1. Chapter 1
Introduction to Quality and
Performance Excellence
1

2. Defining Quality
Perfection Fast delivery
Providing a good, usable product
Consistency
Eliminating waste
Doing it right the first time
Delighting or pleasing customers
Total customer service and satisfaction
Compliance with policies and procedures

3. Formal Definitions of Quality
• The totality of features and
characteristics of a product or service
that bears on its ability to satisfy given
needs – American Society for Quality
– Fitness for use
– Meeting or exceeding customer
expectations
– Conformance to specifications
3

4. Performance Excellence
• An integrated approach to organizational
performance management that results in
– delivery of ever-improving value to
customers and stakeholders, contributing to
organizational sustainability,
– improvement of overall organizational
effectiveness and capabilities, and
– organizational and personal learning.

5. Importance of Quality
• THE buzzword among business in the 1980s
and 1990s
• Quality problems still abound in many
industries, such as automotive
• Consumer expectations are high
• “We’ve made dependence on the quality of
our technology a part of life” – Joseph Juran

6. History of Quality Assurance
(1 of 3)
• Skilled craftsmanship during Middle Ages
• Industrial Revolution: rise of inspection
and separate quality departments
• Early 20th Century: statistical methods at
Bell System
• Quality control during World War II
• Post-war Japan: evolution of quality
management
6

7. History of Quality Assurance
(2 of 3)
• Quality awareness in U.S.
manufacturing industry during 1980s:
from “Little Q” to “Big Q” - Total Quality
Management
• Malcolm Baldrige National Quality
Award (1987)
• Disappointments and criticism
7

8. History of Quality Assurance
(3 of 3)
• Emergence of quality management in
service industries, government, health
care, and education
• Evolution of Six Sigma
• Current and future challenge: maintain
commitment to performance excellence
8

9. Quality Dimensions in
Manufacturing
• Performance – primary operating characteristics
• Features – “bells and whistles”
• Reliability – probability of operating for specific
time and conditions of use
• Conformance – degree to which characteristics
match standards
• Durability - amount of use before deterioration or
replacement
• Serviceability – speed, courtesy, and
competence of repair
• Aesthetics – look, feel, sound, taste, smell

10. Quality Dimensions in
Services
• Time – how much time must a customer wait?
• Timeliness – will a service be performed when
promised?
• Completeness – Are all items in the order included?
• Courtesy – do frontline employees greet each
customer cheerfully?
• Consistency – are services delivered in the same
fashion for every customer, and every time for the
same customer?
• Accessibility and convenience – is the service easy
to obtain?
10

11. Differences Between
Manufacturing and Services
• Customer needs and performance standards are often
difficult to identify and measure
• The production of services typically requires a higher
degree of customization
• The output of many service systems is intangible
• Services are produced and consumed simultaneously
• Customers often are involved in the service process and
present while it is being performed
• Services are generally labor intensive
• Many service organizations must handle very large
numbers of customer transactions.

12. New Frontiers of Quality
• Health care
• Education
• Government
• Not-for-Profits

13. Deming Philosophy
The Deming philosophy focuses on
continual improvements in product and
service quality by reducing uncertainty
and variability in design, manufacturing,
and service processes, driven by the
leadership of top management.

14. Deming Chain Reaction
Improve quality
Costs decrease
Productivity improves
Increase market share with better
quality and lower prices
Stay in business
Provide jobs and more jobs 14

15. Deming’s System of Profound
Knowledge
• Appreciation for a system
• Understanding variation
• Theory of knowledge
• Psychology
15

16. Systems
• Most organizational processes are
cross-functional
• Parts of a system must work together
• Every system must have a purpose
• Management must optimize the system
as a whole
16

17. Variation
• Many sources of uncontrollable
variation exist in any process
• Excessive variation results in product
failures, unhappy customers, and
unnecessary costs
• Statistical methods can be used to
identify and quantify variation to help
understand it and lead to
improvements
17

