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Dr. Lennart Sandholm
Professor and President, Sandholm Associates AB, Djursholm, Sweden

Strategic Plan for Sustainable Excellence

Paper to the 9th World Congress for Total Quality Management, Abu Dhabi U.A.E., 27-29 September 2004

Since the 1980's we can notice an increasing interest in quality. More and more organizations became involved with quality activities of various kinds. Management journals wrote quite a lot about quality. The range of conferences and seminars on quality started to grow. What about the quality of goods being produced and services provided? Has quality really been a success factor for companies in their business development? The answer isn't an unconditional "Yes". In many cases, only marginal results have been achieved when measured in increased profit, better customer satisfaction and other relevant measures. Why are the results not better? What can be done about it?

Organizations are increasingly finding that implementing a certain method is not enough. In order to achieve excellent results, it is necessary to tackle quality in a structured and long-term way. This means that, to start with, it is necessary to concentrate on a thorough planning of how the business has to be developed with a focus on quality. A strategic plan containing all quality related activities has to be developed. In the plan different concepts, approaches, and methods are combined in such a way that they will lead to good competitiveness and excellent business results. The aim must be to achieve a sustainable excellence.

Have quality initiatives usually led to essentially better quality?

There are several reasons for the growing interest in quality: customers' increasingly demanding quality requirements, tougher competition in the market place, demands for improved profitability, growing complexity of goods and services, product liability legislation. This is evident not only in the manufacturing sector but also in the services sector. The importance of quality is growing constantly in both the private sector and the public sector.

Many organizations concern themselves solely with whatever is in fashion at the time. The list of phenomena of this kind is long - quality circles, SPC, QFD, seven QC tools, ISO 9000, benchmarking, process reengineering, and so on. There is nothing wrong with these approaches as such. The problem is how they are used. They are applied as general, isolated methods for influencing quality, for the limited period while they are in fashion. Very few analyses are ever made of what is really needed. A methods-oriented approach takes precedence over a results-oriented approach. In consequence, many companies have not made much progress along the path to excellence. The underlying causes of this situation are often immaturity and ignorance among top executives.

J. M. Juran (Debbie Phillips-Donaldson, On Leadership, Quality Progress, Vol. 35, No. 8 (August 2002), pp. 24, 25.) gives several reasons why not better results have been achieved:
- Executives are skeptical; many companies have tried to "do" quality and failed.
- They have learned not to trust quality advocates - internal and external.
- Executives believe, "Our business is different."
- Many executives believe becoming certified to ISO 9000 will solve all quality problems.
- The varying quality terms and programs create confusion and a belief that higher quality costs more.
- Many executives believe that they can lead their organizations to quality leadership without becoming personally and deeply involved.

"Our business is different"

Of course, every business is different, maybe unique. Operations vary significantly. Some businesses produce goods, others supply services. Goods and services vary greatly. Businesses often work in different ways. Background, ownership, work organisation, etc. vary from business to business.

There are, however, many distinct similarities.

Similarity 1: Every business has a task
Every business has been set up to serve others. Depending on the nature of the business, these are called customers, buyers, users, patients, citizens, etc.

Every business aims to give something to those it has been set up to serve. For some businesses this means the supply of goods, for others this means the supply of services. In both cases, the 'something' is a product.

Similarity 2: The conditions are similar
An important feature of every organization is that it contains people who are engaged in work. Depending on the size and direction of the organization, these people are located in smaller or larger organizational units (departments, sections, groups, administrations, clinics etc.).

In every organization the people in the various organizational units carry out different types of tasks. These tasks contain different activities. What these activities have in common, however, is that they must result in something (i.e. goods or services) for those the business was set up to serve.

Similarity 3: The conditions have consequences
In businesses where people are divided into different organizational units, there are often deficiencies in the co-ordination of the activities the people are engaged in. What needs to be done and by whom is unclear. The division of responsibility can be vague. Maybe the responsibility can be clarified, but what about the authority linked to the responsibility?

Similarity 4: There is potential for improvement in every business
As a result of the conditions described above there are opportunities for considerable improvement in every business. This potential for improvement can be found in two areas irrespective of the type of business.

The first area is what the business results in, i.e. the goods and services the business supplies to those it has been set up for. The goods and services can be developed to satisfy additional needs and expectations, which means giving more to the customers. In addition, there are often deficiencies and faults that can be eliminated.

The other area is the way the business is run. All businesses are made up of processes. These are made up of activities linked together in different ways. The processes will result in goods and services. Some of these are ultimately intended for those the business was set up to serve, some are intended for those who support the internal operations. In both cases, there are opportunities for improved efficiency, shorter lead-times and reduction of deficiencies and faults.

