Cover Story: Total Quality Ltd

The historic story of how Sundaram-Clayton beat the world to win the Deming prize.

They are the Demingods. From the mud has sprung the lotus. From the quagmire of quality that India Inc. has become has emerged a flagbearer of global class. From the disdain for Total Quality Management (TQM) has come forth India's--and Asia's--first-ever winner of the Deming Prize for Overseas Companies: Sundaram-Clayton, the Chennai-based manufacturer of air-brake systems and castings, every rupee of whose turnover of Rs 139.37 crore now carries the watermark of quality that is world-class, organisation-wide, and fault-proof.

For, the Deming Prize is, quite simply, the last word in the world on quality. Instituted by the country that gave quality to the world--Japan--to honour the man who gave quality to the world, W. Edwards Deming, it is an acknowledgement of the fact that Sundaram-Clayton, led by its CEO Venu Srinivasan, 45, has risen above the countrywide contempt for total quality to be counted up there among an exclusively small global elité.

So small that it consists of only 3 other companies: the $6.51-billion Florida Power & Light, which won the Deming Prize in 1989; the $53.26-billion AT&T's Power Systems Division in 1994, and the $38.05-billion Philips' Taiwan unit.

So small that even the great TQM corporations of the world, like the $48.88-billion Honda, the $55.03-billion Sony, and the $190.84-billion General Electric, do not belong to it.

So small that, in the 38 long years since the Deming Prize was instituted--and the 15 years since a separate Prize was offered to companies outside Japan--for 5 different categories, only 163 CEOs and managers have ever strode up to receive the coveted medal on the dais at the Union of Japanese Scientists & Engineers' (a.k.a. JUSE) Centre Hall in downtown Tokyo.

S D Kulkarni

"In the early years, quality goes through pockets of excellence. But it must be translated into a culture that touches every employee."
S D Kulkarni
CEO, L&T

When Srinivasan joined their ranks on November 14, 1998--tellingly, Children's Day--it was a small step for him to the podium, but a truly giant step for India Inc.. What makes Sundaram-Clayton's winning the Deming Prize for total quality--Company-Wide Quality Control (or CWQC, in JUSE-speak)--an extraordinary feat is the fact that no global award for quality makes more demands of both the body and the soul of the winning corporation. The Malcolm Baldrige Award for quality in the US is comprehensive in its coverage of quality-related parameters too, but even its ruthless objectiveness excludes the fanatical obsession with statistical quality-control and performance that the Deming Prize displays. The European Quality Model Award is ingenious in its linkage of the enablers and results of quality, but cannot match the depth of the Deming Prize's probes. For, there is no transaction, no speck of dust on the floor, no tightening of a nut, no disaffected worker that escapes the scrutiny of the examination team.

In fact, the JUSE's rigorous quality audit tests a company on not 2 or 3, but 10 parameters which, between them, envelop each and every activity of a company. The one relentless theme that is tested across every operation: the ability of a company to use statistics-driven quality-control mechanisms to produce--consistently, economically, and reliably--a product or service that meets the customer's requirement in every possible manner--not just once, not just sporadically, not just over a specified period, but time after time after time after time. Explains Suresh Krishna, 61, the CEO of the Rs 326.18-crore Sundram Fasteners, and a fellow-traveller on the road to total quality: "The Deming Prize is not just a recognition of product quality. It is a recognition of the organisation itself. Clearly, Sundaram-Clayton meets the requirements of a world-class company."

Ask a Deming Prize winner, though, and he will say--not from the public pulpit, but as a statement of his intensely personal religion--that quality is a journey, not a destination. That's why Sundaram-Clayton will never rest on its laurels. Says CEO Srinivasan, a man whose energy is only matched by the intensity of his compulsive pursuit of excellence: "Internally, we are pleased. But everybody recognises that we have a long way to go before we become world-class manufacturers." Those, of course, are words of wisdom, gleaned from the teaching of Sundaram-Clayton's Japanese gurus, the JUSE's Yoshikasu Tsuda and the late Y. Washio, who brought Buddha and best-in-class in equal proportions into the company. Argues Ashish Basu, 34, coo, Institute of Quality Ltd (IQL): "The Deming Prize is a good energiser, but it should not be the end-all goal." At Sundaram-Clayton, there are no fears of that happening.

Its climb to the top of TQM started way back in 1979, when Srinivasan took over from his father, T.S. Srinivasan, as CEO after his return from Purdue University (US) in 1977, after his MBA. The SWOT analysis he conducted, applying his B-school learning, revealed, to the company's horror, that a 90-per cent marketshare was no insulation against top-class competition. Concluding that short-term tactics or defensive strategies would not deliver what a long-term transition to excellence could, Srinivasan set his company off on quality street.

In quick succession, Sundaram-Clayton's managers were exposed to the quality practices of global leaders, trained in modern manufacturing techniques, and taught about TQC, first by Yoshio Kondo in a watershed workshop at the National Institute For Quality & Reliability in 1986, and, from 1989 onwards, under the tutelage of Washio and Tsuda. And to walk the talk, Srinivasan set up a core taskforce to baptise Sundaram-Clayton in the new religion of TQC. Recalls quality consultant C.S. Nath, 62, the former general manager (quality) at Sundaram-Clayton: "Srinivasan laid the foundation for TQC in just a few years. When I look back, I am amazed at how focused he has been."