18. Theory of Knowledge
• Knowledge is not possible without
theory
• Experience alone does not establish
a theory, it only describes
• Theory shows cause-and-effect
relationships that can be used for
prediction
18

19. Psychology
• People are motivated intrinsically and
extrinsically; intrinsic motivation is the
most powerful
• Fear is demotivating
• Managers should develop pride and joy in
work
19

20. Deming’s 14 Points (Abridged)
(1 of 2)
1. Create and publish a company mission
statement and commit to it.
2. Learn the new philosophy.
3. Understand the purpose of inspection.
4. End business practices driven by price alone.
5. Constantly improve system of production
and service.
6. Institute training.
7. Teach and institute leadership.
8. Drive out fear and create trust.
20

21. Deming’s 14 Points (2 of 2)
9. Optimize team and individual efforts.
10. Eliminate exhortations for work force.
11. Eliminate numerical quotas and M.B.O.
Focus on improvement.
12. Remove barriers that rob people of pride
of workmanship.
13. Encourage education and self-improvement.
14. Take action to accomplish the transformation.
www.deming.org 21

22. Juran Philosophy
Juran proposed a simple definition of
quality: “fitness for use.” This definition
of quality suggests that it should be
viewed from both external and internal
perspectives; that is, quality is related
to “(1) product performance that results
in customer satisfaction; (2) freedom
from product deficiencies, which avoids
customer dissatisfaction.”

23. Juran’s Quality Trilogy
• Quality planning
• Quality control
• Quality improvement
www.juran.com 23

24. Crosby Philosophy
Quality is free . . .
“Quality is free. It’s not a gift, but it is
free. What costs money are the unquality
things -- all the actions that involve not
doing jobs right the first time.”

25. Crosby’s Absolutes of Quality
Management
• Quality means conformance to requirements
• Problems are functional in nature
• There is no optimum level of defects
• Cost of quality is the only useful
measurement
• Zero defects is the only performance
standard
www.philipcrosby.com 25

26. Principles of Total Quality
• Customer and stakeholder focus
• Process orientation
• Continuous improvement and learning
• Employee engagement and teamwork
• Management by fact
• Visionary leadership and a strategic
orientation
26

27. Customer and Stakeholder
Focus
• Customer is principal judge of
quality
• Organizations must first understand
customers’ needs and expectations
in order to meet and exceed them
• Organizations must build
relationships with customers
• Customers are internal and external
27

28. Process Orientation
• A process is a sequence of activities that is
intended to achieve some result
28

29. Cross-functional Perspective

30. Continuous Improvement and
Learning
• Incremental and breakthrough
improvement
– Products and services
– Work processes
– Flexibility, responsiveness, and cycle time
• Learning – why changes are successful
through feedback between practices and
results

31. Learning Cycle
1. Planning
2. Execution of plans
3. Assessment of progress
4. Revision of plans based upon
assessment findings

32. Employee Engagement and
Teamwork
• Engagement – workers have a strong
emotional bond to their organization,
are actively involved in and committed
to their work, feel that their jobs are
important, know that their opinions and
ideas have value, and often go beyond
their immediate responsibilities for the
good of the organization
• Teamwork must exist vertically,
horizontally, and interorganizationally
32

33. Management by Fact
• Organizations need good performance
measures to drive strategies and change,
manage resources, and continuously improve
• Data and information support analysis at all
levels
• Typical measures: customer, product and
service, market, competitive comparisons,
supplier, employee, cost and financial

34. Visionary Leadership and a
Strategic Orientation
• Leadership is the responsibility of top
management
• Senior leaders should be role models for
the entire organization
• Leaders must make long-term
commitments to key stakeholders
• Quality should drive strategic plans

35. TQ and Agency Theory
• Agency relationship: a concept in which
one party (the principal) engages another
party (the agent) to perform work
• Key assumption: individuals in agency
relationships are utility maximizers and will
always take actions to enhance their self-
interests.

