely rethink how organisations operate. The concept has even been used especially by David Osborne and Ted Gaebler (1993) Reinventing Government: How the Entrepreneurial Spirit is Transforming the Public Sector (Plume, New York) when arguing for the United States’ public sector to be reinvented in an entrepreneurial spirit.

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Re-engineering

Process re-engineering necessitates escaping the conceptual parameters imposed by past ideas and ways of ‘doing things’. Such an approach is often termed a greenfields approach to reform or change. A greenfields approach requires those involved in a re-engineering exercise to rethink everything they do. Starting with a blank white board their rethinking of a process must:

1. Suspend reference to existing practices and traditional concepts;

2. Start process design from the output service/product delivered and the external customer requirements;

3. Define process relationships by mapping the ideal or optimal internal customer relationships that can support external customer requirements;

4. Derive ideal and optimal procedures and relationships without initial regard as to ‘why we cannot do this’;

5. Frame new performance targets;

6. Review the new performance targets against corporate or strategic targets; and

7. Establish priorities and responsibilities for implementing process re- engineering.

In effect, re-engineering is about escaping the incremental and ad hoc change exercises to promote a radical re think of how organisations conduct operations. It is therefore more than a tool or adjunct to existing management theories. It is both holistic in its consideration of organisational management and in how we change operations. The Phases in Process Re-engineering encompass all levels of organisational operations.

Business Process Re-engineering (BPR) is a specific approach coined to focus re-engineering effort on process level innovation.

Phases in Process Re-engineering

 Identify the corporate vision.

 Consolidate the Strategic Direction (Mission, Objectives and Key Result Areas)

 Develop an ‘enabling’ culture to support changes

 Develop co-operative workplace partnerships

 Map the existing processes

 Re-engineer processes

 Redesign jobs

 Retool equipment and retrain staff

 Continually review, renew, reorganise, and redesign

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Marshall Romney (1995:3) reported the following seven principles for successful reengineering. They are derived from Michael Hammer, co- author of Reengineering the Corporation: A Manifesto for Business Revolution .

Figure 36: 7 principles for reengineering

Principle Detail

Organize around processes and outcomes, not tasks.

Companies often divide business processes into individual tasks and assign them to different people. The documents used in the business process often wait for hours or days at each desktop as they are passed between the people involved in the process. Delphi Consulting Group estimates that up to 90 percent of the time needed to complete typical office tasks is a result of gathering and transferring paper documents.

Centralize and disperse data.

Some companies centralize operations to achieve economies of scale. Others decentralize operations to be more responsive to their customers and to provide better service. With current technology, companies can have the advantages of both approaches: corporate-wide data bases centralize data, and telecommunications technology disburses it.

Capture data once, at its source.

Many organizations have a number of separate information systems, such as an accounting system, a management information system, a marketing system, a production system, and so on. Each of these systems collects, enters, and processes some of the same information. Not only is this inefficient and expensive, but redundant data exists that all too often contains discrepancies. These problems can be solved by capturing data once, at its source, storing it in data bases, and making the data accessible to all authorized users.

Information producers process information.

Most organizations process their acquisition/payment information like Ford Motor used to do. Ford prepared multicopy purchase orders and receiving reports. Fourteen different data items on these two documents had to be matched to a vendor’s invoice before a payment could be made. Accounts payable had more than 500 people who spent most of their time trying to reconcile all the mismatches. The process was time consuming and frustrating, and vendors were unhappy because payments were delayed.

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Principle Detail

Output users perform the processes.

Most organizations are split into separate departments and each specializes in a specific task. Each department completes its particular task and passes its “product” off to another department. This principle states that the people who use information from the system should be those who perform the process that produces that information.

Empower workers. Most organizations have a hierarchical structure with one or more levels of management to supervise, direct, and control those below them. Many organizations have found that empowering workers with decision-making responsibilities leads to a higher quality product and service, faster responses to problems, and fewer levels of management. Expert systems and other newly developed information technology helps workers make correct decisions and avoid mistakes.

Integrate parallel activities.

Many business processes are so complex that they are divided up and assigned to independent teams. These teams work in parallel with each other and then integrate their tasks when they are done. For example, when Chrysler designed a new car, they had different teams designing the body, the interior, the engine, the transmission. and other elements. When they began assembling the cars, they often found that the components did not fit together properly and had to be redesigned.

The above phases and principles are not radical in concept. We have seen in other topics that operations are often part of the strategic planning process with cascading performance measures derived from corporate mission, vision and objectives and performance targets and indicators that move down to business and operational plans.

On the other hand, the phases suggest that the concept of re- engineering is not inconsistent with quality management systems and the concept of continuous improvement. Certainly continuous improvement, the search for creative and innovative approaches to operations management, suggests dynamic change focused on achieving better ways to deliver products or services.

