Catalyst for Creativity and Innovation: Total Quality Management
As discussed earlier, creativity spawns new ideas that promote organizational success, and innovation makes those ideas a reality. As also discussed earlier, organization member expertise is normally a significant catalyst in spawning new, creative ideas.
This section presents critical insights into building expertise in total quality management (TQM) in both managers and nonmanagers in organizations. This expertise is intended as a wellspring of new, creative, quality-oriented ideas that promote organizational success. Major topics discussed are the essentials of total quality management and creative ideas based on TQM expertise.
Essentials of Total Quality Management
This section outlines the fundamental principles of total quality management. Topics include defining TQM, the importance of quality in organizations, established quality awards, and the quality improvement process.
Defining Total Quality Management
Quality is defined as how well a product does what it is supposed to do—how closely and reliably it satisfies the specifications to which it was built. Quality is presented as the degree of excellence on which products or services can be ranked on the basis of selected features.
Total quality management (TQM) is the continuous process of involving all organization members in ensuring that every activity related to the production of goods or services has an appropriate role in establishing product quality.36 In other words, all organization members should emphasize the appropriate performance of activities throughout the company to maintain the quality of products offered by the company. Under the TQM concept, organization members work both individually and collectively to maintain the quality of the products offered to the marketplace.
Although the TQM movement actually began in the United States, its establishment, development, and growth throughout the world are largely credited to the Japanese. The Japanese believe that a TQM program should be company-wide and must include the cooperation of all people within a company. Top managers, middle managers, supervisors, and workers throughout the company must work together to ensure that all phases of company operations appropriately affect product quality. These company operations include areas such as market research, research and development, product planning, design, production, purchasing, vendor management, manufacturing, inspection, sales, after-sales customer care, financial control, personnel administration, and company training and education.
The Importance of Quality
Many managers and management theorists warn that U.S. organizations that don’t produce high-quality products will soon be unable to compete in the world marketplace. A 1990 book by Armand V. Feigenbaum stated the problem succinctly:
Quality. Remember it? American manufacturing has slumped a long way from the glory days of the 1950s and 1960s when “Made in the U.S.A.” proudly stood for the best that industry could turn out. . . . While the Japanese were developing remarkably higher standards for a whole host of products, from consumer electronics to cars and machine tools, many U.S. managers were smugly dozing at the switch. Now, aside from aerospace and agriculture, there are few markets left where the U.S. carries its own weight in international trade. For American industry, the message is simple: Get Better or Get Beat.37
Producing high-quality products is not an end in itself. Rather, successfully offering high-quality goods and services to the marketplace typically results in three important ends for the organization: a positive company image, lower costs and higher market share, and decreased product liability costs.
Positive Company Image
A reputation for high-quality products creates a positive image for an organization, and organizations gain many advantages from having such an image: A positive image helps a firm recruit valuable new employees, accelerate sales of its new products, and obtain needed loans from financial institutions. To summarize, high-quality products generally result in a positive company image, which in turn leads to numerous organizational benefits.38
Lower Costs and Higher Market Share
Activities that support product quality also benefit the organization by yielding lower costs and greater market share. Figure A3.6 illustrates this point. As shown in the top half of this figure, greater market share or gain in product sales is a direct result of customer perception of improved product quality. As shown in the bottom half of the figure, organizational activities that contribute to product quality result in such benefits as increased productivity, lower rework and scrap costs, and lower warranty costs, which in turn result in lower manufacturing costs and lower costs of servicing products after they are sold. Figure A3.6 also makes the important point that both greater market share and lower costs attributed to high quality usually result in greater organizational profits.
Decreased Product Liability Costs
Product manufacturers are increasingly facing costly legal suits over damages caused by faulty products. More and more frequently, organizations that design and produce faulty products are being held liable in the courts for damages resulting from the use of such products. To take one dramatic example, Pfizer, a company that develops mechanical heart valves, recently settled an estimated 180 lawsuits by heart-implant patients claiming that the valves used in their implants were faulty.40 Successful TQM efforts typically result in improved products and product performance, and the typical result of improved products and product performance is lower product liability costs.
Figure A3.6 TQM typically results in greater market share and lower costs
Established Quality Awards
Recognizing all these benefits of quality, U.S. companies have placed significant emphasis on manufacturing high-quality products. Several major awards have been established in the United States and abroad to acknowledge those organizations that produce exceptionally high-quality products and services. The most prestigious international award is the Deming Award, established in Japan in honor of W. Edwards Deming, who introduced Japanese firms to statistical quality control and quality improvement techniques after World War II. The most widely known award in the United States is the Malcolm Baldrige National Quality Award, which is awarded by the American Society of Quality and Control and was established in 1988.41
As these examples suggest, quality is an increasingly important element in an organization’s ability to compete in today’s global marketplace.