head for success business studies – grade 12. term 2 topic 6: quality of performance

HEAD FOR SUCCESSBUSINESS STUDIES – GRADE 12

TERM 2TOPIC 6: QUALITY OF PERFORMANCE

QUALITY OF PERFORMANCEINTRODUCTION:• It is difficult to define the concept of quality.• Researchers suggest that quality is ultimately

determined by customers and not by management.• Customers often judge the quality of a product based

on their expectations of the product.

QUALITY OF PERFORMANCETHE CONCEPT OF QUALITY:

Quality • A quality product does what it is supposed to do.

• Customers often perceive quality as the extent to which a product meets a customer’s expectations.

• Quality refers to a good/service’s ability to satisfy a specific need.

• The quality of a product or service is measured against specific criteria, for example:

The ability of a product to do what it is supposed to do.

Reliability. Affordability. Design.


Quality assurance • The process aimed at ensuring that: A good or service being developed will meet

specified requirements. Control measurements are in place. Control measurements are implemented properly. Ways of improving control measurements are

identified.

Quality

control (QC)

• The process of ensuring that products or services are made to consistently high standards.

• Quality control aims to identify, eliminate and avoid the occurrence of deviation from predetermined standards in the production process.

• Quality control involves control of the material, workmanship and machinery that is used in the production process.

• Advantages of quality control: Dealers and consumers are assured that goods are of the required

standard. Fewer faulty products being manufactured leads to increased productivity,

as well as increased sales. QC encourages workers to continually produce quality goods and services. Production costs can be reduced by eliminating poor quality goods. Reduction in production costs leads to an increase in profit. Leads to improved quality and product design. Manufacturers provide salary and wage incentives for quality work. Reveals poor performance by workers as well as faulty machines – this is

important for training workers and replacing machinery.


Quality

management

• The process of supervising or managing all activities needed to ensure a business produces goods and services of consistently high standards.

• Quality management encompasses: Quality planning Quality control Quality assurance Quality improvement


Quality

performance

• Refers to the assessment and analysis of processes, goods and services in order to measure the performance of a business.


Quality management systems (Q

MS)

• refers to all policies, processes, strategies and resources needed to apply quality management.

• Some elements of a QMS are: Quality manual Quality goals Quality policy Resources• Advantages of QMS include: Reduction of costly mistakes Continuous improvement of processes, goods and services Increased profits due to the elimination of errors Improved customer satisfaction due to the elimination of errors. More efficient use of resources Improves compliance with quality standards Helps to establish a business’ reputation


Risk

management

• Involves identifying risks and finding strategies to deal with risks, e.g. transferring the risk, minimising the risk, avoiding the risk.

• The following steps are involved: Identify threats/risks. Determine the extent to which critical assets are exposed to these

threats. Formulate strategies to protect critical assets, e.g. by taking out an

insurance policy. Evaluate the risk by determining the probability of the risk occurring. Control the risk by finding ways of minimising losses. Finance the risk by taking out an insurance policy or by budgeting for

possible losses.

QUALITY OF PERFORMANCETHE CONCEPT OF QUALITY:Benchmarking • A good product or service are measured against

a similar product or service of which the quality has been approved.

QUALITY OF PERFORMANCETHE CONCEPT OF QUALITY:Characteristics of quality products and quality business operations:

Product quality Business quality• A quality product does

what it is supposed to do.• A quality product is safe

to use.• A quality product is

reliable.• A quality product is

durable.• A quality product is

serviceable.

• A quality business designs goods and services with their customers in mind.

• Production processes deliver products with characteristics desired by customers.

• Customers must feel that they are treated fairly.

• A culture of quality must be cultivated – all employees must be aware that the business does not tolerate work of inferior quality.

QUALITY OF PERFORMANCETHE RELATION BETWEEN QUALITY AND THE VARIOUS BUSINESS FUNCTIONS:

• If each employee and each business function delivers good work, the collective effort will result in a business that delivers goods and services of the desired quality.• Eight business functions can be identified – each

with its own role and responsibility.


Business function Main responsibilityPurchasing function • Responsible for finding the most suitable

suppliers and purchasing raw materials/stock at the right time, for the right price, of the right quality and in the right quantities.

Production function • Responsible for converting raw materials into final products.

Public relations function

• Responsible for creating a favourable image of the business enterprise.

