Until recently, it was the American way to worry about price first and quality second—but not anymore. The pursuit of quality is almost a given in today's marketplace. If your company isn't pursuing technical excellence, reductions in cycle time and increased profitability, then it's already on its way out of the game.
Product excellence is becoming vital in the era of quality. The difference between business success and failure will be the people who make up an organization. Who's responsible for the people? Human resources, of course.
"Total-quality management is a culture change," explains Jean Ferketish, senior consultant with Development Dimensions International in Bridgeville, Pennsylvania. "A culture change means a collective behavior change on the part of people in the organization. HR is the owner of many of the organizational systems that can create that behavior change."
Unfortunately, HR systems often get in the way of cultural shifts. If you compensate employees only for acquiring new customers, for example, you can forget any idea of developing an orientation toward customer service. If you reward people only for individual achievement, then there's no reason for employees to work hard at team building.
HR professionals aren't necessarily the ones to blame when personnel practices interfere with quality. In many companies, it's the low status of HR that's at fault.
"What does HR have to do with turning out a quality product?" line managers ask.
"Everything," Ferketish answers. "HR plays a significant role in supporting and driving a continuous-improvement culture. Keeping systems aligned with quality strategies will be the HR challenge of the next decade," she says.
This doesn't mean that HR should lead a quality effort, however. According to Ed Lawler, professor at the Center for Effective Organizations at the University of Southern California in Los Angeles, staff groups rarely lead any key strategic initiative successfully. "Line management should lead the effort," he says, "but HR has to be involved as a partner from the beginning."
Xerox, in the early stages of its quality effort, made a conscious decision to exclude human resources, according to Jerry Finnigan, manager of HR at the company's plant in El Segundo, California. "In the past, HR has managed all cultural-change strategies," he explains, "and management felt that if HR led the quality effort, it would be perceived as just another flavor of the month." Instead, line managers and vice presidents carried the quality torch.
It wasn't long, however, before Xerox managers realized that they had made a mistake. The company had to align its HR systems with its quality goals for the effort to be a success. Xerox invited HR to the table, and asked its HR professionals to share, among other things, their expertise in training and in the area of rewards and recognition. Today, few would deny that the function's involvement helped Xerox win the Malcolm Baldrige National Quality Award in 1989. "HR is an integral part of making quality a reality," Finnigan says. "Maybe we shouldn't lead the effort, but we have to be partners early on."
Every HR system has the potential to influence employee performance and thus the success or failure of a total-quality initiative. From hiring and compensation to training and performance management, HR must work to ensure that its systems reinforce the company's quality message.
The first HR system to come under scrutiny in a start-up quality effort is employee communication.
The purpose of communication of a TQM program isn't to sell quality, but to recognize quality. Unfortunately, many firms introduce TQM with a lot of hoopla, according to Tom Varian, VP of communication for Organizational Dynamics Inc. in Burlington, Massachusetts.
"The natural tendency is for managers to get the total-quality message out as quickly and forcefully as possible," he says. It may take months or even years, however, for a company to see results from its quality efforts. "This creates a situation in which the employees perceive of the communications as a lot of commotion about nothing," Varian explains.
Ferketish agrees. "Introducing TQM with banners, T-shirts, mugs and newsletter articles about the greatness of quality is disastrous for TQM," she says. "All you're doing is building a credibility gap, because no successes have been realized."
How should a company communicate about quality? According to Varian, there are three basic principles:
- Recognize that communication isn't a check-the-box exercise. Don't publish one newsletter story each month for six months and consider that you've explained quality. "Understand that communication about quality is a strategic effort, as is TQM," he says.
- The purpose of communication isn't to explain quality to employees but to involve them in the effort. Newsletter articles shouldn't discuss quality tools, for instance, without explaining why employees should be interested in those tools.
- Companies should take pains to shape quality messages from the receiver's perspective. To do this, Varian recommends that communicators uncover the employees' alarm-clock concerns. "What do your employees think about in the morning as they're getting ready for work?" Varian asks. "They probably aren't thinking about how to achieve technical excellence or customer satisfaction. They're probably thinking, 'This job is a hassle' or 'My boss treats me like a child.' You must learn what employees are thinking and then connect quality to issues that really matter to them," Varian says. (See "Communicating TQM to Small Groups Improves Understanding.")
Volkswagen of America Inc., in Auburn Hills, Michigan, used this approach in developing its quality communication plan earlier this year. According to John Madigan, corporate communication specialist, Volkswagen surveyed its employees about their alarm-clock issues and then anonymously printed some of their responses in the internal newsletter. A typical alarm-clock comment was, "Boy, I wish I had more influence over getting things done around here."
