ten mistakes ceos make about quality

8/9/2019 Ten Mistakes Ceos Make About Quality

1/6

nsights

from

Baldrige

ward

winn ers and

top

quality

firms

by

Willard

I

Zangwill

HE WINNERS OF THE MALCOLM BALDRIGE

National' Quality Award and other fmns

noted for excellent quaJity programs

think differently about quality than most

firms. A professor

of

management sci

ence and students,at the University of Chicago

interviewed executives at a number

of

firms that

have excellent quality programs. These interviews

revealed 1 mistakes thatmany corporate executive

officers (CEOs) make that inight prevent their com

panies from e v ~ l o p i n g excellent quality programs.

Mistake Failing to

lead

When CEOs strive to be leaders and to inspire

their employees to excel, many adopt an approach

that almost always fails. They recall movie scenes

in which great leaders give powerful and highly

motivating speeches, such as Knute

Rockne inspiring his football, team or

Gen. George' Patton spurring his troops

to success. Leadership to these CEOs

becomes management by exhortation

and inspiration. Speeches, high goals,

slogans, and campaigns are supposed

to motivate employees and propel the

organization toward competitive victory

This misguided Hollywood style

of

leadership almost always

fails.

Jack Stack EO

of

Springfield

. Remanufacturing, which remanufac

tures engines in Springfie ld

MO,

recalls when he took over a division

and gave a powerful speech designed

to

rouse and inspire the workers. At the

end of the speech, he asked if there

were any questions, and one worker

in the back yelled out, How old are

you, anyhow? The workers had often

been exhorted with motivational

speeches and campaigns, slogans, and

goals. They were cynical because of

repeated failures and knew from experi

ence that little real change would occur

Although speeches and exhortations

might produce.a brief flurry of

activity,

soon p o p ~ o back to the same man-

agement, systems, and procedures as before.

Repeatedly, CEOs make speeches, set goals, wage

a big campaign, and then wonder why this leader

ship produces little lasting change.

Movies, in an effort to create a dramatic effect,

confuse the issue. Prior

to

their speeches, Rockne

and Patton thoroughly planned

.

organized

equipped, trained, and prepared their men. That

was the main substance

of

their l e ~ e r s h i p and cre

ated the success. The motivational speech was the

final encouragement and, perhaps, was not even

necessary.

Good leadership must produce results, which

means that the actual work done in the offices or

factory must change. Exhortations rarely accom

plish that. Change requires a new infrastructure in

which the organization's steps, procedures, and

Quality

Progress une

1994


2/6

~ e c l m i 9 e s a r e i m I ? f ~ v e d

This

i e q u i r e ~ new

systems,

plarming,

mcentlves, and trammg. Improvement in the·way work is done

is what quality systems accomplish and is the substance

of

real

leadership.

Mistake

Thinking

th i planning

devolves from

financial or

marketing

goals

~ l a r m i n g · i n many organizations, starts with top management

settmg goals for financial growth (profit, earnings per share, and

return

on

investment) and market growth (sales). These overall

financial and sales goals then

get

broken down into specific

goals and budgets for each department or area.

What is often neglected in these goals, however, is the cus

tomer, who

~ k e s

the purchase and pays the bills. Planning

should start

WIth

the customer, and the centerpiece of plarming

should

be

customer satisfaction. This is true

of

the Baldrige

Award winners.

Westinghouse

Commercial

Nuclear

Fuels

Division, for example, has quality goals that.directly relate to

~ s t o m e r

satisfaction issues. The senior management level has

eIght goals, which are divided into subgoals in lower levels

of

the organization. Even the individual worker

or

work team has

goals that relate to the overall customer satisfaction goals. Each

month, Xerox Business Systems sends out 40,00psurveys to its

customers and to people who bought from the competitors, and

the data from these surveys strongly influence corporate goals.

~ o t o r o l .has overa:ching goals for improving quality and cycle

tIme, whIch are dIrectly derived from customer satisfaction

issues. All of the Baldrige Award winners examined, such as

GlobeMetallurgical, IBM Rochester,· and Federal Express, have

systems to ensure that customer satisfaction drives their goals. .