General management function

• Responsible for the overall management of the business enterprise by performing the four basic management activities: planning, organising, leading and controlling.

QUALITY OF PERFORMANCETHE RELATION BETWEEN QUALITY AND THE VARIOUS BUSINESS FUNCTIONS:Business function Main responsibility

Marketing function • Responsible for distributing and selling the enterprise’s products.

• Involves getting the right product to the right place, at the right price and to the right consumers, by making use of the most effective advertising methods.

Human resources function

• Responsible for recruiting, selecting and appointing new employees.

Administration function

• Responsible for collecting, storing and distributing business information so that the information can be used to analyse trends and make decisions.

Financial function • Responsible for financing all business activities by ensuring that money is available to run the business efficiently – this is achieved through careful financial planning.


• The eight business functions enable the business to deliver goods and services of quality:

Factors that contribute to success Factors that contribute to

failure

Production function

• Technology is applied to improve quality, e.g. scanners count goods more accurately than human beings do.

• Plan the production process to incur minimum downtime, e.g. rather do machine maintenance at night.

• Devise a quality control strategy, e.g. by determining tolerance levels and carrying out regular inspections and tests.

• Choose the most suitable production system, e.g. mass production, batch production or jobbing.

• Accredit with quality control bodies, e.g. the SABS. • Encourage accuracy and high productivity among

employees, e.g. by rewarding employees with incentive bonuses for reaching performance targets.

• Insufficient methods of control.

• Lack of planning which leads to downtime.


Factors that contribute to success Factors that contribute to failure

Purchasing function

• Ensures that the business buys the required raw materials:

From the right supplier. For the right price. At the right time. In the right quantities. From the right place.• Build relationships with suppliers to avoid delays

with the delivery of supplies.• Regular stock control to ensure that the actual

stock on shelves corresponds with stock records.• Ensure availability of sufficient stock levels to carry

on with business operations.• Minimise losses due to theft and obsolescence by

taking out insurance policies.

• Insufficient stock control.

• Failure to negotiate better prices from suppliers.



Public

relations functions

• Create a favourable image of the business, e.g. through publicity.

• Shape the public’s opinion by: Delivering quality goods and services. Being involved in corporate social investment

programmes. Ensuring that phones are answered promptly

and that phone operators act professionally.

• Failure to liaise with the press.

• Internal publicity (appearance of buildings, way in which telephones are answered) is not up to standard.



General managemen

t function

• Create a suitable mission and vision for the business.

• Allocate resources in the most effective way.• Be aware of trends and changes in the business

environment.• Be strategically smart and proactive.• Organise employees in the most efficient way.• Demonstrate effective leadership.• Communicate expectations to employees.• Involve employees in decision making processes.

• Lack of communication between management and employees.

• Reactive approach to market trends instead of being proactive.



Marketing

function

• Effective product development to keep up with trends.

• Devise a good pricing strategy to attract customers.

• Design effective packaging to protect goods and increase sales.

• Select the most suitable distribution strategy so that goods can reach consumers quickly and affordably.

• Adopt an effective marketing communication policy that meets ethical standards in order to convince consumers to buy goods.

• Continuously adapt the product to meet the dynamic needs of consumers.

• Lack of advertising.• Failure to keep up

with product development trends.



failure

Human

Resource

s function

• Effective recruitment to attract the best candidates.• Fair selection processes.• Employee development to keep u[ with changes in

technology and in the industry.• Employee retention and training to ensure availability

of skilled employees for future positions.• Keep employees motivated, e.g. by paying fair

remuneration.

• Advertising jobs in the wrong places.

• Failure to do succession planning.



failure

Administration

function

• Efficient application of technology.• Collect data and information to identify market trends.• Ensure accuracy of captured data or information.• Process data and information to assist management in

decision making.• Make information available to management in order

for management to react to opportunities and threats.

• Insufficient information storage systems.

• Inability to verify data.



failure

Financia

l function

• Obtain capital from the most suitable sources available.• Negotiate for better interest rates in order to save

money.• Draw up budgets to ensure sufficient application of

monetary resources.• Ensure that financial records are up to date to ensure

timely and accurate tax payments.• Investigate strategies to increase profitability.• Invest surplus funds to create sources of passive

income.

• Insufficient budget planning.

• Lack of financial control.