In the same issue, Volkswagen printed a story about how the company's total-quality effort, Total Quality Focus (TQF), might address these concerns. For this story, Madigan asked employees who had attended TQF training to explain to their peers how TQF would affect them. These employees said such things as, "The most exciting thing about TQF is that it opens the door for each employee to make changes within his or her area of responsibility."
Madigan believes that using comments from actual employees lends credibility to the communication process. Furthermore, by printing the real-life alarm-clock issues, employees get the impression that the company genuinely cares about what matters to them. Thanks to this communication approach, Volkswagen employees are well on their way toward understanding what TQF means and toward understanding that TQF has the potential to address some fairly prevalent concerns. According to Madigan, the company hopes that this approach eventually will help create buy-in for the quality effort.
Training should focus on building quality skills.
Many companies fall into the same trap with training that they do in communicating. These companies invest all their resources in up-front awareness building, instead of looking at what individuals need to know for quality to become a long-term reality.
"Many companies that have finite training budgets dump all that money into awareness training," Ferketish says. "You need a touch of awareness, and you want employees to learn about quality tools, but you also need to feed them skills that they need for handling conflict, delegating for results, reaching agreement in teams, and so on. Too many companies place their training emphasis on awareness and process improvement, ignoring the behavioral skills needed to create the change that they're looking for." (See "Coca-Cola Learns from Its Training Mistakes.")
Ferketish adds that managers need to understand that awareness training takes less time than skills training. They need to realize that it's a critical first step, but one that seldom leads to the behavioral changes that are necessary to support continuous quality improvement. "I may be aware that I shouldn't have dessert because I'm counting calories, and I may know how to put my fork down, but unless my behavior and attitude about dessert change, I'll probably eat it anyway."
According to a survey conducted by the Olsten Corp. in New York City, many companies are beginning to understand the importance of behavioral-skills development. Of the survey participants that provide quality training, 54% offer courses in teamwork skills, 47% provide training to enhance communication and 45% offer workshops in decision making and problem solving. Far fewer companies provide training in traditional quality tools, such as quality control, statistical-process control and benchmarking.
Tellabs, a telecommunications equipment company in Lisle, Illinois, completely revamped its training program two years ago to bring it into alignment with the company's total-quality effort. According to Dan Stolle, Tellabs' director of HR, the company abolished its generic technical-training curriculum in favor of courses focusing on skills that are related to the company's critical success factors. With a skill-based pay program, technical training still is important for employees in manufacturing. Tellabs, however, felt that employees could acquire those skills just as effectively from co-workers as from trainers, according to Stolle.
By shifting the responsibility for skills certification to employees, the company was able to reallocate its training budget for courses like leadership training, team problem solving and decision making. Furthermore, the company now emphasizes real-time training, by requiring that attendees bring real issues to the training sessions. For a workshop on team problem solving, for example, employees must attend with their team members and resolve a current team problem.
"This way," Stolle says, "training doesn't take time away from employees' jobs; it is their job." Practicing new skills during training also helps employees learn the behaviors that they need for applying those skills effectively.
The other significant shift in Tellabs' training program is that company trainers now work as internal consultants who assess training needs, and as brokers who find experts outside the company to meet those needs. Little training is done by staff trainers. "This allows us to move quickly as needs change," Stolle explains.
For companies that are beginning to revamp their training programs as part of a quality effort, Ferketish has this last bit of advice. "Quality principles should be woven into every course offered. If a course doesn't show employees how to live the company values or how to meet its critical success factors, you'd better get rid of it," she says. Introducing concepts and principles of quality to employees is relatively easy. Training workers to apply the concepts and principles of quality in a way that affects the bottom line is much more difficult.
Just as training needs to reinforce the behaviors necessary for quality, so does an organization's performance-management system.
W. Edwards Deming, the quality guru, believes that most appraisal practices focus too much attention on individual achievement, although most quality problems are the products of systems or processes. As Deming's argument goes, focusing on individuals is counterproductive and ignores the causes of poor quality.
For this reason, many U.S. companies are considering scrapping the individual performance appraisal. But as Ferketish asks, "Is no system really the right system?" Performance appraisals may conflict with continuous-improvement cultures, but only in companies that stress quantity on the appraisal without regard for quality.
Companies should revise their performance-appraisal processes to focus on the behaviors required to achieve objectives. It isn't enough to evaluate whether or not an employee has met a deadline or managed a budget well. HR professionals have to look at the behavior that the employee has exhibited in achieving those goals. Did he or she exert a lot of pressure on co-workers in meeting deadlines or managing budgets? If so, that person probably isn't in concert with the company's goals of teamwork and mutual respect.
The performance-management system is the program that needed the most radical redesign at Harris Corporation's Electronic Systems Sector in Melbourne, Florida, as the company pursued its quality goals. Like many companies, Harris previously had used the performance-management process only to justify compensation decisions. But as the company began to focus on continuous improvement and customer satisfaction, managers realized that the appraisal process was blocking the development of these new values instead of reinforcing them.