36. Contrast With TQ (1 OF 2)
• TQ views the management system as one based on
social and human values, whereas agency theory is
based on an economic perspective that removes people
from the equation.
• Agency theory propounds the belief that people are self-
interested and opportunistic and that their rights are
conditional and proportional to the value they add to the
organization. TQ suggests that people are also
motivated by interests other than self, and that people
have an innate right to be respected.

37. Contrast With TQ (2 OF 2)
• Agency theory assumes an inherent conflict of goals
between agents and principals, and that agent goals
are aligned with principal goals through formal
contracts. In TQ, everyone in the organization shares
common goals and a continuous improvement
philosophy, and goals are aligned through adoption of
TQ practices and culture.
• TQ takes a long-term perspective based on
continuous improvement, whereas agency theory
focuses on short-term achievement of the contract
between the principal and agent.
• TQ leaders provide a quality vision and play a
strategic role in the organization; leaders in agency
theory develop control mechanisms and engage in
monitoring.

38. TQ and Organizational Models

39. Chapter 2
Frameworks for
Organizational Quality
39

40. Malcolm Baldrige National
Quality Award
• Help improve quality in
U.S. companies
• Recognize achievements
of excellent firms and
provide examples to others
• Establish criteria for
evaluating quality efforts Malcolm Baldrige,
former U.S. Secretary
• Provide guidance for other of Commerce
American companies
40

41. Criteria for Performance
Excellence
• Leadership
• Strategic Planning
• Customer and Market Focus
• Measurement, Analysis, and
Knowledge Management
• Human Resource Focus Baldrige
Award trophy
• Process Management
• Business Results
41

42. The Baldrige Framework –
A Systems Perspective
Organizational Profile:
Environment, Relationships, and
Challenges
5
2
Human
Strategic Resource
Planning Focus
7
1
Business
Leadership
Results
3
Customer & 6
Market Process
Focus Management
4
Measurement, Analysis, and Knowledge Management

43. Baldrige Web Site
www.baldrige.org
• Links to award recipients and
application summaries
• Updated criteria versions
• CEO issue sheets
• Other information

44. Baldrige Award Evaluation Process
Receive Applications
Stage 1
Independent Review
Judges Select for No Feedback report
Consensus Review?
to applicant
Stage 2
Consensus Review
Judges Select for No Feedback report
Site Visit Review?
to applicant
Stage 3
Site Visit Review
Stage 4
Judges Recommend Award Feedback report
Recipients to
NIST Director/DOC to applicant

45. Scoring and Evaluation
• Approach
• Deployment
• Results

46. Approach
• Appropriateness of methods
• Effectiveness of use of the methods.
Degree to which the approach is
– Repeatable, integrated, and consistently applied
– Embodies evaluation/improvement/learning
cycles
– Based on reliable information and data
• Alignment with organizational needs
• Evidence of innovation

47. Deployment
• Extent to which the approach is applied to
all appropriate work units

48. Results
• Current performance
• Performance relative to appropriate
comparisons and benchmarks
• Rate, breadth, and importance of
performance improvements
• Linkage of results measures to key
customer, market, process, and action
plan performance requirements

49. Criteria Evolution (1 of 2)
• From quality assurance and strategic quality
planning to a focus on process management and
overall strategic planning
• From a focus on current customers to a focus on
current and future customers and markets
• From human resource utilization to human
resource development and management
• From supplier quality to supplier partnerships
• From individual quality improvement activities
to cycles of evaluation and improvement in all
key areas

50. Criteria Evolution (2 of 2)
• From individual quality improvement activities to
cycles of evaluation and improvement in all key
areas
• From data analysis of quality efforts to an
aggregate, integrated organizational level review
of key company data
• From results that focus on limited financial
performance to a focus on a composite of
business results, including customer satisfaction
and financial, product, service, and strategic
performance
• From organizational achievement to
organizational sustainability

51. Self Assessment
A primary goal of the Baldrige program is
to encourage many organizations to
improve on their own by equipping them
with a standard template for measuring
their performance and their progress
toward performance excellence.
Boeing Airlift & Tanker
Programs – 1998 winner

52. International Quality Award
Programs
• Deming Prize
• European Quality Award
• Canadian Awards for Business Excellence
• Australian Business Excellence Award
• Chinese National Quality Award
• Many others!

