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    Total quality management

    TQM is an integrative philosophy of management for continuously improving

    the quality of products and processes. TQM functions on the premise that the

    quality of products and processes is the responsibility of everyone who is involved

    with the creation or consumption of the products or services offered by an

    organization. In other words, TQM capitalizes on the involvement of management,

    workforce, suppliers, and even customers, in order to meet or exceed customer

    expectations. TQM practices as cross-functional product design, process

    management, supplier quality management, customer involvement, information

    and feedback, committed leadership, strategic planning, cross-functional training,

    and employee involvement

    Total Quality Management (TQM) is a comprehensive and structured approach to

    organizational management that seeks to improve the quality of products and

    services through ongoing refinements in response to continuous feedback. TQMrequirements may be defined separately for a particular organization or may be in

    adherence to established standards,such as the International Organization for

    Standardization's ISO 9000 series. TQM can be applied to any type of

    organization; the manufacturing sector and for use in almost every type of

    organization imaginable, including schools, highway maintenance, hotel

    management, and churches. TQM is based on quality management from thecustomer's point of view.

    TQM processes are divided into four sequential categories: plan,do,check,and

    act.In the planningphase, people define the problem to be addressed, collectrelevant data, and ascertain the problem's root cause; in the doingphase, people

    develop and implement a solution, and decide upon a measurement to gauge its

    effectiveness; in the checkingphase, people confirm the results through before-

    and-after data comparison; in the actingphase,people document their results,

    inform others about process changes, and make recommendations for the problemto be addressed in the next PDCA cycle.

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    TOTAL QUALITY MANAGEMENT IN THE HOSPITALITY INDUSTRY

    Quality in the hospitality industry

    Quality is considered to be of very great importance in the hospitalityindustry.

    Mill (1986) identifies the aim of service quality as being able to ensure a satisfiedcustomer. However, the focus of quality initiatives has been primarily on selection

    and training of front line staff (see, for example, Gober & Tannehill, 1984; Mill,

    1986; Cathcart 1988). The issues of measurement and process improvement have

    been largely neglected.

    The Mayfair Crest Hotel in Brisbane, Queensland, has adopted an approach to

    service quality which resembles TQM. Kerr et al. (1988) describe this approach. It

    is based on an overall mission for the hotel: "The Spirit of the Mayfair Crest is

    Serving You". This mission was cascaded through the hotel by each departmentand subsequently each employee being asked to define the meaning of this mission

    in their own context. Thus the overall direction of the staff of the hotel was brought

    together to develop the teamwork that is vital to TQM.

    However, the issue of measurement still remained a problem. Only feedback from

    'How do you rate us?' forms and indirect measures of employee satisfaction were

    used to measure their performance. Like all such measures, they are received too

    late to prevent a problem affecting a customer.

    How can appropriate measurements be developed for a hotel that can complete thequality triangle and fully implement the TQM ideal?

    Internal and external service quality measures

    Service quality, which always involves the customer as part of a transaction, will

    therefore always be a balance: the balance between the expectations that the

    customer had and their perceptions of the service received. A 'high quality' service

    is one where the customer's perceptions meet or exceed their expectations.

    The components of perceived service quality have been identified (Parasuraman etal., 1988) as

    1. Reliability: the ability to provide a service as expected by the customer.2. Assurance: the degree to which the customer can feel confident that the

    service will be correctly provided.

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    Tangibles: the quality of the physical environment and materials used in providing the service.

    3. Responsiveness: the ability of the service provider to respond to theindividual needs of a particular customer.

    4. Empathy: the courtesy, understanding and friendliness shown by the serviceprovider.

    Note that these are external measures: they can be obtained only after the service is

    delivered. They thus suffer from the problems noted above for service quality

    measures: a failure can be detected only when it is too late to respond.

    Such measures have great value, but not in the ongoing business of monitoring and

    improving quality. Rather they can indicate the targets that must be aimed for.

    They define what the customer is expecting and so what we must aim to deliver. In

    order to deliver these expectations, we need internal measures: measures that willtell us how we can deliver what the customer expects. More importantly, how we

    can know before delivery that the service will exceed the customer's expectations?

    Zimmerman & Enell (1988) advise that careful consultation with the customer and

    an appraisal of the performance of competitors is needed in order to create any

    scales or measurements of quality which they place in a narrowed down

    framework of four quality standards. The four service quality categories are:

    timeliness;

    integrity;

    predictability;

    customer satisfaction.

