Is 'quality' a losing strategy?

by Onno van Ewyk

Has Total Quality Management proved to be an expensive and unsuccessful excursion for those companies which pioneered it in the early and mid-1980s? Has it failed to deliver on its glowing promises of more competitive, efficient, and adaptable organisations? Have the many millions of dollars spent on training staff and restructuring work-places generated anything like adequate financial returns? These are some of the questions currently being hotly debated in United States business circles. The answers coming back are a mixture of yeses and nos. Yes, because many companies are disillusioned with the results of their TQM programmes, and no because many others claim resounding success, often crediting TQM as the source of their survival .

Much of the disquiet comes from the fact that a number of the companies which have won prestigious Malcolm Baldridge National Quality Awards, have subsequently got into financial difficulties. For example, Wallace & Co, an Oil Equipment manufacturer which won the award in 1990, recently filed for Chapter 11 Bankruptcy as the cost of its quality programs increased and oil prices fell. Florida Power and Light, winner of the inaugural Baldridge Award, also found itself in straitened circumstances a few years after.

Other companies have publicly declared their disappointment in the success of their quality management programmes to date. Take the case of Varian Associates Inc, a $1.3B scientific equipment supplier. It joined the quality movement with almost religious fervour in the 1980s. The net result however, according to a senior executive, has been that, "All of the quality-based charts went up and to the right, but everything else went down".

The source of these problems appears to be "the Rolls-Royce syndrome". This is the view that pursuing quality for its own sake will always drive costs higher than consumers can afford, and often concentrates effort on aspects which are unimportant or unappreciated by customers. This spells financial disaster and makes 'quality' a losing strategy.

The disillusioned companies pinpointed narrowly defined quality objectives as one major reason for their failure. Just like Rolls-Royce's cars, their products had some superlative aspects but considered overall they failed to deliver. A magnificently crafted walnut dashboard won't compensate for poor handling and unconscionable fuel economy. Varian experienced this effect when it increased on-time project completions from 42% to an astounding 92%, but sales did not increase as expected because its technicians were so busy pushing deadlines they didn't return customers' phone calls.

Similarly, Federal Express Corp., a huge parcel delivery organisation and another 1990 Baldridge recipient, admitted that it focused on speed without due consideration for accuracy. Spectacular gains in average delivery times were offset by the costs and ill-will generated by increases in misdirected packages.

These companies became fixated on the word 'quality' and lost sight of the word 'management'. Ironically the result was that key quality management precepts were ignored; customers' responses were taken for granted instead of continuously monitored and evaluated; selected processes were improved, but their effect on other equally important processes were not considered; changes were not tested on a small scale first before being implemented corporate-wide; and there was little attempt made to measure costs and benefits along the way.

No statistics are available for the relative success of US companies which have implemented TQM. In Australia, however, a study involving 1400 companies was completed recently by the Australian Manufacturing Association. It showed that companies which followed a 'best practice' model enjoyed greater export success and averaged sales increases nearly 8 times greater than others.

This debate on the financial viability of TQM has not quelled enthusiasm for it, but rather it has given a healthy dose of realism to those companies which embraced it as a simple-minded ethos to cure all their ills. It may even open the way for more cynically-minded managers who have so far been put off quality management by the almost evangelical hype which has accompanied it.

Despite the current revisionist push, quality management is still seen as the most viable source of effective corporate change. A striking example of this is Porsche in Europe. The legendary sports car maker is currently fighting to survive a major slump in its sales. Swallowing its European pride, it has over the last two years remodelled its production processes using Toyota's successful Kaizen continuous quality improvement concepts. Production times in its factory have been cut by 35% and now the chief executive is turning his attention to revitalising the marketing department to bring the company closer to its customers.

When the dust settles on quality management's current controversy, the likely outcome may be that it will appeal as strongly to the tough-minded pragmatists in business as it does to the visionaries.

16/12/94

1. "How to make quality pay", International BusinessWeek, 8 August 1994

2. "Japanese skills save exotic marque", Sydney Morning Herald, 24 November 1994


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This is one of a series of articles written by Phil Cohen and Onno van Ewyk, HCi. Most of the articles were also published in the Australian Financial Review. This article may be reproduced only with the permission of HCi (email HCi ). Copyright HCi, 1993-1998.