53. Deming Prize
• Instituted 1951 by Union of Japanese
Scientists and Engineers (JUSE)
• Several categories including prizes for
individuals, factories, small companies, and
Deming application prize
• American company winners include Florida
Power & Light and AT&T Power Systems
Division
53

54. ISO 9000:2000
• Quality system standards adopted by
International Organization for
Standardization in 1987; revised in 1994
and 2000
• Technical specifications and criteria to be
used as rules, guidelines, or definitions of
characteristics to ensure that materials,
products, processes, and services are fit
for their purpose.
54

55. Rationale for ISO 9000
• ISO 9000 defines quality system standards,
based on the premise that certain generic
characteristics of management practices can be
standardized, and that a well-designed, well-
implemented, and carefully managed quality
system provides confidence that the out-puts will
meet customer expectations and requirements.

56. Objectives of ISO Standards (1 of 2)
• Achieve, maintain, and continuously
improve product quality
• Improve quality of operations to continually
meet customers’ and stakeholders’ needs
• Provide confidence to internal
management and other employees that
quality requirements are being fulfilled
56

57. Objectives of ISO Standards (2 of 2)
• Provide confidence to customers and other
stakeholders that quality requirements are
being achieved
• Provide confidence that quality system
requirements are fulfilled
57

58. Structure of ISO 9000 Standards
• 21 elements organized into four major
sections:
– Management Responsibility
– Resource Management
– Product Realization
– Measurement, Analysis, and Iimprovement
58

59. ISO 9000:2000 Quality
Management Principles
1. Customer Focus
2. Leadership
3. Involvement of People
4. Process Approach
5. System Approach to Management
6. Continual Improvement
7. Factual Approach to Decision Making
8. Mutually Beneficial Supplier Relationships

60. Six Sigma
• Six Sigma – a business improvement approach
that seeks to find and eliminate causes of
defects and errors in manufacturing and service
processes by focusing on outputs that are
critical to customers and a clear financial return
for the organization.
• Based on a statistical measure that equates to
3.4 or fewer errors or defects per million
opportunities
• Pioneered by Motorola in the mid-1980s and
popularized by the success of General Electric

61. Key Concepts of Six Sigma
(1 of 2)
• Think in terms of key business processes,
customer requirements, and overall strategic
objectives.
• Focus on corporate sponsors responsible for
championing projects, support team activities,
help to overcome resistance to change, and
obtaining resources.
• Emphasize such quantifiable measures as
defects per million opportunities (dpmo) that
can be applied to all parts of an organization

62. Key Concepts of Six Sigma
(2 of 2)
• Ensure that appropriate metrics are identified early
and focus on business results, thereby providing
incentives and accountability.
• Provide extensive training followed by project team
deployment
• Create highly qualified process improvement
experts (“green belts,” “black belts,” and “master
black belts”) who can apply improvement tools and
lead teams.
• Set stretch objectives for improvement.

63. Six Sigma as a Quality
Framework (1 of 2)
• TQ is based largely on worker empowerment
and teams; Six Sigma is owned by business
leader champions.
• TQ activities generally occur within a function,
process, or individual workplace; Six Sigma
projects are truly cross-functional.

64. Six Sigma as a Quality
Framework (2 of 2)
• TQ training is generally limited to simple
improvement tools and concepts; Six Sigma
focuses on a more rigorous and advanced set
of statistical methods and a structured
problem-solving methodology DMAIC—define,
measure, analyze, improve, and control.
• TQ is focused on improvement with little
financial accountability; Six Sigma requires a
verifiable return on investment and focus on
the bottom line.

65. Transactional Six Sigma
• Applications in service organizations
• Issues:
– The culture of services is usually less scientific and
service employees typically do not think in terms of
processes, measurements, and data. The
processes are often invisible, complex, and not
well defined or well documented.
– The work typically requires considerable human
intervention, such as customer interaction,
underwriting or approval decisions, or manual
report generation.