QUALITY OF PERFORMANCETHE IMPACT OF QUALITY ON DIFFERENT BUSINESS STRUCTURES:• A business’ structure (small or large) can impact on the

quality of processes, systems, goods and services of a business.• Businesses have devised various strategies to ensure quality

processes, systems, goods and services in a business.

QUALITY OF PERFORMANCETHE IMPACT OF QUALITY ON DIFFERENT BUSINESS STRUCTURES:

Smaller business structures(E.g. sole proprietorships, small

partnerships, CC’s and small private companies)

Larger business structures(E.g. large partnerships, large private companies and

public companies)

General

• A lack of employees may limit the extent to which quality control is carried out in smaller businesses, however, owners of small businesses are often actively involved in quality control.

• Many small businesses cannot afford mistakes: this motivates small business owners to ensure production of quality goods.

• Most larger businesses have enough staff to carry out quality control, large business structures sometimes become cumbersome.

• Many large businesses have access to technology that promotes quality control, e.g. scanners can count goods more accurately than human beings can.

• Sometimes difficult to keep large number of employees motivated.

• Large businesses usually have quality control systems in place.

• Large businesses are better equipped to cope when employees are away for training.

QUALITY OF PERFORMANCETHE IMPACT OF QUALITY ON DIFFERENT BUSINESS STRUCTURES:• Strategies devised by businesses to ensure quality processes,

systems, goods and services include:• Total Quality Management (TQM)• Quality circles




Larger business structures(E.g. large partnerships, large private

companies and public companies)

Total Quality Management (TQM)

Definition: • A system according to which a business aims to produce high quality products

from the start, to avoid having to detect and correct defects at a later stage.• Aims to create awareness of quality in all organisational processes.• Based on participation of all people involved in a business.• Smaller businesses are often

understaffed which makes it much harder to achieve TQM.

• Smaller businesses that implement the principles of TQM will, however, save time and money, enabling staff to concentrate on core business activities and not on correcting defects.

• Large businesses are more likely to implement the principles of TQM, as large businesses have greater human resources, i.e. employees.

• Large businesses can even appoint a TQM task-team to ensure that the principles of TQM are implemented throughout the business.

QUALITY OF PERFORMANCETHE IMPACT OF QUALITY ON DIFFERENT BUSINESS STRUCTURES:Basic principles of TQM:• TQM comprises three basic principles:

Total Based on participation of all people involved in a business, including employees on the lowest level of the business to top management.

Quality TQM aims to improve the quality of goods, services, systems and processes in a business.

Management The process of supervising or managing all activities needed to ensure a business produces goods and services of consistently high standards.

QUALITY OF PERFORMANCEDIE IMPAK VAN GEHALTE OP VERSKILLENDE SAKE-STRUKTURE:Smaller business structures

(E.g. sole proprietorships, small partnerships, CC’s and small private companies)



Continuous skills development

Definition:• Skilled employees affect labour productivity, because skilled employees work faster,

make fewer mistakes and pose a smaller safety risk than unskilled employees.• Skills training is available through SETAs.• As employees’ skills develop, they become able to devise better production and quality

control strategies.• This will lead to improved products and ultimately to enhanced consumer satisfaction.• People employed in smaller businesses are

often required to perform a wide range of tasks.

• Hence, skills development is vital to ensure survival of small businesses.

• Smaller businesses can, however, find it more difficult to cope with their daily operations when staff is sent away for skills development training.

• Large businesses have access to a greater range of skills than smaller businesses, because they usually employ more people.

• Large businesses can do skills training on a rotation basis – which limits the impact on the continuity of business operations.


Smaller business structures(E.g. sole proprietorships, small partnerships, CC’s

and small private companies)



Total client satisfaction

Definition:• A system according to which a business aims to achieve total client satisfaction every

time there is customer interaction.• Total client satisfaction focuses on both quality products and customer service.• Spend more time with a customer to achieve client satisfaction, instead of having to

correct mistakes later.• Smaller enterprises may find it difficult to find

employees to run the business and to give their full attention to total customer satisfaction.

• Small businesses often do not have enough staff to justify a customer service department.

• Hence, staff members must divide their time between customer service and completing all their other tasks as well.

• Client satisfaction is vital for the survival of any business.

• Large businesses can generally afford to have a customer service department.

• The customer services department focuses exclusively on achieving client satisfaction.