That wasn't all. To provide a big bang bull's eye to aim for--a magnet for the quality practices, as it were--he decided to set external targets, starting with the national quality awards. Sweeping those was easy given Sundaram-Clayton's head-start and commitment: in 1989, for instance, it won the Confederation of Indian Industry's (CII) Quality Circle award, followed by the Quality Circle Federation of India awards in the following years. Despite this raising of the bar, it was evident to Srinivasan that continuous quality improvement had been hardwired into the organisation by the 1990s. And, as it often happens even with the best of companies, the movement faced the threat of petering out if not kept up relentlessly. Concurs S.D. Kulkarni, 64, the CEO of the Rs 5,841-crore Larsen & Toubro: "In the early years, quality goes through pockets of excellence, but it must be translated into a culture that touches every employee. The vision and momentum must not be lost." So, in 1995, Srinivasan threw a huge challenge to his team: beat the world by winning the Deming Prize. The organisational sub-conscious had been aware that its objective was world-class quality--and the Deming Prize was whispered about in the gangways of the shopfloor--but it now became a focused goal. Points out Suresh Lulla, 54, CEO, Qimpro Consultants: "Such goals help inculcate a sense of pride and purposefulness in people."

R Seshasayee

"It will take a long time for total quality to become an industry-wide norm. India Inc. is a long way off from achieving global standards ."
R Seshasayee
CEO, Ashok Leyland

The results of Sundaram-Clayton's total quality movement are written not just on the medal that was put around Srinivasan's neck, but also on the company's books. Its financial indicators in the 5 years between 1992-93 and 1997-98 tell a tale of top-level performances. Being a vendor to the auto-makers, its top line, of course, is tied to those of its customers: the Rs 2,048-crore Ashok Leyland and the Rs 7,450-crore Tata Engineering & Locomotives Co. for air-brake systems, and the Rs 7,842-crore Maruti Udyog and Hyundai Motors India for castings. Thus, sales grew at an average rate of 35 per cent per annum between 1992-93 and 1996-97 although it shrank by 25 per cent in 1997-98 on account of the recession in the automobile industry. Likewise, the average growth in net profits in those 4 years was a stunning 83 per cent per annum--a glowing tribute to quality-led cost management--although it fell back by 35 per cent in 1997-98. But, internally, its performance improved consistently despite the recession, with turnover per employee rising by an average of 18 per cent a year, and gross value added climbing by an average of 12 per cent per annum.

Make no mistake, merely working towards an award--and developing the requisite mindset of competitiveness--is not enough. What Sundaram-Clayton's progress reveals is the all-important alignment of the quality imperatives of the company with the parameters used by an assessment framework, such as the one applied by the JUSE for the Deming Prize. The Deming Prize Committee defines quality as "a system of activities to ensure the quality of products and services, in which products and services of the quality required by customers are produced and delivered economically." Sundaram-Clayton's quality coup: integrating Deming's 10 parameters into the 4 streams of its quality practices, which flow around policies, people, processes, and products, respectively. Its TQC model puts employees at the base of the pyramid, daily management on top of it, and erects 5 pillars resting on these 2: Total Employee Involvement, Policy Deployment, Standardisation, Kaizen, and Training. In short, everyone everywhere in the company is a custodian of quality. Says IQL's Basu: "Most companies, when they have set a quality goal, will sub-contract the monitoring to the quality department. But that's not what Deming Prize winners do." BT offers a guided tour through today's Deming Prize winner's systems for tomorrow's Deming Prize aspirants.

The TQM corporation ensures that quality is everyone's job for every moment that they are on the job. But only the Deming company articulates this ownership as a policy. Nor is the policy limited to ownership; every activity in the company must conform to the master-list of guidelines on quality. Sundaram-Clayton's strategy: it uses its policy to dovetail the Deming definition of what quality means into the requirement for involving everyone in it. Explains Srinivasan: "Quality is a multi-faceted body. It has to encompass the entire organisation." In fact, Sundaram-Clayton actually has a Quality Policy room, where the company's top managers meet once a week for a review.

At Sundaram-Clayton, the Quality Policy exists in the form of an elaborate statement, which reads: "Sundaram-Clayton will deliver a level of quality that totally meets customer expectations. This customer satisfaction will be obtained by supplying products of the right quality, at the right time, and at the right place. Total employee involvement and continuous improvement in every sphere of activity will be the twin supports on which Sundaram-Clayton quality will stand." Thus, policy deployment spreads across the entire organisational value-chain, including marketing, operations, product development, finance, and personnel. That is especially crucial in the context of the Deming Prize, which grades the performance of every department and function separately--including the CEO himself. Explains Sarita Nagpal, 44, TQM Counsellor, cii: "At Sundaram-Clayton, transformation is truly everybody's job--just as Deming wanted it to be." Adds C. Narasimhan, 58, President, Sundaram-Clayton: "It is the clarity about the company's strategic position in its industry and its long-term goals that has enabled the organisation to align itself with the larger objective of becoming a world-class manufacturer."

@ WORK. Policy deployment spells out the objectives of all levels of employees in the organisation, from the CEO--for the next 5 years--right down to the machine-operator--for the next 30 minutes. The company identifies the critical issues 3 months ahead of each new financial year using Deming's PDCA cycle: Plan-Do-Check-Act. The three most important issues are picked for focus, and this is communicated to everybody in the company. Sundaram-Clayton uses what it calls Managing Points and Checking Points as TQC tools to track the course once the objective has been defined. Thus, the president's Managing Points--which flow from his objectives--become the Checking Points for the manager immediately under him. Likewise, the sales target of the head of marketing is his Managing Point--and is split into Checking Points under segment sales and territory sales. By vertically connecting these Managing and Checking Points, Sundaram-Clayton configures an organisation that single-mindedly pursues its stated policy objective for the year. And, applying data-driven CWQC, the progress is depicted on charts, with deviations showing up as red lines--the recurrence of which kicks off the problem-solving cycle.