P e t e r s o ~ Products, a metal stamping firm near Chicago, IL,

was about to launch a marketing campaign to elevate sales.

n s t e a ~ i t d e c i d e d

to

improve on-time delivery to the customer.

When the percentageof o n ~ t i m e delivery went up, the salespeo

ple.were ecstatic because for the first time they could promise

delIvery. Sales rose.25 because the customers.were getting

what

they

wanted, and Peterson

was

able to drop the plan for

the marketing m p i g n ~

Another example is Cooper Tire in Findlay, OR. Building a

reputation as a reliable supplier with modem plants, it aimed its

marketing. directly at the customers. It has doubled its market

share and enjoys

a·profit

growth rate

of

pe r year

According to

th w

York imes it is the envy

of

giants like

Goodyear, Bridgestone, and Michelin.

In

most

firms, planningis a vertical process that is driven

from the top down

or

from the bottom up. Planning should

be

a

horizontal process, however, starting from the

customer

and

working inward. Financial goals are also necessary,· but

the

cus

tomer

should

drive goal-setting process, and every depart

ment.and functional group should have goals that positively

.affect customer satisfaction. As

Bob

LaBant,

IBM

vice·presi

dent,· said,· My·goal is .to· make our customers successful. I

had onemeasure, i twould

be

their success. 3

Mistake elieving

that

being

close

to

thie

customer

and

planning

for customer satisfaction issuni ient

. ..The .top executives

at

many companies believe

that

their

firms have a strong customerfocus. They might have oriented

t h ~ i r planlling_ sys tems to better. satisfy.

the

customer.

They

mIght·

also

maIntaIn complaint·hotlines, have extensive war-

44

Quality Progress

une

1994

,ranties, and conduct customer satisfaetioll surveys. h s te

·niques, while helpful, still do not constitute·a total custom

focus· because customer satisfaction is not something that c

cerns only some parts

of

the firm. Each and every group

in

firm should have goals and incentives that are tied into enha

ing customer satisfaction. This requires a carefully conceiv

management system that

involves

all

p·arts

of the firm

improving customer satisfaction.

Why

is this done so infrequently? Perhaps themost pervas

reason is that many companies lack a systematic approach

customer satisfaction. The executives believe that a system is

needed

and

that they already understand the customers a

know what they want. Almost always, however, that belie

false. Motorola, for example, is well aware of thi s f ac t a

requires its executives to visit its customers firms. The exe

tives are required to speak notjust to the firms executives,

also

t? the

workers who actually use the

Motorola

produ

Expenence has shown that almost everyone has distorted id

about what customers truly think, and a systematic approach

needed to overcome this.

Steps to

overcome

the problem

Row should such an approach be developed? The first step

to

conduct an

analysis of all of the interactions a

custom

might have with the organization. Most organizations coll

customer satisfaction information

on

the products

or

servi

they provide, an organization provides far more than jus

product

or service. It also provides a complicated se tof inter

tions with the customer, all of which should

be

top notch. F

example, a firm must have 1qlowledgeable salespeople, on-ti

delivery, accurate information, error-free invoices, courteo

and helpful employees who quickly answer phones, and acc

rate and understandable technical manuals. Data should

be

c

lected on all customer interactions because·total customer sat

faction means meeting.

or

exceeding customer expectations

all areas.

Once the data are collected, the infonnation must

be

used

i ~ p r o v e the system. For example, the complaint departm

mIght handle a customer s complaint well, but once the c

tomer s specific problem is resolved, a deeper issue arises abo

what happens next. Many firms do not try to find the cause

the complaint and change the system to prevent the probl

from recurring. Using customer information merely to resol

the immediate problem

or

error is not sufficient; the underlyi

systemmust

be

improved. . .

