Case Game: The Case Of Quality Management

CASE GAME
The Case Of Quality Management
Contd.

THE DISCUSSION

RAM AGARWAL
Exec. Vice President, Wipro

There are a few basics that are universal to all TQM initiatives. Training is one of them. An organisation needs to train people, across the board, on the tools, methodologies, and the objectives of TQM. It needs to build tenacity-a determination to achieve pre-set goals-at all levels. People should not be intimidated by failure. And it also needs to build patience.

The TQM culture grows slowly. But once it takes root, it spreads with minimal nurturing. TQM always starts with the customer and the marketplace. It makes people flexible so that they can respond to the changing needs of the customer. Finally, of course, TQM is all about people and processes.

If one were to audit the TQM journey at Total Industries against these basics, the concerns of Kumar and his team are quite natural. Take the one relating to value. Organisations create value when they provide goods and services in a competitive marketplace at a price that is higher than what it costs them to make these products. TQM has already started creating value at Total: it has helped reduce the COPQ from 36.2 per cent to 32.2 per cent.

Having tracked COPQ for a while, Kumar and his team should now analyse the basis of this value creation more closely. Part of this value would, of course, be due to TQM initiatives, but part of it could also be due to factors that have nothing to do with TQM-like an unexpected surge in sales from, say, a large institutional order. These should be analysed in detail before jumping headlong into conclusions about the merits and demerits of the quality movement. One tool in TQM is MAIC-Measure, Analyse, Initiate, and Control. That is what Total should do. The good news is that Total has the data. Now the data must be put to good use. A detailed analysis of the customer profile, for instance, would show the reasons why the Switchgears division has been continuously losing marketshare.

Quality is like attaining nirvana. There are several roads leading to it. No road is right and wrong. The road taken by Total can be modified, based on the learning and the experience gained so far. One major gap appears to be absence of the marketing function in the TQM structure. This must be corrected. It will ensure that Kumar and his team do not get the kind of surprises they did in with switchgears.

Another lacuna in Total's TQM drive is the absence of a change agent. A cascading structure is fine, but it is not sufficient. You need someone who can guide the progress of TQM, monitor the performance, and ensure that everyone stays on track. In fact, Total needs an in-house guru. He could be a bright and experienced line manager who has the energy and tenacity to brave the changing times.

L.S. MURTY
Assoc. Prof., IIM (Bangalore)

The management at Total has taken an informed decision to adopt TQM as part of its objective of getting closer to customers. Its approach to TQM has been textbook-perfect. The management established a sense of urgency, formed a powerful guiding coalition, created a vision, communicated the vision, empowered others to act on the vision, and planned for and created short-term wins. And yet, paradoxically, the management is questioning the success and the very validity of the TQM initiatives.

Needless to say, Total's objective is to be competitive in the market and thus improve its results. But the management has focused on cost reduction and adopted COPQ as an important parameter. It has measured COPQ and tracked the performance improvement over the past 10 months. Customer orientation has several dimensions such as response time, providing variety, and cost reduction, which are inter-related. Sometimes this relation could be negative and undesirable. For instance, cost reduction initiatives seek to standardise products and thus fail to provide the requisite variety.

Given its competent and committed management, it is not surprising that Total Industries achieved cost reduction. But this spelt disaster for the Switchgears division. By focusing on customer orientation in a polarised fashion, the division developed customised special-purpose switchgears, and, in the process, lost the cost advantages in the larger general-purpose switchgears segment. The focus on COPQ also did not help raise marketshare, probably because the large firms that use special-purpose switchgears do not value the cost reductions much. This seems to be a classic case of what Harvard Professor Michael Porter calls ''stuck in the middle''.

It would be a catastrophe if such reductions have come at the expense of market-valued variety or response time. Managers have to be clear about this interplay between the various important, yet conflicting, performance parameters. Incorrect performance measures can make even proven programmes fail. The Balanced Scorecard approach is valuable in this context.

Total has to consciously study its business context and identify a set of objectives, which should then be prioritised. And though the set may be the same for the four divisions, it is more likely that the priorities will be different. For instance, while cost is an important parameter for all the divisions, it is more important for the Soaps & Oils division than, say, Switchgears.

Total must rethink its target markets, and identify and prioritise the relevant parameters. An exclusive exercise should be done for each division of the company. Detailed TQM programmes could then be designed, and implemented in each division. On the other hand, a centralised TQM programme, such as the one led by Roy of the Soaps & Oils division, could lead to mixed results.

RAVINDER SINGH
COO, Institute of Quality Ltd

Some of the initial steps taken at Total for implementing TQM, like setting up councils at the apex and business levels, and revisiting key business drivers, are in the right direction. However, the subsequent focus and actions have not supported the overall objectives outlined by the management.

Despite the management's intention of implementing TQM in areas like Strategic Planning, HRD, and Relationship Marketing, and not just in Operations, Phase iii of the implementation of TQM at Total Industries seems to have been based on a silo approach rather than a holistic approach encompassing all the functions and their cross relationships. The organisation needs to re-orient its quality initiative through the introduction of a few changes based on the Balanced Scorecard methodology.

Besides training its executives in all aspects of quality, Total should focus on COPQ for the entire organisation and not just the manufacturing processes. If this had been done, the increase in COPQ resulting from dissatisfied customers and lost markets would have been several times the COPQ reduction on account of internal process improvements. This would have given Total a comprehensive picture of the impact of the changes.

Total should establish a system for approving any major changes in its operating processes. Such a formal system would have prevented the implementation of changes that led to the neglect of the largest customer base of the Switchgears division, the retail segment. This approach will ensure the integrity of the changes implemented through a study of its impact in other areas.

Total Industries should identify measurements to monitor indicators such as customer satisfaction, new customer acquisition, and marketshares in targeted segments. Some of the critical processes that the organisation should measure and improve are product development, supply chain management, manufacturing, marketing, and after sales service and support. The finance measures should examine the financial consequences of the company's strategies and their implementation.

At Total, a review system based on metrics in these core areas will provide the management with critical information that will help it oversee the long-term functioning of the company and the successful implementation of the TQM initiative.

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