    Timeliness of service has been referred to by a number of authors as an important

    component in the quality of a service. It is a reasonable feature of service to be

    given high priority because the service has to be produced on demand and the

    interval in provision is an element of the actual product.

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    TQM IN BANKING

    Most bankers would like to believe that banks are in the finance industry, and not in theservice industry. Thus they tend to compete in terms of financial prowess rather thanservice quality. People, resources, time, and systems are devoted more to managing

    assets and cash rather than managing customers and service. In fact most banksystems are designed to control customers rather than satisfy customers. Products andprocedures are set up for the convenience of the bank rather than that of the customer.

    A big bank may have as many as three vice presidents responsible for guarding itsassets, but no one to take care of customer service and complaints. Banks usually givecustomer service and satisfaction very low priority, and accordingly assign it to a lowlevel, if not lowly-paid, manager. Few or none of the bank's elaborate systems andstructures are designed to monitor and maintain customer loyalty.

    The lifeblood of any business is its customers. Profit comes from sales minus cost.Sales must be realized first before cost becomes relevant. Customers decide sales

    based on their perception of product and service quality. In short, quality determinesprofits, and customers alone define and determines what that quality is and should be.

    Fast-food chains, airlines, hotels, supermarkets and other service sectors have startedto embrace quality as their raison detre, following the success of the quality movement,known as Total Quality Management (TQM) in the manufacturing sector. Banks andother financial institutions, like insurance companies and investment houses, arerelatively slow in shifting into this customer-first paradigm. Historically, banks wereconceived as sophisticated control systems since it does business with the most liquidof assets: cash. Banks have to maintain image, reputation, and credibility in order to dotheir job as custodians of other people's money. But over the years, the complex

    systems and bureaucracy were set up and added in the name of control whilesacrificing and neglecting customer service in the process.

    Total Quality Management (TQM), which is about total customer service and continuouscustomer satisfaction, is applicable not only in the manufacturing industry but in theservice sector as well, where the customer is just as important. In fact, customers in theservice industry are more sensitive to service quality and service delivery than inmanufacturing because they are always in contact with front-line service personnel,which is not the case with factory workers. These points-of-purchase contact or"moments of truth" decide whether the customer will come back or shift to the next doorcompetitor.

    The banking industry, often the biggest service industry in any country stand to benefitfrom TQM. For one basic reason: banks depend on customer satisfaction and loyalty fortheir survival, but ironically, very few really pay much attention to the plight of theirclients - before, during, and after sales.

    Many banks are managed by finance people, with little or no training in customerservice. Good service does not happen naturally or by accident. Good service is

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    planned and managed. Without planning, bad service is the natural state of affairs. Asthe quality guru, Dr. W. Edwards Deming put it, to improve service quality, one has tohave profound knowledge of the service delivery system. Bankers tend to think thatmoney - not the customer - matters. They find it hard to accept that banks are in theservice industry in the same league as McDonalds, Singapore Airlines, Federal

    Express, Domino Pizza, and Marks & Spencer. Because of this antiquated paradigm,banks could not appreciate the excellent and valuable lessons in customer service andpeople management which these world-class service institutions could offer for free.Customer service will not improve if banks just learn and copy from other banks: theworld class bank in terms of service does not exist yet.

    In general, the bigger the bank, the more inferior the service because of complacencyand bureaucracy which stifle both innovation and efficiency in customer service. The bigbank can lose customers because of bad or slow service but can easily replace themwith new and even bigger customers,thus hiding the service problem.

    Presently banks are ranked, benchmarked, and judged of their success by sheer size,financial resources, and other quantitative measures which hardly indicate customerservice quality: asset base, number of ATM's (automated teller machines), number oftransactions, number of depositors, amount of loans released, etc. Bank executives aremainly involved in asset management (the bigger the better), cash flow management,spread management (the wider the better), asset/liability management, and financialratio analysis.