The

fai lure to

properly use customer information oft

occurs the design

of

a new product. The marketing depa

ment mIght collect a great deal

of

customer-related informatio

but the design engineers might not use it. For instance, mark

ing might discover that customers want a carwith good accel

ation, but the engineers need to know whether that means acc

eration for passing on a highway, acceleration from°o

miles per hour,

or

acceleration to make the tires squeal. Ea

s i ~ a t i o n requires different engineering design choices, but m

ketmg often does not obtain infonnation in a

fonn

that the en

neers can use. -

. One way to overcome this problem is to give the right peop

dIrect access to the customers. Ingersoll Rand in Pittstown, N

did this in the design of a new hand-held air grinder. A cro

functional new product development team was fonned consi

ing

of

people from the marketing, engineering, and

m a n u f a c t u


3/6

ing departments. This team conducted focus groups with cus

tomers throughout the country.

It

w as a bl e to develop the new

g rind er in

one-third

th e

usual

development

cycle time.

Th e

g ri nd er h as sol d w ell ·

and wo n an award

from the Industrial

Design Society of America.

4

While exposing decision makers to customers is a good first

step, more fonnal techniques should

be

developed to drive the

customer infonnation throughout the company. Quality func

tion

d ep lo ym en t Q FD ) i s

u se d b y

a number of companies,

including Hewlett-Packard, Ford,

an d

General Motors.

QF D

obtains detailed lifestyle

infonnation

.from the·customer. This

infonnation

is. t he n d ep lo ye d t hr ou gh ou t t he p ro du ct d esig n

process to e n s u r ~ thatthe final product fits the lifestyle of the

cust0

et, \ ¥ h o t h e n \ V ~ l feel comfortable with it.

good

custolller satisfaction

system

d oe s f ar

more

than

obtain i I I f o f 1 1 1 a t i ~ l . · It gets the right infonnation to the right peo

pl e

and ensurestllatthe infonnation is used not just to correct a

specific error, but to improve the underlying process.

Whenlhe sySlembreaks down

Even avery·g )odsystem· might·not

be

sufficient under times

st r ess

an d

s t r a i n ~ h e s y st em i s o ft en · a b an d on ed a nd

customer-oriented goals are sacrificed to achieve other business

objectlves. To m e ~ t e n d o f p e r i o d g oa ls, f or e xa mp le , a g re at

rush often t4kes place

in

which defective products are shipped

or services are cut. This happens because·executives are driven

t o r ea ch t he ir n um er ic al g oa ls, t o shi p a spe ci fi ed a mo un t of

product, or to make a certain profit.

When

a c ru nc h c om es a nd

the numbers might not

be

reached, the customer-oriented stan

dards are likely to

be

abandoned·first.

What

c an be· d on e a bo ut t hi s? Rob er t G al vi n, c ha ir ma n of

Motorola s executive committee, said

one of

his most important

roles was to stand

up

for quality.

5

He

served as the guardian and

maintained the status

of

quality and customer f ocu s e ve n i n

times

of

stress

an d

pressure, when others would have sacrificed

them. That is a role that top management cannot delegate, and it

is the foundation

of any successful total customer satisfaction

system. Only the CE O can ensure, even in times

of

great pres

sure, that quality and customer satisfaction are preserved.

istake

: elieving thatqualitymeans inspection

Many

executives view quality narrowly and believe that it

refers only to manufacturing process control and inspection.

Inspection, however, is the antithesis

of quality. In fact,·quality s

ultimate goal is to eliminate inspection. Inspection should not

be needed if the process is successful in producing the product

withotit defects.· Inspection is ·only necessary

if the production

process is faulty and producing defects. In this circumstance,

final inspection might

be

necessary,

but it

should

be

viewed

only as an interim procedure.

There are three problems with inspection.

Th e

fi rst i s t ha t

inspection only eliminates a percentage of the defects. Joseph

M. Juran, W Edwards Deming, and others suggest

that

inspec

t io n wi ll, as a r ul e of thumb, eliminate

8

of the defects, and

2

of the defects will still·get through to the customer.

6

Second, inspector might

be

able to find defects·when the

d ef ec t r at e is a t a f ew p er ce nt , but·w h en t he re i s

on e

defect per

25,000, he or she cannot hope to find a defect. Today s market

place demands such high quality levels, often a few defects per

million that

final

in sp e ction is

no t a

practical

method for

achieving those levels.

Th e third

major

p ro bl em w it h f in al i nspe ct io n i s t ha t

it

is

expensive; the cost of inspectors, equipment, and correcting

th e

defects at the final stage is high.