QUALITY OF PERFORMANCEDIE IMPAK VAN GEHALTE OP VERSKILLENDE SAKE-STRUKTURE:





Continuous i

mprovement to processes and systems

Definition:• Businesses should always investigate ways to streamline processes and systems.• Improved processes and systems will lead to product improvement.• Improved products lead to enhanced customer satisfaction which, in turn, leads to

increased sales and profitability.

• Employees in smaller businesses are often required to multitask.

• This means that finding ways of improving a business is only one of many tasks needed to be performed by the same employee.

• Quality work and good performance is often compromised when employees focus on many tasks at the same time.

• Small business often do not enjoy the benefits of having on-site IT-specialists or engineers – if problems arise, time is wasted for outside specialists.

• Larger businesses usually employ a team of people to look for ways of improving processes and systems.

• Large businesses often have people like engineers and IT-specialists on site – this enables them to address problems immediately.






Involve all employees

Definition:• The success of TQM relies heavily on participation of all employees.• Ways in which employees can be involved include communication to employees from

top management and training.• Employees are more likely to implement the principles of TQM if they feel their

contributions are valuable.• Smaller businesses have fewer employees.• This makes it easier to communicate with

employees about the implementation of TQM.

• All employees in large businesses must participate in implementing TQM, including employees on the low levels of the business

• Management must devise a communication strategy to ensure communication reaches every employee.






Focus on teamwork

Definition:• Teams often manage to solve problems quicker and more creatively than individuals.• TQM tries to harness this benefit.• Many small businesses only have one or

two employees.• This makes it difficult for teams in small

businesses to experience the benefits of teamwork as it is intended by TQM.

• Because teams in large business are often more diverse, teams in large business are usually capable of experiencing the full benefit of teamwork.






Top management involvement

Definition:• Management is the foundation of successful implementation of TQM.• Management guides and inspires employees to achieve results.• Top management need to commit itself towards defining clear goals.• In many smaller businesses, there is often

not a clear distinction between management and employees.

• The distinction is rather between the owner, who usually becomes the manager, and employees.

• TQM requires a full commitment of the owners of small businesses..

• Top management is responsible for identifying and defining the goals and objectives a business wants to achieve with TQM.

• TQM requires total commitment from top management.

• Top management must communicate their plans for the business to all other employees.






Adequate finance and capacity

Definition:• There are costs involved in implementing TQM.• Although businesses derive benefits from implementing the approach they need to

finance, for example, employees’ skills development, hiring additional employees and spend money on researching alternative processes..

• Many small businesses might neither have the financial capability, nor the general capacity to successfully implement TQM.

• Temporary employees might have to be appointed when permanent employees are away on training, for example.

• Large businesses need to budget for implementing TQM.

• Larger businesses have a greater capacity to cope with the disruption associated with implementing new strategies, for example large businesses will still be able to carry on with business operations when employees are on training.






Planning

Definition:• Implementation of TQM needs to be planned carefully, because all employees are

involved.• Provision must be made to, for example, train employees to acquire skills associated

with successful implementation of TQM.• The stages in which TQM will be rolled out also need to be planned.• Planning for implementing TQM is easier

in smaller businesses, because fewer employees are involved.

• Large business must carefully plan the TQM implementation process.

• Top management must plan the implementation process and communicate their plans to all other employees..






Monitoring and evaluation of quality processes

Definition:• Because TQM requires commitment from a business in its entirety, the success of

processes needs constant monitoring and evaluation to ensure achievement of desired results.

• Because processes need to be monitored constantly, employees in smaller businesses might be distracted from focusing on core business activities.

• Large business can appoint special teams to monitor and evaluate the TQM rollout process.

QUALITY OF PERFORMANCETHE IMPACT OF QUALITY ON DIFFERENT BUSINESS STRUCTURES:The impact of TQM on cost reduction:The main benefit of TQM is that it leads to cost reduction and increased profitability, because:• Costs are reduced as mistakes are eliminated.• As errors are eliminated, customers will experience increased levels

of satisfaction. This will lead to an increase in customer spending, which in turn leads to an increase in profit.

• As mistakes are eliminated, fewer resources are used.• Greater efficiency is achieved as processes improve. More goods

are produced in the same amount of time, which also increases profitabilility as fixed costs remain at a constant

QUALITY OF PERFORMANCETHE IMPACT OF QUALITY ON DIFFERENT BUSINESS STRUCTURES:Impact of TQM on small and large businesses

Impact on small businesses Impact on large businesses

• Difficult to implement TQM in small businesses due to lack of resources and cost of implementation.