For example, in a continuous-improvement culture, employeess must be willing to take risks, but the performance-management process rewarded workers only for doing what they were told. "This wasn't the behavior that we were looking for, yet it was the behavior that we were reinforcing," says Terry Geraghty, director of organizational development.
In revising its performance-management system, Harris first had to identify the skills and values that were crucial to the company's success—customer service, teamwork and technical knowledge. Harris calls these values dimensions.
For each dimension, the company then listed the key behaviors associated with it. For instance, behaviors that would support the dimension of customer service include:
- Encouraging customer involvement in problem solving
- Meeting or exceeding customer requirements
- Taking action to remedy misunderstandings or inconveniences to the customer.
Managers then rewrote each job description, incorporating the behavioral dimensions necessary for a worker to be successful in that job. All employees have access to this information so that they know what supervisors expect. "Our dimensions were guiding company decisions, but for employees to become involved, we had to explain what those dimensions meant in behavioral terms," Geraghty says.
Today, the company evaluates employees on how well their accomplishments relate to the objectives set earlier in the year, and on how well they exhibit the behaviors listed under the dimensions for their jobs. Behaviors are assessed through a combination of the employee's self-appraisal, peer review and manager's observations.
According to Geraghty, Harris went this route because, to be effective, organizations should have both a management-by-objective type of system and a system of facilitating dimensions. Organizations also should integrate them. Using an MBO-type system alone results in employees' receiving feedback on accomplishing goals and nothing on what they did to accomplish them. People who fall short of goals receive encouragement to work harder but little guidance on what to do to achieve the goals.
"How can individuals increase productivity or cut costs if they already are trying as hard as they can?" Geraghty asks. "The only way for them to improve is to change their behaviors." To put it another way, he says, "I may want you to improve your golf score, but I can't tell you just to go out and make it better without telling you how to make it better. I can't coach results, which is what the old performance-management system attempted to do; I can only coach behaviors."
The addition of behavioral dimensions to Harris's performance appraisal greatly contributes to employee development as well. By focusing on behaviors, workers can understand more clearly what the company expects of them and how they can contribute to its overall goals. This, in turn, helps them set individual goals, and it helps the firm identify areas in which workers need training.
The quality revolution underway in the U.S. has created a corresponding revolution in compensation.
The growing popularity of skill-based pay, broadbanding and variable-pay programs is a direct result of quality-driven efforts to pay employees based on what they contribute, not on what a narrow job description says they're supposed to contribute. If your firm is preaching quality and hasn't changed the compensation-and-rewards systems to support those lessons, don't be surprised if quality results are less than you'd hoped.
As Lawler writes in an article in Organizational Dynamics, "In the past, most pay systems have focused on individuals. Job descriptions spell out what an individual is to do, job-evaluation systems suggest how much the job is worth, and merit-pay increases reflect how well the individual has done the job." Yet there's a direct conflict between these traditional practices and TQM's emphasis on collective responsibility.
For this reason, an overwhelming number of companies are revamping their pay systems to reward people based on how well the company or unit performs as a whole. Many consultants are calling this revolution new pay because the changes underway are destined to replace existing compensation practices. New pay, according to many pundits, isn't a fad that will pass in time.
The new-pay view is that organizations should use all elements of compensation effectively, including salary, benefits, rewards and so on, to help form partnerships between the company and its employees. These partnerships help employees:
- Understand the goals of the organization better
- Know how to help accomplish those goals
- Be involved in decisions that affect their jobs
- Receive rewards for their contributions.
"Powerful messages are sent to employees through the rewards system," says Jan Wilkinson, director of HR systems at Duke Power Company in Charlotte, North Carolina. "It's a major reinforcer of company values." For this reason, the compensation-and-reward structure was one of the first HR subsystems to undergo a major overhaul as Duke Power began its quality quest in 1989.
Many companies look at pay and benefits as individual items and adjust them to curb costs or meet workplace demands. Not Duke Power. It chose to view rewards as an interrelated system that could be reshaped continually to support the business needs of the company, Wilkinson explains. Duke Power's first strategic decision along these lines was to package compensation and benefits together under a single reward system. "We looked at what was rewarding to employees about working here and then put all those things together under one heading," she says.
Today, Duke Power's reward system includes:
- Salary banding
- Variable compensation
- Hourly pay for performance
- Increased opportunities for career development
- Individualand team-incentive plans that are tied to organization performance
- A shift in performance-management measures and accountabilities
- Awards for excellence
- Flexible work-and-family benefits.
The organization is using the new reward systems to encourage customer satisfaction, cost-consciousness, innovation, risk taking, teamwork, employee involvement, information sharing and ownership. Furthermore, by linking rewards to company performance, Duke can provide greater rewards during good years and contain costs when the business isn't as successful.