    According to John A. Young, President & CEO, Hewlett - Packard, "Our one major goalis to create satisfied customers. Hence, all systems, objectives, and measurements aredesigned to improve customer satisfaction." A bank applying TQM should track as goals

    and benchmarks those that matter to the customer:

    y processing times of key products and services, like loans, new accounts, ATMcards, credit cards, check encashment;

    y waiting times like downtime and queuing time;y customer complaints, written or verbal;y friendliness and efficiency of staff;y accuracy and timeliness of statements of accounts and records;y effective interest rates, inclusive of all service and hidden charges;y promptness in responding to customer inquiries such as in answering the phone,

    the number of rings before phone is picked up, and number of transfers beforethe caller talks to the right person.

    y lost customers and accounts

    These service indices should then be audited as regularly and as conscientiously as thebank internal auditors audit cash flows, transactions, and balances. McDonald'sinspectors, equipped with standards and stopwatches, regularly check branchperformance in terms of quality, service, cleanliness, and value. They make sure allbranches have the same consistency in product and service quality. In other words, the

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    customers will not have any "surprises". Contrast this to banks, whose service qualitydiffers by branch, location, and branch managers. To aggravate the problem, headoffice rates and promotes branch managers based on the sheer business the branchgenerates: loans released, interest earned, and deposits generated; they are seldomevaluated on customers satisfaction, service, and complaints, No wonder branch

    managers do not pay attention to customer service since it does not affect theirperformance evaluation. Most banks therefore do not have a system to handle errors orcustomer complaints, verbal or written, .

    Electronic network companies which serve the banking industry's ATM needs oftenproudly compare themselves through print media in terms of number and amount oftransactions, number of machines installed, and number of member banks. But they aresilent on what is important to the ATM customer: machine and network downtime andbreakdown, which often cause a lot of inconvenience and frustration. User-friendlinessis another thing they forgot. One ATM I have used was not programmed to acceptdeposits, only withdrawals - a mysterious decision with a confused sense of business

    priorities. One of the networks was designed without the customer in mind. You key inyour PIN security code and then it prompts you to painstakingly enter all informationnecessary for the transaction. After waiting for a few anxious seconds, the machine tellsyou that the network is down or your bank is not connected to the network! Afterentering his security code, the machine should have told the customer immediately thathis transaction could not be processed, rather than waste his time answering questionsunnecessarily. Indeed, customer service is too important to be left in the hands offinance managers and/or software engineers and programmers. There are many otheranti-customer systems and policies that banks employ knowingly and unknowingly.

    Friendliness is just as important as efficiency to customers. Many banks have neglected

    the basics in salesmanship and service: no Greetings when meeting customers, noThank You's after any and every transaction, no Eye Contact with the customer, noApologies for having kept you waiting. In Japanese banks, tellers are trained to thankthe customer all the time even if he withdraws money, and to apologize if he was keptwaiting longer than the standard time. Depositors, borrowers, inquirers, in fact, anybodywho enters the bank are all treated as customers with immediate and thoroughattention. In contrast, the first to welcome customers in many banks in Asia are heavilyarmed security guards. Managment thinks that the only way to intimidate thieves is tointimidate everybody else, including their own customers. The banking industry hasprobably the largest training budget in the private sector, next to the airline; with somuch to be desired in customer service quality, these huge sums are obviously wastedin training the wrong people in the wrong things.

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    What are the consequences of bad service? According to the TARP report onConsumer Affairs submitted to the White House:

    y

    96% of unhappy customers never complain about rude or discourteous treatmenty 90% or more who are dissatisfied with the service they receive will not buy again

    or come backy each of those unhappy customers will tell his or her story to at least nine other

    peopley 13% of those unhappy former customers will tell their stories to more than 20

    people.

    The financial consequences of slow service and processing could also be staggering. Inmanufacturing, the quality cost, or the cost of not doing the right things right the firsttime, is estimated at 15%-35% of sales of any company. One major international credit

    card company I have studied in Indonesia was having a negative ROI or -7% becauseof system inefficiency in processing foreign billings and invoices. It took the company 3months from time it pays the member-merchants to the time it collects the money fromthe foreign card issuer. Analysis showed that if they could streamline operations, andcut this time to one week, the company could have a potential ROI of 112% ! Indeed,there is money in efficiency. But few banks realized that if they continuously cut allprocessing times, it becomes a WIN-WIN situation - customers are happier, and thebanks make more money.

    TQM starts with leadership committed to quality. I have yet to see a bank CEO whocould come down from his executive suite at least once a year and stay in the ground

    floor for one whole day observing and noting how customers are being served. Topexecutives could regularly pose as customers, tellers, or security guards to get a feel ofthe situation. If top management can perform this feat and institute meaningful changesand systems based on its observation and hands-on experience, then the bank is on itsway to becoming a truly world-class bank -a bank of service excellence.