At

worst, the defective product

must

be

scrapped, totally wasting the item. Even when the item

ca n

be

salvaged, the rework and repair adds substantially to the

cost.

Quality improvement efforts in many companies have shown

that inspection is an inadequate approach.

It is much better and

less expensive to produce the product correctly in the first place.

The key to this is error cause removal, which means identifying

the cause of the defect

or

error and then eliminating it.

Once

the

cause

i s e li mi na te d, t he d ef ec t

cannot

occur. Systematically

d on e, t hi s a pp ro ac h i s f ar le ss e xp en si ve a nd i s t he b est w ay t o

achieve virtually zero defects.

Fo r example

billing invoices fo r

domestic

pagers from

Motorola had

45 0

errors out of 22,000 total invoices.

Th e

errors

included wrong

or

omitted serial numbers, freight amounts,

or

carriers. I n jus t· o ne year, t he error rate was c ut t o n in e o ut of

20,000. This would have been impossible to do

by

inspection.

Instead, the causes of t he defe ct s w er e r oo te d o ut o ne by one.

Th e

team

working

on

this problem noticed that

some

of

the

infonnation was already in the computer and did no t need to be

recopied, which eliminated the possibility of error in that step.

Other infonnation was available from the ba r coding system,

and fonn simplification cut the remaining e r r o r s ~

7

A no th er e xa mp le i s f ro m t he Peo pl e s Bank of Bridgeport,

CT, which· ha d a h ig h e rro r rate for its tellers i n t he p roo fi ng

department.

Fo r

e ac h e rr or f oun d, a spe ci al c or re ct io n n ot ic e

ha d to be issued, which was.expensive. To solve the problem,

extra

inspection, training,

an d

management·

encouragement

were attempted, but that did not help the situation. Finally, the

bank tried to eliminate the root causes of the errors. It

d i s c o v ~

e re d t ha t t he t el le rs h ad t o k no w h ow t o d o 7 8 o pe ra ti ons. T he

bank

standardized documents and reorganized the system so

that the tellers needed to do only 12 operations.

Th e

errors vir

tually disappeared.

Whether

in

manufacturing

or

service activities, defects are

rarely

c ut b y

increasing inspection. Getting rid

of

the root caus

es

of

the errors is usually cheaper and more effective.

istake : elieving that quality improvement

is

too

expensive

Many executives believe that quality

improvement

is too

expensive when, in fact, the opposite is true-quality

cuts costs.

Q ua li ty r eq ui re s d oi ng t he r ig ht jo b r ig ht t he fi rs t t im e, a nd

d oi ng t he r ig ht job ·is c he ap er t ha n do ing t he w ro ng j ob . A ny

task that must be redone or product that must be reworked adds

cost. Any infonnation that is incorrect and must be revised adds

cost.

An y

waste

of

people s

time, s uch as h avi ng to w ai t

an

excessively long time for top management to make a decision,

adds to t he cost. T he m or e righ t things that are do ne r ig ht the

first t ime , t he m or e m on ey that is saved. T ha t i s

wh y

quality

saves money, and all of the Baldrige Award winners have docu

mented proof of this.

On e

of the curious facts about quality is that costs tend to go

d ow n m or e

r a pid ly th an

e xp ec te d. T hi s i s because

quality

improvement in one area often cuts costs in other areas, thereby

reaping multiple

savings.

For e xa mple a

firm

d ec id ed t o

improve the quality of the information generated

by

its comput

erized inventory system.

8

Its computers would show that a prod

uct was in inventory when, in fact, there was no such product on

Quality Progress June 1994


4/6

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the shelf, or they would show that a product was unavailable

when there were still several in stock. Even though this hap

pened only a small percentage of.the time, people often had to

call the warehouse to check whether an item was in stock ornot.

To

improve this system, the finn set up a special team to get

rid of the defects. Any time a problem arose, the team would

count the inventory and check out what had gone wrong. Many

problems were found and resolved. Part numbers were simpli

fied and corrected, storage was rearranged, and the computer

software was improved. After a couple months of effort, the

computerized inventory system was made reliable, dependable,

and aGcurate.An 'immediate savings was in the elimination

of

phone calls checking whether an item was in stock.