• Not possible to implement TQM in all small business due to lack of staff members.

• Various studies have shown that small businesses that implemented TQM didn’t experience increased profitability.

• According to studies, the main benefits of TQM of small businesses are:

Development of a quality culture in the business.

Improved training for employees.

• Easier to implement TQM is large businesses, because there are more staff members.

• Imperative to implement TQM in large businesses.

• TQM in large businesses have significant advantages, including:

Reduction of costs More efficient use of resources Increased profitability Increased customer satisfaction Improved skills among employees

QUALITY OF PERFORMANCETHE IMPACT OF QUALITY ON DIFFERENT BUSINESS STRUCTURES :





Quality circles

Definition:• Small group of employees (6 – 10) who voluntarily meet on a regular basis to

discuss problems relating to production and quality.• Many small businesses are unable to

enjoy the benefits of quality circles, because they simply do not have enough staff members to form a quality circle.

• Forming quality circles are an ideal way of monitoring a business’ performance in terms of quality.

• Large businesses are in a better position to form quality circles, because large businesses employ more people.

QUALITY OF PERFORMANCETHE IMPORTANCE AND ADVANTAGES OF QUALITY:

FOR THE BUSINESS FOR CONSUMERS

• Good reputation.• High levels of customer

satisfaction equals increased sales and profitability.

• Fewer faulty products to replace.• Increased labour productivity.• Decreased production costs.

• Consumers are confident that products comply with safety standards.

• Less time is wasted on replacing faulty goods.

• High levels of customer satisfaction.

• Customers are confident that goods are reliable.

QUALITY OF PERFORMANCEINTERNAL CONTROL:• A business has full control over its micro or internal

environment.• Hence, management controls the quality of goods and

services that a business delivers.• Internal control is a collection of policies put into place to

ensure:• Business is conducted in a well organised manner.• Efficient use of resources.• Protection of a business’ assets.• Identifying faults and correcting them.

• Although internal control is often associated with the financial function, it applies to all business functions.

QUALITY OF PERFORMANCEINTERNAL CONTROL:• Internal control comprises of five components:Control environment Refers to the way in which a business is managed.

Risk assessment Involves determining the likelihood of a risk occurring and developing a strategy that deals with the risk.

Control activities Refers to policies implemented by management to make sure a business achieves its objectives.

Information and communication

Refers to the way in which information is shared in a business.

Monitoring The process of monitoring a business’ performance-results in order compare actual results with desired results.

QUALITY OF PERFORMANCEQUALITY AND THE VALUE CHAIN:• A value chain refers to a series of activities performed by all

business functions to deliver goods or services to gain the competitive edge over competitors.• A value chain analysis is carried out when each activity

performed by a business is assessed in order to improve quality and reduce costs.• Value chain analysis aims to identify a business’ most valuable

activities and to improve other activities that enable a business to be more competitive.

INBOUND LOGISTICS OUTBOUND LOGISTICS

is the activities involved with the receiving of goods.

is the activities involved with the distribution of final goods and services to consumers.

QUALITY OF PERFORMANCEQUALITY CONTROL BODIES:• The South African Bureau of Standards (SABS)• The SABS is the national standardisation authority.• The SABS develops standards against which products are tested.• Services rendered by the SABS include:• Development, promotion and maintenance of the South

African National Standards.• Testing and auditing of products against the requirements set

in the standards.• Certifying products/services and processes for conformity to

standards.• Academic and advisory services on the content and use of

standards.• Promotion of industrial design in the country.

QUALITY OF PERFORMANCEQUALITY CONTROL BODIES:• International Organisation for Standardisation (ISO)• The ISO is an international body that develops international

standards which covers most areas of technology and business.• A standard is a document that provides requirements and

specifications against which processes, goods, services and materials are measured to ensure good quality.

• Examples of ISO standards:• ISO 9000: Quality management• ISO 14000: Environmental management• ISO 22000: Food safety management• ISO 26000: Social responsibility

QUALITY OF PERFORMANCEQUALITY CONTROL BODIES:• International Organisation for Standardisation (ISO)• The ISO 9000-standards are based on eight quality management

principles:• Customer-focused organisation• Leadership• Involvement of people• Process approach• System approach to management• Continual improvement• Factual approach to decision making• Mutually beneficial supplier relationship

head for success business studies – grade 12. term 2 topic 6: quality of performance

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