According to Wilkinson, the new integrated system sends the message to employees that there are ample recognition and rewards for those employees who help Duke Power reach its goals. It has taken extensive communication and training for employees to understand the new reward process and to realize the impact that they can have not only on the company's bottom line, but also on their own. The communications effort has been successful, however. In a recent survey, employees gave high marks to the new system, proving that well-thought-out rewards can contribute greatly to employee satisfaction and thus to the achievement of quality goals.
Teamwork is important in TQM efforts that involve unions.
The egalitarian approach is extremely necessary in the labor-relations arena. Unfortunately, the us-versus-them mentality found in many unionized companies has the potential to undermine a total quality effort. It's the responsibility of HR to communicate with union members and to coordinate team-building efforts.
Gary Schroer, manager of business systems for Armco Worldwide Grinding Systems in Kansas City, Missouri, describes his company's relationship with the union as having been one of "periodic noncooperation." That's until the company implemented its TeamWorks program last year. Developed under the direction of the HR department, TeamWorks is an effort to give all employees an equal voice in developing ideas to make Armco more productive, more profitable and more fulfilling for its workers. It's the latest step in a quality process that has been underway for 10 years.
With TeamWorks, employees volunteer to serve on seven-member teams that research and suggest ideas to improve quality and productivity, reduce expenses and generate additional revenue. When the company approves an idea, team members earn recognition and awards. Since the program began:
- Close to $4 million in cost savings have been realized through team ideas
- Nearly 500 ideas have been submitted for consideration from 80 employee teams
- Grievances have decreased by approximately 40%.
Until the company developed TeamWorks, Schroer says that employees spent more time thinking about "how the company is going to get to me next," than they did about working on solutions to real business problems. By developing employee teams, encouraging open discussion and giving employees financial rewards for savings generated from their ideas, Armco has been able to turn this situation around.
"I'm uncomfortable with how simple this all sounds," Schroer adds, "but it really comes down to talking with the union about what's important. In our case, HR was the driver in generating management understanding of the need for TeamWorks and employee involvement." Before TeamWorks, managers mandated all programs and workplace changes. Today, employees do.
An important part of TQM is hiring the right employees.
Although the primary concern of HR in a quality initiative obviously is the existing work force, HR professionals shouldn't give short shrift to employee candidates and the hiring process. One of the first steps in delivering a quality customer-service orientation is selecting and developing the right people to provide that service.
The Ritz-Carlton Hotel Co., based in Atlanta, won the Baldrige Award in 1992. According to Patrick Mene, the company's corporate director of quality, the company's selection process especially impressed the Baldrige examiners. "Selecting people who are capable of serving others in a warm, genuine manner is critical," explains Mene. For this reason, Ritz-Carlton focuses on finding people who are ladies and gentlemen.
But the hotel chain doesn't rely on an interviewer's opinion of how a lady or gentleman should act—far from it. Working with Talent+, a selection-and-management consulting company in Lincoln, Nebraska, Ritz-Carlton conducted research of current employees to learn what personal characteristics were likely to lead to success in the organization. Once the company identified the characteristics, it developed an applicant interview to solicit responses that would reveal if a candidate possessed these characteristics. All questions are job-related.
The Ritz-Carlton calls this approach its Quality Selection Process and claims that it has contributed significantly to the company's 47% reduction in turnover and 27% decrease in customer complaints during the last three years.
Harris Electronic Systems Sector has taken a similar approach, applying the behaviors identified for its performance appraisal to a targeted-selection process. "Using dimensions to interview candidates will help managers identify the persons who exhibit the behaviors known to be important for the particular job. This will eliminate much of the guesswork and bias involved in the hiring process," Geraghty says.
Because employee characteristics that spell success at one company may doom another company to failure, it's important that HR professionals research the success characteristics of their own employees. This requires organizations to commit more resources to the selection process, and to structure the process so that it includes a realistic preview of expected behaviors and encourages self-selection whenever possible.
Perhaps the best quality principle for human resources professionals to keep in mind is the principle of integration. All HR systems must be integrated with and reflect the values and vision of the organization for quality to become a reality. In addition, the human resources function must be integrated. Don't use one set of criteria for appraising performance on the job and a different set for selecting and hiring employees. Don't train employees to behave in one way and then compensate them for behaving in another.
"Historians say that battles are won and lost on logistical support, not on the more glamorous parts of the effort," Ferketish says. "The TQM battle will be won or lost on systems alignment. It may not be glamorous, but it's a critical part of the emerging role of the HR function."
HR is important to nurturing change, but it can't lead the effort. "HR must have expertise in organizational change to get people excited and involved in total quality," Lawler says, "but HR professionals can't do it alone."
Personnel Journal, August 1993, Vol. 72, No.8, pp. 48A-48O.