Business 101: Principles of Management

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When an organization adopts total quality management, they are really creating a new culture of customer satisfaction and quality products and services utilizing the skills of highly qualified employees and strong supplier relations to meet and exceed organizational goals.

What Is Total Quality Management?

No one approach to change works for every organization. Organizational culture, management processes and systems that exist in the current organization need to be carefully analyzed to determine the best way to go.

Total quality management (TQM) is a management approach to customer satisfaction, employee satisfaction and supplier relationships by continually improving on a business's processes and systems to develop quality products and services.

When yacht sales plummeted at Swanky Yacht Builders, Inc., owner Mr. Cash became concerned. A peek at his competitor Lux-A-Roo Yacht Builders' floating showroom convinced Cash that there was an internal problem.

The first thing he did was review recent customer satisfaction surveys. Clearly, changes needed to be made. His clients complained about the poor customer service they received when calling to complain about problems with their yachts.

He discovered that his employees were stressed out over the amount of calls they were responsible for answering. Because of this, employees were short-tempered with callers. Even suppliers were angry about the low sales. They could no longer rely on Swanky's to order parts and equipment on a regular basis.

Mr. Cash was in a quandary about how to solve this problem. He turned to TQM for the answer.

Important TQM Decisions

Implementing TQM in an organization requires rigorous self-reflection. Managers tackle important questions like:

• What is the purpose of our organization?
• What is our vision?
• What is our mission statement?
• What are our overall organizational objectives?
• How closely linked to our mission are our objectives?
• What values do we hold dear to us as an organization?

Mr. Cash immediately began assembling a team of managers. This powerhouse of management brains worked day and night relentlessly pursuing the right answers. They first looked at the purpose of the organization.

What does Swanky Yacht Builders want the world to know about why they do what they do? The management team came up with their purpose:

Swanky Yacht Builders provides clients with the most opulent way to sail the world.

Now that the purpose has been set, the vision, or future state of the company, is defined:

Swanky Yachts wants to be the foremost source of luxury yachts by exceeding customer expectations through quality craftsmanship by skilled employees and building relationships with the best suppliers.

The mission statement was next. The team decided to use:

Swanky Yacht Builders is dedicated to providing the wealthiest 1% with the highest quality yachts. We want to exceed the quality expectations of our clients, develop our employees to their fullest potential and build strong relationships with the community.

Next, the team reviewed the company objectives. They came up with objectives in all areas of the business:

• A financial goal of increasing sales by 15% over the next 12 months
• A marketing goal of developing a new yacht design to attract a new target market
• A human resource goal of training existing staff on new processes and systems
• A customer goal of reducing the number of complaints by responding to calls in less time
• A supplier goal of developing long-lasting relationships with suppliers

Now that the new mission statement and objectives are tightly linked, it is time to implement TQM company-wide.

Implementing TQM

So far, Mr. Cash has assessed his current needs, like increasing customer satisfaction, by identifying the events that led to the need for TQM - such as the decrease in sales and the quality of his employees' work life and the relationships he developed with suppliers. He did all the right things necessary to create a more competitive company.

Now he can implement TQM. Cash started with customer expectations. His clients expect their yachts to run smoothly. This means the yacht builders must be trained to build yachts right the first time.

He also had to look at the supplies he used to build yachts. He noticed that some parts used were actually refurbished, not new. His suppliers were asked to supply only pristine, new parts.

Cash shadowed the customer service agents as they handled customer calls. What he found out was shocking. His employees were juggling three to four calls at one time without a break in the day. These agents ate their lunch at their desks.

Cash hired a few more agents and implemented a training program for new and existing employees. He also changed the customer service schedule so all agents had a chance to take a needed break for lunch.

Salespeople were given new goals and a database of wealthy potential clients to contact. These salespeople were also given more latitude to negotiate prices. With access to data and autonomy to make deals, sales began to increase.

The management team coached and mentored employees. Daily processes were monitored and revised as necessary.

Finally, Cash and the management team provided feedback to employees through an evaluation system. Recognition and rewards were given to employees who followed TQM and demonstrated improvement in their area of the company.

Lesson Summary

Total quality management is a management approach to customer satisfaction, employee satisfaction and supplier relationships. It involves developing processes and systems that work right the first time.

As processes and systems evolve, they are monitored and revised as needed.

There are a few important things to look at in the present state of an organization when considering using TQM as an approach to quality management:

• The purpose of our organization
• The vision
• The mission statement
• Overall organizational objectives
• The link between the mission statement and overall objectives
• Company values

A set of new overall objectives is developed, and processes and systems are designed to effect change.

As processes and systems evolve, managers evaluate outcomes. If a process or system is not working effectively or efficiently, it is revised and re-integrated.

When processes and systems work right, employees are rewarded for their part in maintaining the overall quality-management plan.