Similarity 5: Leadership is necessary to realise the potential for improvement
In many businesses the large potential for improvement is not exploited. The reason is that the business lacks a professional, committed, consistent and clear leadership when it comes to quality. Top management may often talk of quality but this is not reflected in action. The deficiencies in the leadership for quality are clear.

Five stages of quality culture

The quality culture differs from organization to organization. In some organizations the quality culture is well developed, while in others the quality culture is very rudimentary.

According to the author's experience, five stages of quality culture can be identified.

Dormant stage
Within an organization in this stage of culture, there is no evident interest in becoming involved in quality or anything related to quality. Management thinks that things are fine as they are. Profitability is acceptable and there is a feeling of no external threat. This is the stage western industry was in, until around 1980.

Awakening stage
A more or less rude awakening might come. The situation is not as pleasant as it has been. Conditions have changed radically. Manufacturers in the western world come up against a type of competition they have not met before. They started to lose market shares and many companies started making losses. The reason was that Japanese competitors were overtaking them in the eyes of the customers. This crisis hit the western world around 1980.

Groping stage
When a crisis occurs, something has to be done. The question is "What to do?". In this situation, as very few top managers really know exactly how to bring quality into the activities, there is a tendency to have a go with whatever happens to be the latest fad in management magazines, as well as in conference and seminar invitations. That is to say, that there is a culture of relying on trendy methods and approaches. And over the past twenty years there have been plenty of fads: quality circles, SPC, QFD, ISO 9000, etc. There is nothing wrong with these methods as such, what is wrong is the way they are applied. They are used as general strategies of improving the performance of the organization in the quality field, without the situation first having been properly analyzed.

Action stage
Gradually it dawns that the input applied in the form of trendy methods and approaches has only generated marginal results. It is then that management might realize that measures of a quite different character are called for. This requires a strategic plan for business development followed by implementation (see below).

Maturity stage
In a culture of this stage, quality, and consequently a clear focus on customers, is a natural part of the operations. It is integrated into everything that is done in the organization. One might not even use the word quality. Quality is something completely natural, as natural as finance has been for years. The internal culture includes an ambition of continuous improvement of products and processes.

Learn from the successful companies

There are companies that are successful. These companies show a distinct result orientation and a good level of competence in the quality area. By carefully studying successful companies, the basis for an effective program for business development can be formed. The outstanding features of companies that have succeeded in their quality initiatives are given below.

- Work focused on customers
Activities are focused on satisfying the customers' needs - both external and internal customers.

- Competition watched closely
To be better than the competitors in the eyes of the external customers is an effective strategy for success.

- Measures based on facts
If measures taken are based on facts there is more chance of achieving better results. Opinions, beliefs and vague ideas are best avoided as a basis for making decisions.

- Work focused on results
In business, it is the results that count. Are our customers much more satisfied? Have we halved the cost of poor quality? The activities should focus on goals of this type. Blinkered focusing on methods that happen to be fashionable at the time is best avoided. These should be recognized for what they are - methods suitable to be used when an analysis indicates that use of such a method can lead to considerably better results.

- Chronic problems tackled systematically
Chronic problems, often hidden in the organization, count for great losses. Eliminating their root causes in a systematical and organized way leads to a great gain in profitability.

- Preventive measures taken
Launching of new products or services is done with a clear focus on meeting the customers' needs and wishes all from the beginning.

- Work characterized by action
It is action that gets results. Just talking will not get very far.

- Persistent and systematic work towards agreed goals
To achieve really worthwhile results persistent and systematic work is required. Consistent and regular action is necessary. "Quick fixes" that do not involve much effort will not get the company very far.

- Long-term view
Giving the business a long-term orientation is the only road to success. Short campaigns will not produce any lasting results.

- Hands-on leadership
The company's top executive provides a hands-on leadership characterized by commitment and visibility.

- Everyone involved
Excellent business results require the dedication and participation of everyone. Conditions for performing the work in a good way are provided by management.

- Everyone trained
To become a real quality organization means for many companies a transformation of the internal culture. Everyone's attitudes have to be changed; new skills are required in many areas. This is achieved by means of a massive training program aiming at all functions and all levels of the organization.

- Partnership with customers and suppliers
The company has an open and constructive co-operation with key customers and suppliers, to the benefit of both parties.