Theorists and practitioners within the field of re-engineering have debated what exactly it entails. Writers like Michael Hammer and James Champy suggest that organisations have not responded well to the imperatives of the three “Cs” – customer, competition and change (Hammer and Champy, 1994:24). Re-engineering, to be truly effective, requires the corporation as an entity to be completely renewed. This requires what has been called the “big-bang” approach to re- engineering where all processes are considered as part of the corporation re-engineering exercise.

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More conservative and slightly less risky approaches argue for process re-engineering to be a cumulative approach to improvement. As such process re-engineering seeks to maximise the corporate performance while optimising competitive advantage by exceeding customer expectations. The exercise will radically alter an operation defined by a series of related input, transformation and output sequences.

For the purposes of this Unit process re-engineering will be considered as part of a wider effort to expand a corporation’s capacity to undertake change. As such the exercise of process re-engineering goes beyond a limited reconsideration of a process in isolation from wider corporate efforts to achieve an operational breakthrough. This also assists define process re-engineering as distinct from a process ‘redesign’ such as administrative or process cycle time reduction.

Hammer and Champy see the focus on re-engineering work through information technology, and thus creating process innovation as in fact limiting the definition of re-engineering. They argue:

… despite the prominent role played by information technology in business reengineering, it should by now be clear that reengineering is not the same as automation. Automating existing processes with information technology is analogous to paving cow paths. Automation simply provides more efficient ways of doing the wrong kinds of things (Hammer and Champy, 1994:48).

It is beyond our scope here to discuss all the arguments but we need to appreciate the nature of process re-engineering as a systematic effort to stimulate process innovation and the total rethinking of corporate operations.

Dangers

Reengineering will not succeed if you:

 Try to reinvent when it need to be replaced

 Repair instead of fix

 Focus on the problem not the business processes

 Change has no meaning to those currently and in future doing the job

 Lack of systematic process for change

 Accepting minor results as a trade off for support

 Lack of executive support

 Trying to drive it from a staff-up, rather than collective exercise orchestrated from the top

 Wrong priorities

 Loose or cannot secure capabilities to make it happen (all dressed up but nowhere to go.)

 Right solution ,wrong culture

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 Backing major process change in the face of market upheaval or higher priority (perceived or real) process changes in other parts of the organisation

Identifying when to re-engineer processes

There is not one line of thought suggested by re-engineering experts on when one should adopt a re-engineering approach to changing process operations.

All re-engineering exercises involve risk. You may recall that the level of risk involved in making decisions or solving problems often marks a manager’s capacity to improve operations. The higher the risk the less palatable a manager may find the solution. Depending on the scope of the re-engineering exercise the level of risk will vary. However, in comparison to traditional change and improvement exercises, re- engineering is a high risk undertaking.

Given the success and current status awarded re-engineering there are obvious reasons why the concept is appealing to corporations and government.

In a Harvard Business Review article published in 1995, John Kotter (March-April, 1995, 59-67) identified eight considerations for the success of transformational change. Alignment to and delivery of these considerations are often listed as reasons why re-engineering secured so much initial support.

1. Create a sense of urgency.

2. Form a team of key stakeholders who support the initiative.

3. Form a vision: appealing & easy to understand & communicate.

4. Vision must be communicated.

5. Obstacles must be removed–identify barriers & deal with them.

6. Plan for short-term wins.

7. Don’t declare victory too soon–complete the process.

8. Anchor the changes in organizational culture.

Reading

Brynjolfsson, E, Renshaw, AA & van Alstyne, M ( Draft: January, 1997 ) The Matrix of Change: A Tool for Business Process Reengineering , MIT Sloan School of Management, Cambridge, MA. Sourced February 2010 at http://ccs.mit.edu/papers/CCSWP189/ccswp189.html#ab

.

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Given that our working definition of process re-engineering involves an organisation seeking operational breakthroughs, the time to use re- engineering will depend on the priority concerns of the organisation. The issue is to identify what imperatives drive the managers to consider re- engineering in the first place?

Recently a manager and the large defence force technology design team spent four months designing a computer simulation program that could test design solutions for a new army weather proof rain coat. The design effort was structured on reengineering grounds due to past complaints from customers that the supplied equipment never worked to their requirements and took too long to get to production.

To accelerate the concept to full trial the army instigated business process re-engineering. They came to rely heavily upon computer simulation and fast-track design teams. Having spent only 13 months responding to the army design specification and producing the new product the corporation was very keen to ensure that the customer (hardened soldiers and their officers) that they had produced a product which exceeded the specifications. The coat had triple stitching and could survive the worst possible weather conditions.

The computer simulation that formed the basis for the design was shown and the army agreed to field test a full production model. Unfortunately the clothing turned out to be both too heavy and unable to survive normal tropical monsoonal conditions. It turned out that the product had never actually been worn in tropical conditions.