Then came an unexpected twist. Twice a year the finn took

physical inventory and counted everything in stock. Soon after

the computerized inventory system was corrected, a physical

count was made. The numbers from the physical count, howev

er, were different from those that the computer reported. The

physical count showed the computer count to be wrong. The

quality team was upset and felt demoralized. After all

of

the

effort to improve the computerized inventory system, the team

members thought that it had failed.

The. quality team, however, decided to check the physical

count. Since everyone in the finn helped do the physical count,

it turned out that many people made errors because they did not

understand the parts number system or the storage system.. The

physical count, therefore, was·wrong, and the computer count

of the inventory was more accurate. The biannual physical

inventory was stopped since it was not as accurate as the com

puter system,·and the computer data were then used for al l

fmancial reporting.

In addition, th e accounting department had two computer

programmers developing software for the physical count, which

was.

necessary because

of

the finn's changing product mix, con

sisting

of

a variety

of

electronic test and computer equipment.

Now, with the physical count eliminated, the programmers were

no longer needed for that task.

The people who ha d started the project

of

correcting the

errors in the computer system had no concept that other.savings

would result. Phone calls from people trying to fmd out what

was in stock, physical counts of inventory, andthe need,

fOf

revi

sions to the inventory computer program were eliminated.

Most systems consist of many parts or steps in which one

part feeds information or material to the next.. As the quality

of

one part of the.system improves, it sends higher-quality infor

mation or material to the subsequent steps in the process. That

higher-quality input produces a cost reduction in those steps.

Since the interconnection

of

systems is often complex, some

t imes , as in the inventory example, i t is dif ficult to foresee

exactly where the cost reductions will occur.

Bu t

as quality

improves in one operation, costsalmost always drop not only in

that operation, but also in other operations.

ist ke

n ging intuition and

not

f ct

Most CEOs strongly believe in their judgment. After all, that

is the essence

of

being a CEO-having the background, judg

ment, and intuition to make good decisions. Research, however,

tells a different story. Many behavioral science studies have ver

ified that intuition and judgment are not nearly as sound as we

are led to believe. effect, people's brains lie to them and tell

them their judgment is much better than it really is

46 Quality Progress

June

1994

The book e ision r ps by 1. Edward Russo and Paul 1

Schoemaker, for example, details some of the fallacies that p

ple s

brains tell them.

9

In December

of

one year, executi

were asked to predict sales for the following year. More tha

year later and after the actual annual sales figures were sha

with everyone, the executives were asked to recall their pred

tions, and they remembered them as being much closer to

actual outcome than they really were. essence, once the ac

al figures were known, the brain subconsciously distorted

recalled the predictions as closer to the actual outcome.

Once a person knows an out

'come, his

or

her brain adjusts

its memory.

Th e p erson

then

thinks that his or her judgment

was far bet ter than i t actually

was. Judgment also gets distort

ed because the brain tends to

p ay m or e

attention to recent,

unusual, or emotional events.

Management

by fact

no t

intuition, strives to

surmount

this predicament.

On e

of the

m o st c om m on

areas for mis

judgment is i n a s su m in g to

know the needs

of

customers.

Almost. all presumptions about

customers are wrong. Whitman Corporation in Chicago,

was concerned that its customers were upset because of dama

to goods during shipment. It launched a project to reduce

shipping damage and succeeded after some effort. Only la

did it learn that the customers were disappointed and thou

the old shipping method was better. Although the new pack

ing protected the contents well, it was extremely hard for

customers to open.IO

At

First National Bank

of

Chicago in lliinois, the manag

thought that the most important thing to customers was fa

courteous service. When the customers were surveyed, how

er, that i te m ra nk ed fourth in importance. Th e c ust ome

biggest concern was employees who said they would get ba

to them on an issue, but then did not.