66. Chapter 3
Performance Excellence,
Competitive Advantage, and
Strategic Management
66

67. Competitive Advantage
• Competitive advantage: a firm’s ability to
achieve market superiority over its
competitors.
• Characteristics:
– Is driven by customer wants and needs
– Makes significant contribution to business success
– Matches organization’s unique resources with
opportunities
– Is durable and lasting
– Provides basis for further improvement
– Provides direction and motivation
67

68. Product Quality and Business
Performance - PIMS Studies
• Product quality is the most important determinant of
business profitability.
• Businesses offering premium quality products and
services usually have large market shares and were
early entrants into their markets.
• Quality is positively and significantly related to a
higher return on investment for almost all kinds of
products and market situations.
• A strategy of quality improvement usually leads to
increased market share but at a cost in terms of
reduced short-run profitability.
• High-quality producers can usually charge premium
prices.

69. Quality and Profitability
Improved quality Improved quality
of design of conformance
Higher perceived Higher Lower
value prices manufacturing and
service costs
Increased market Increased
share revenues
Higher profitability 69

70. Quality and Business Results
Studies
• General Accounting Office study of Baldrige
Award applicants
• Hendricks and Singhal study of quality
award winners
• Performance results of Baldrige Award
winners

71. GAO Study Model

72. Sources of Competitive
Advantage
• Cost Leadership
• Differentiation
• People

73. Quality and Differentiation
Strategies
• Superior product and service design
• Outstanding service
• High agility
• Continuous innovation
• Rapid response

74. Quality and Product Design
• Understanding customer needs and
expectations
• Systematic processes for design and product
improvement
• Tools and techniques
– Concurrent engineering
– Value analysis
– Design reviews
– Experimental design

75. Quality and Outstanding Service
• Key components of service quality:
employees and information technology
• Dimensions of service quality
– Reliability – ability to provide what was promised
– Assurance – knowledge and courtesy of
employees and ability to convey trust
– Tangibles – physical facilities and appearance of
personnel
– Empathy – degree of caring and individual
attention
– Responsiveness – willingness to help customers
and provide prompt service

76. Quality and Agility
• Agility – capacity for flexibility and rapid
change
– Continual monitoring and sensing of
changing customer needs and expectations
– Fast design changes
– Rapid roll out of new products and
processes
– Cross-functional cooperation and
coordination
– Good supplier relations

77. Quality and Innovation
• Innovation is vital to competing in today’s
world
• Innovation creates new customer needs
and expectations and leads to higher
levels of performance
• Creativity and breakthrough thinking are
encouraged

78. Quality and Time
• Cycle time – the time it takes to accomplish one cycle
of a process
• Success in today’s markets requires increasingly
shorter cycle times
• Major improvements in response time often require
work organizations, processes, and paths to be
simplified and shortened. Simplified processes
reduce opportunities for errors, leading to improved
quality.
• Improvements in response time often result from
increased understanding of internal customer-
supplier relationships and teamwork.

79. Information and Knowledge for
Competitive Advantage
• A supply of consistent, accurate, and
timely data across all functional areas of
business provides real-time information for
the evaluation, control, and improvement
of processes, products, and services to
meet both business objectives and rapidly
changing customer needs.

80. Need for Performance
Measurement
• To lead the entire organization in a particular
direction; that is, to drive strategies and
organizational change;
• to manage the resources needed to travel in
this direction by evaluating the effectiveness of
action plans; and
• to operate the processes that make the
organization work and continuously improve

81. Balanced Scorecard
1. Financial perspective
2. Internal perspective
3. Customer perspective
4. Innovation and learning
perspective
Leading measures Lagging measures

82. Baldrige Classification of
Performance Measures
• Product and service outcomes
• Customer-focused outcomes
• Financial and market outcomes
• Human resource outcomes
• Organizational effectivene