Strategic plan for business development

The four strategies as per above include many activities. These activities have to be integrated into a strategic plan for business development (see Figure 1) leading to an internal culture of business excellence characterized by:
- Customer focus
- Process orientation
- Participation and empowerment
- Continuous improvement

In the strategic plan, a variety of concepts, views and methods (even trendy ones) must be combined in such a way that they improve the organization's competitive ability and generate excellent business results.

Figure 1. Strategic plan for business development.

In the author's experience, an effective strategic plan for business development contains four components:

- Commitment of top management
- Cultural change
- Improvements
- Systematic approach

Commitment of top management
Without the clear and explicit commitment of the organization's top management there is no chance of achieving worthwhile results. The executive group must show by practical action that they are truly concerned with developing the business by focusing on total quality.

A plan for this type of business development should initially be aimed at creating such commitment. A good way of starting is to hold a one-day top management seminar. The purpose of this is to convince the executive group of the effect that a business development with a focus on total quality has in the form of better results. In addition, it should be made clear that it is the dedicated support of top management that will determine what results are achieved.

To obtain facts on which the design of the strategic plan can be based, the top management seminar should be followed by a quality culture assessment. An assessment carried out during a relatively limited period of time is usually enough to show where the weaknesses lie and thus where the opportunities for developing the business exist.

The result of the assessment could be presented to top management at a workshop. The aim of this workshop is to decide jointly what needs to be done to significantly improve the operational results. The strategic plan for the rest of the development work is drawn up here.

Management commitment also includes defining the organization's mission. This forms the basis of the work on vision and quality policy. Both the vision and the quality policy are to be communicated by management to everyone in the organization. Everyone should understand the meaning of this for his or her own work. In addition, management should be prepared to communicate to the personnel its overall concrete goals for the business. This includes quality goals.

Cultural change
The customers and their needs should govern all the activities within the organization. The underlying principle should be to satisfy the needs of both external and internal customers. For most organizations this will require a change in the internal culture.

The factor that determines how successful this type of change will be is the commitment of top managers and how they convey their intentions to the rest of the organization. This requires a comprehensive training program. This starts with a seminar for top management (see above under commitment of top management) and then continues down through the organization, level by level. The training is aimed at influencing attitudes to a business development with the focus on total quality and at providing the necessary knowledge about methods and techniques. The massive work required in the training field is dealt with in more detail above under Strategy 2.

Improvements
The improvement activities have two aims. One is to meet the customers' needs in a better way, the other is to improve all the processes within the organization.

Experience shows that the best results in improvement work are achieved by implementing one concrete improvement project after another, which is the approach used in the Six Sigma programs. Improvements are dealt with under Strategy 4 (see above).

The choice of improvement project should be made on the basis of information. The information can be obtained in different ways:

Operational results
It is easy to obtain information, using a limited effort, on the operational results of any organization. This could be reflected in the occurrence of faults and failures, complaints, process outputs, etc.

Problem identification
People in the organization usually find it easy to identify problems that need to be solved. A systematic identification of problems can thus serve as a useful start to the improvement work.

Process analysis
Studying and analyzing the organization's processes can provide a valuable basis for the improvement activities.

Customer-focused operations analysis
By a structured analysis of customers and customer needs, improvement opportunities will be found. External customers, as well as internal customers have to be considered.

Quality assessment
An assessment of the activities, for instance, with the aid of the criteria in a quality award scheme, can indicate where improvements are possible.

Poor quality costs
Information on the costs of poor quality, i.e. the costs that could be avoided if all products and processes were perfect, is a good starting point for the improvement work. This type of information provides a common basis for deciding on the importance of alternative improvement projects.

Customer attitudes
The customers' attitudes to the company's products and behavior are a key factor determining how successful the organization will be. It is therefore important to measure these attitudes. The information thus obtained serves as an important start of the improvement work.

Personnel attitudes
The attitudes of personnel towards the company's activities are very important for the operational results. It is therefore important to obtain information on the attitudes of the personnel through surveys. The results of these surveys can also be used as a basis for the improvement activities.

Benchmarking
Benchmarking is a way of learning to become better by making comparisons with successful organizations. This could be a useful point for starting the improvement process.

Systematic approach
The work needs to be conducted in a systematic way in order to achieve excellent results. This is where an appropriate quality management system comes in. Such a system should show how the different operations, which are essential to quality, should be carried out. The standards included in ISO 9000 can provide some guidance. However, it is up to each individual organization to work out the best systematic methods for their own needs.

Paper to the 9th World Congress for Total Quality Management, Abu Dhabi U.A.E., 27-29 September 2004

Dr. Lennart Sandholm
Professor and President, Sandholm Associates AB, Djursholm, Sweden