I I

The need for management·by fact extends not just to c

tomers, but to any act ion

or

decision that

can be

made,

demonstrated in the following examples. A·finn was proud t

it had reduced its defect rates to

5

from 15 . When asked

the facts, it produced some charts that showed a 5 defect r

for several months. There was no indication, however, that

defect rate was previously 15 . When pushed further, someo

recalled that someone else had said the defect rate was at le

15

at some point last year. Someone else then recollected t

when new machines were ins talled the defect r at e s hot

briefly, and perhaps, that unique occurrence accounted for

15 .12

Another finn was proud

of

the new sales techniques its sal

people were using. When questioned, however, they could p

duce no proof of increased sales and justified it by replying t

the salespeople had only recently been trained so it was t

early for proof. When the training was investigated, it was d

covered that only 60 of the salespeople had attended the tra

in g session. When those attendees were questioned

mo

thought the training was useless and too theoretical, so th

never implemented it.


5/6

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Compaq computer also searches for facts and, according to

Vice President Hugh Barnes, continually uses sanity checks and

cross-checks.I

4

Just because_ an executive says somethIng, that

does not mean the statement is gospel. Suppose an executive

p red ict s that the sales for a prod uc t will b e 5 ,0 00 units. Tha t

statement

is

questioned, and the facts are sought. Is it the per

son s surmise? Is it based on market surveys? Is it based on firm

orders? The degree

of

validity

of

the statement is thereby deter

mined.

The mind, behavioral scientists know, searches for evidence

to confrim its beliefs and denies the validity or existence

of

con

trary or additional evidence. The best antidote to these distor

t io ns is-ma na ge me nt b y fact. The facts a re u su al ly e asie r t o

obtain and considerably-more useful than most people believe.

Baldrige Award winners tend to collect a great deal

of

informa

tion and use it extensively in their decision processes.

ist ke : Using

misguidQd

incentives and

developing

distorled culture

CEOs-often sincerely try to institute beneficial changes, such

as launching a quality program. They allocate resources, train

people, _and establish goals. But after a year of waiting, they

have gained little in return for their time and money. Why does

this occur?

O bt ai ni ng a siz ab le c ha ng e i n a n o rg an iz at io n req ui re s a

major revision in the culture, and a CEO s program to improve

quality will havelittle impact if the incentives are wrong for the

culture. This frequently occurs, for example, when managers

are encouraged to attain.monthly production quotas, even

if

it

means shipping poor-quality products.

Another common incentive is the promotion

of

managers

w ho a re d ee me d g oo d c ri si s o r fire-fi gh ti ng man ag ers. The

manager who

is

considered a star is the one who marshals the

resources, gets everyone to work overtime, and resolves crises.

Top management hears

of

these heroics and promotion occurs.

Rarely does anyone ask, however, why this manager permitted

so many crises to happen.

One important tenet

of

quality is to keep the system under

control so that defects or crises rarely occur. The best executives

follow this philosophy and work to reduce the number

of

crises

Without the crises to get top management s attention, however,

these people might work with little honor or promotion.

Trouble might also ensue

if

the overriding culture

is

based on

cost reduction. Some managers will cut back on training, main

tenance, and new product

d e v e l o p ~ e n t .

Those actions cut cost,

but they have no chance to positively influence the company.

This manager will keep costs very low, look good to top man

agement, and receive a promotion in 18 to 24 months. The man

ager after him or her, however, is left with depleted resources

and the inability to compete. Implementing a quality program

often means making careful investigation of

the cultural aspects

of

the organization that might defeat it.

ist ke 8: Changing

t rgets

e ch ye r

Most CEOs have an annual planning process, similar to man

agement by objectives, in which

goals

are established for the

n ex t year. The o ve ra ll gb al s a re set b y top mana ge me nt, a nd

then lower levels get their goals after some debate and discus

sion in-a cascading process. In theory, if managers have reason

able _goals and incentives, then

most

g oa ls w il l b e a cc om -

plished. In actual practice, however, high levels

of

accomplish

ment rarely occur.

To

chieve ny re lly impor t n t nd ch ll enging

go l

requires training, investment, management reviews, incentives,

worker involvement, and cultural changes. All of this takes time

and effort to implement.

f

new goals are instituted annually,

management gets involved with new goals and directions before

it can get fully underway on the old goals.

