Researchers and consultants have advocated a variety of incremental approaches to achieving excellent quality in products and processes. Despite their differences, almost all of these plans have remarkable similarities. Although a specific improvement process may not precisely follow the order given in Figure A3.7, most such processes at least approximate it.

Hammer argues that significant improvement requires “breaking away from . . . outdated rules and . . . assumptions.” Improvement basically demands a complete rethinking of operations. He, too, recommends that management organize a team representing the functional units involved in the process to be reengineered as well as units that depend on the process.

One important reason for reengineering instead of attempting incremental improvements is the need to integrate computerized production and information systems. This change is expensive and is difficult to accomplish piecemeal through an incremental approach.

Hammer outlines seven principles of reengineering:

• Principle 1: Organize around outcomes, not tasks—Traditionally, work has been organized around different tasks, such as sawing, typing, assembling, and supervising. This first principle of reengineering instead has one person or team perform all the steps in an identified process. The person or team would be responsible for the outcome of the total process.

• Principle 2: Have those who use the output of the process perform the process—For example, a production department may do its own purchasing and even its own cost accounting. This principle requires a broader range of expertise from individuals and teams as well as a greater integration of activities.

• Principle 3: Subsume information-processing work into the real work that produces the information—Computer technology now makes it possible for a work process to process information simultaneously. For example, scanners at checkout counters in grocery stores both process customer purchases and update accounting and inventory records at the same time.

• Principle 4: Treat geographically dispersed resources as though they were centralized—Hammer uses Hewlett-Packard as an example of how this principle works: Each of the company’s 50 manufacturing units had its own purchasing department, which prevented the company from achieving the benefits of scale discounts. Rather than centralize purchasing, which would have reduced the responsiveness to local manufacturing needs, Hewlett-Packard introduced a corporate unit to coordinate local purchases so that scale discounts can be gained. That way, local purchasing units retain their decentralized authority and preserve their local responsiveness.

• Principle 5: Link parallel activities instead of integrating their results—Several processes are often required to produce products and services. Too often, though, companies segregate these processes so that the product comes together only at the final stage. Meanwhile, problems that occur in one or more processes may not become apparent until the final step, at which point it is too late to fix the problem. It is better, Hammer says, to coordinate the various processes so that problems are avoided recognized and taken care of right away.

• Principle 6: Put the decision point where the work is performed and build control into the process—Even though traditional bureaucracies separate decision authority from the work, this principle suggests that the people doing the work are the ones who should make the decisions about that work. The salesperson should have the authority and responsibility to approve credit, for example. This principle saves time and allows the organization to respond more effectively and efficiently to customer needs.

  Some managers worry that this principle will reduce control over the process. However, control can be built into the process. In the example just cited, the criteria for credit approval can be built into a computer program so that the salesperson has guidance for every credit decision.

• Principle 7: Capture information once and at the source—Computerized online databases help make this principle achievable. It is now easy to collect information when it originates and then to store it and send it to those who need it.

Reengineering allows major improvements to be made all at once. Although reengineering can be an expensive way to improve quality, today’s rapidly changing markets sometimes demand such a drastic response—even and especially when firms experience poor performance.44

Philip B. Crosby is known throughout the world as an expert in the area of quality and is considered a pioneer of the quality movement in the United States.46 His work provides managers with valuable insights on how to achieve product quality. According to Crosby, organizational integrity, systems, communications, operations, and policies must all be consistent with the goal of achieving product quality before significant progress in reaching product quality can be made and maintained. Several possible creative ideas based on Crosby’s work for achieving quality in organizations are listed in Figure A3.8.

W. Edwards Deming, who originally trained as a statistician and began teaching statistical quality control in Japan shortly after World War II, is recognized internationally as a primary contributor to Japanese quality improvement programs. Deming advocated that the way to achieve product quality is continuously to improve the design of a product and the process used to manufacture it.47 According to Deming, management has the primary responsibility for achieving product quality. Several possible creative ideas based on Deming’s work for achieving quality in organizations are listed in Figure A3.9.