The moral of the above story is that reengineering or any other technique is no substitute for common sense. The workplace of the future must survive on managers and staff practising common sense every day and openly responding to customer needs. Information technology or the best change process in the world still rely on people working within existing operations and the constraints impacting customer satisfaction.

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Benchmarking could have told the design manager what had and had not worked in the past; quality control could have identified better testing and assurance techniques; or other methods could have improved the product finally delivered. One has to ask though, what were the expert managers and staff in the team doing? If the aim of a re-engineered process is to provide systematic direction and efficient transformation of inputs into output to meet customer requirements, then failures such as the above should not be acceptable. Yet they occur daily. The level of their occurrence and the difficulties in changing processes, procedures, products or services, cultures, and organisations to alleviate such problems lie at the root concern with traditional approaches to management.

For those organisations wanting to achieve or maintain world competitive best practices, the requirements for re-engineering are simple:

 Management of incremental process improvement is useless if the systems and people cannot satisfy either current or future demands;

 Continuous improvement is only valuable if the processes are already competitive and future innovation or reengineering exercises can create breakthrough changes; and

 In a world of rapid change the capacity to manage change in a process context is as important as the management of the process outcomes.

To evolve or to reengineer?

It would be fair to state that the purist approach to reengineering advocated in the 1990s has been replaced in management thinking by more evolutionary approaches. The concept of ‘blowing up’ processes and rapid, radical surgery has been superseded by the realisation such approaches are symptoms of wider problems. The need for re- engineering has been replaced by an acknowledgement change need to evolve. As such responsiveness and agility have to be built into how businesses operate. Innovation and incremental change should continuously enable processes to move with changing customer and operational needs.

Re-engineering took so much time and effort to implement the core business suffered. Now approaches such as agility, continuous improvement and such like have gained more sway in management thinking by emphasising innovation is part of how businesses and managed.

The need for speed

In the New Economy speed is touted as one of the most critical sustainable competitive advantages a business can acquire. It has also been presented as a value proposition that online customers seek over price (Meyer & Davis, 1998; Lemberg, 2000; Fred, 2002). It is against this backdrop that learning becomes an enabler of not just performance improvement but also the speed with which organisations can develop staff capabilities to deliver their core value proposition. This emphasis has placed people at the heart of modern service organisations. As

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stated by Charles Fred (2002:36), a new metric has emerged; this centres on the cycle time to achieve performance proficiency, which:

. . . helps redefine the development of people in the context of the delivery of value and of time – in this case the time it takes for individuals to prepare themselves to perform.

Figure 37: S-curve of innovation in a service context

As depicted above, speed and competitiveness are realised by advancing individuals rapidly along the learning curve to the point of proficiency (Fred, 2002:95). The figure above also emphasises how the learning curve extends beyond the point where proficiency is achieved to build the mental models that promote continuous learning and the acquisition of skills and knowledge necessary to assimilate new information, to transfer knowledge or to accumulate the experience necessary to deal with unexpected contingencies (Fred, 2002:67).

To accelerate the cycle time to proficiency, businesses have to:

 Establish the proficiency threshold;

 Accelerate the accumulation of experience; and

 Measure the cycle time to threshold proficiency (Fred, 2002:34).

According to Fred, these activities present a very good indicator of the performance capacity of an organisation and set apart agile, responsive and competitive organisations. The concept of a cycle time to proficiency also reinforces the importance of moving developing capabilities in the workforce for not only acquiring the skills to perform, but also the capacity to learn and respond to new challenges.

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The acceleration of learning is also a ‘speed’-based issue. As illustrated in the figure below real value to the organisation and its direct capacity to achieve service proficiency can occur by reducing learning and performance cycle times.

Figure 38: Reducing cycle time in traditional training and development (Fred, 2002:81)

Fred also reinforces that the changing nature of staff capabilities and expectations in relation to learning. This is also consistent with changing customer expectations. Younger staff and those now familiar with electronic service and work expect technology to be deployed to enhance how they access content, information and knowledge to fit their needs, when and where they want (Fred, 2002:125).

In the context of speed and organisational competitiveness, managers need to be aware of any techniques, processes or tools that will permit them to:

 Shorten the time taken to raise an individual’s performance to the point of proficiency;

 Transfer the mental models and sense of identity that facilitate assimilation of new information, transfer of knowledge or accumulation of experience;

 Enhance the capabilities of the organisation to support how people learn and respond to new challenges;

 Recognise and reward responsiveness;

 Provide real-time capability for individuals to control when, where and how they can rapidly acquire knowledge and learning relevant to immediate work performance (codified knowledge transfer);

 Enable collaboration, interaction and knowledge transfer with others (uncodified knowledge transfer); and

 Support change processes that enhance the communication of timely and accurate knowledge.

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Document No: Version No: V 2.1 Last Modified Date: 27-Dec-12 © John Bailey 2010 Page Sequence: Page 77 of 77

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Course Unit: BSBMGT516A – Facilitate continuous improvement

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