How can a CEO overcome this? Although some of the annual

goals can change yearly, a few should be so fundamental and

crucial that they persist into the foreseeable future. Motorola

has instituted three such goals for the entire firm: quality, cycle

time, and cost reduction. It took years to develop and implement

the systems to ensure progress on these goals and for some peo-

. pIe to realize that the CEO was really serious about them.

I

Although some goals will have to be revised annually, chang

ing too many goals too fast will confuse middle management

and employees. Instead, top management should identify the

fundamental factors that underpin the firm s success.

To

imple

ment these factors, top management should include a few cardi

nal goals as

well as the systems to achieve them training, man

agement reviews, and incentives).

ist ke 9:

F ailing to follow the best pr ctices

Near the end

of

the 1970s, Xerox was confronted by formi

dable competition from Japanese firms. The Japanese were sell

ing copiers at a cost comparable to Xerox s manufacturing cost.

Xerox s market share was plunging. After years

of

disregarding

its Japanese competition, Xerox had to confront reality.

Although Xerox launched several.programs in its counterat

tack, perhaps the most crucial was benchmarking. With bench

marking, employees in the organization determined the best

practices in the industry. -They learned about these best prac

tices, i mp le me nt ed the m, an d b ec am e the be st at the m. Al l

functions

of

the firm, not just manufacturing, were required to

benchmark, including shipping, internal auditing, treasury, and

training. Xerox, like most manufacturing

fIrmS

had most

of

its

costs not in manufacturing, but in overhead and general admin

istration. Therefore, all parts

of

the fmn had to benchmark and

learn how to become the best at what they did.

I

An important aspect

of

benchmarking is to.look for the best

practices not just i nsid e o ne s i ndu st ry b ut also o ut sid e. For

warehousing, for example, Xerox benchmarked against L.L.

B ea n. G oi ng o ut si de o ne s i nd ustry mig ht , in fact, b e e asie r

because direct competitors are less likely to share information.

IBM Rochester, a Baldrige Award winner, for example, bench

marks itself against 200 other leading fiims from both inside

and outside its industry.17

Benchmarking is a powerful concept. But despite the obvious

value

of

learning from the best, many managers will perceive

the process as threatening and deny its value. They will object

that other fmns are different and--not comparable and argue that

what another fmn does is not relevant. At Xerox, people gave

repeated rationalizations and justifications for not benchmark

ing such as the fact that the Japanese have a different culture,

g et g ov er nm en t s up po rt , a nd h av e a b et te r s ch oo l s ys te m.

Denial of the situation was rampant, and Xerox leadership had

to convince people that they could learn and improve by study

ing other organizations.

I8

The most difficult part of benchmark

ing is not the process itself, but in getting people to do it.

Benchmarking requires leadership to help people face the

Quality Progress June 1994 47


6/6

Acknowledgment

The author wishes to thank George Easton, University of Chica

for his extensive help in writing this paper.

Willard I.

Zangwill is a professor

of

management science at

Graduate School of Business, University of Chicago. He has a doct

ate in operations research from Stanford University in Californ

Zangwill is an ASQCmember.

References

1.

Lucien Rhodes with Patrica Amend, The Turnaround, I

August 1986, p. 42.

2. Johnathan P. Hicks, A Tire Outdistances Its Rivals, New Y

Times May 8 1990.

3. IBM Rochester, 1990Winnerof the Malcolm Baldrige Natio

Quality Award, IBM, Rochester, MN, 1990.

4. N.R. Kleinfield, How 'Strykeforce' Beat the Clock, New Y

Times

March 25,1990, p. 1.

5. Robert Galvin, chairman

of

the executive committee, Motor

Guest Lecture at Graduate School

of

Business, University

of

Chica

Feb.

13

1991.

6. Joseph M. Juran, editor in chief, and Frank M. Gryna, assoc

editor, Juran s Quality Control Handbook (New York,

NY:

McGra

Hill Book Company, 1988), Section

18.

7. Paul Noakes, vice president , Motorola,private conversati

March

18 1991 .

8. J.

Timothy Fuller and Willard Zangwill, Repealing the Law

Diminishing Returns for Quality, Report, University of Chica

Graduate School of Business, Nov. 3,1989.

9. J.

Edward Russo and Paul J.H. Shoemaker,

Decision Traps

(N

York,

NY:

Simon and Schuster, 1989).

10.

William Naumann, vice president, Whitman Corporation, Gu

Lecture at Graduate School

of

Business, University

of

Chica

Nov. 30, 1992.

11. Aleta Holub, vice president, First National Bank of Chica

personal interview, Jan. 18, 1992.

12. William Naumann, vice president, Whitman Corporation, Gu

Lecture at Graduate School of Business, University of Chica

Nov. 30, 1992.,

13. Tim Fuller, lecturer, Special Seminar, University of Chica

Winter 1991.

14.

Hugh Barnes, vice president, Compaq Computer, personal int

view, May 18,1992.

15. Paul Noakes, vice president, Motorola, private conversati

March 18, 1991.

16. Barry Bebb, retired vice president, Xerox, personal intervie

Jan. 29, 1992.

17. IBM Rochester, 1990-Winner of the

Malcolm Baldr

National Quality Award, IBM, Rochester, MN, 1990.

18.

Barry Bebb, retired vice president, Xerox, personal intervie

Jan. 29, 1992.

19. George Easton, professor, Graduate School

of

Busine

University of Chicago, personal interview,May 18, 1991.

Fair

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fact' that they are not the best and must therefore improve. It

also requires hard work to know one's own process thoroughly

and to understand and learn from the benchmarking process.

Most

of

all, it requires a CEO who knows that world-class suc

cess cannot be achieved with second-class operations.

Mistake 1 :

Believing Baldrige ward examiners

are stupid

The Baldrige Award

is

an award given for outstanding quali

ty to companies applying in three categories: manufacturing; ,

service, and small business (no more than 500 employees). To

apply, companies must complete the Baldrige Award examina

tion process, which requires making detailed descriptions

of

the

company's total quality systems. Many firms, however, make

the mistake

of

submitting m t ~ r i l that resembles a public rela

tions piece. This,might occur because

of

the company's natural

enthusiasm for its achievement., More likely, it is, because the

company lacks well-defined, well-documented, and measurable

quality systems.

A rule

of

thumb for determining whether a good quality system

exists is to audit the process.

An

audit will detennine whether

tpe.companY is making progress

in

a particular area and what to

dO if it is n o ~ . : i . . p o o r . s y s t e ~ , f o r example, will likely have one

ormQre

of

the.following problems: no clearly established goals,

no

means to measure progress toward the goals, and no w e l l ~

defined process of identifying and correcting problems.

Most Baldrige,Award,applicants have fairly good systems in

the.

processes', that directly generate the products and services.

The 'weak systems are generally seen in leadership, planning,

product

development, and administrative activities. The lack of

systems

in

these areas often becomes apparent in applicants'

responses to questions asking

how

these processes are

improved. The companies might respond by i n d i ~ t i n g that they

have meetings or that a particular person, such as the division

manager,has responsibility for, the activity.

Or

they might

try

a

publicrelations approach such as, We at the

Z

company are

always looking for ways to improve our strategic quality plan

ningprocess.We

believe that quality is one

of

the most impor

tant components

of

our business plan, and thus, quality is an

integral part of, our strategic planning process. The company,

however, never directly describes how the process is systemati

cally improved.

Another example

is an

organization s description

of a

process that ensures that customer service requirements are

understood and responded to throughout the company. 19

An

. inadequate response would be:

We

believe that a customer

focus is a key element in our continued success. Every customer

contact department has signs posted stating 'Service and cour

tesy are our business. ' In addition, all internal stationery for

memos has 'Treat the Customer Right' imprinted prominently

in· the letterhead. Again, there is no discussion

of

the system.

Virtually every issue addressed in the Baldrige Award criteria

asks for a description

of

the management system or process the

company uses for that issue. This means how the process, is

monitored, how it is improved, and what the results have been

both in tenns

of

improvements over time and in comparison

to

competitors and world-class companies.

When no

system

exists, it is

tempting

to resort to public relations statements

about the importance

of

quality and customer satisfaction. The

Baldrige Award examiners, however, are not stupid enough to

be

fooled.

Quality rogress

une

1994

ten mistakes ceos make about quality

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