SIXTH EDIT I ON

'
UALITY
HANDBOOK
TH E CO M PLET E GUI D E T O
.PERFORMANCE EXCELLENCE
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 Contents
Contribu tors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix
Introduction to the Sixth Ed ition . . . . . . . . • . . . . • . . . . . . . . . . . . • . . . . xi

Sect ion I Key Concepts: What Leaders Need to Know about Quality
1 Attaining Superior Results through Quality Joseph M. Juran 3

2 Quality's Impact on Society and the National Culture Joseph M. Jurm1 . . . 41

3 The Universal Methods to Manage for Quality joseph M . Juran . . . . 69
4 Quality Planning: Designing Innovative Products and Services
Joseph A. De Feo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83

5 Quality Improvement: Creating Breakthroughs in Performance

Joseph M. Jumn tmd joseph A. DeFeo. . .. . .. . . . . . . . . . . . .. . . . . . .. . . . . . . 137
6 Quality Control: Assuring Repeatable and Compliant Processes
Joseph M. Juran . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . • . . . . . . . . . . 195
7 Strategic Planni ng and 'Deployment: Moving from Good t o Great
Joseph A. DeFeo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227
8 Business Process Management: Creating an Adaptable Organization
Joseph A. DeFeo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 255
9 The Juran Transformatio.n Model a.n d Roadmap joseph A. Defeo and
Janice Dowxt Thompson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 279
10 A Look Ahead: Eco-Quality for Environmental Sustainability
Joseph R. DeFeo, Jr. and Brian A. Stockhoff . . . . . . . . . . . . . . . . . . . . . • . . . . 313

Section II Methods and Tools: What to Use to Attain Performance Excellence

11 Lean Techniques: Improving Process Efficiency Steven M. Doerman

and R. Kevin Caldwell. .. . . . .. .. . .. . . .. . .. .. . . .. . . . .. .. . . . . . .. . .. . 327
12 Six Sigma: Improving Process Effectiveness Joseph A. De Feo and
John F. Early . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 355
13 Root Cause Analysis to Maintain Performance Dennis J. Monroe . . . . . . 387
14 Continuous Innovation Using Design for Six Sigma Joseph A. Defeo
and Jolm F. Early . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 407

y
yj Contents

15 Benchmarking: Defining Best Practices for Marke t Leadership

Brad Wood and Alexander Janssen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 439
16 Using International Standards to Ensure Organization Compliance
Joseph A. De Feo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 467
17 Using National Awards for ExceUence to Drive and
Monitor Performance James Er Ralston . . . . . . . . . . . . . . . . . . . . . . . . . . 491
18 Core Tools to Des ign, Control, and Improve Performance
Brian A. Stocklwff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 541
19 Accurate and Reliable Measurement Systems and Advanced Tools
John F. Early and Brian A. Stockhoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 583

Section Ill Applications: Most Important Methods In Your Industry

20 Product-Based Organizations: Delivering Quality While Being
Lean and Green Steven M. Doemwn . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 675
21 Service-Based O rganizations: Customer Service at lts Best
Miclurelf. Moscynski .. .. . . .. . . . .. . . .. . .. .. . .. .. . . . . .. . .. . . . . . .. . 703
22 Self-Service Based Organizations: Assuring Quality in a Nanosecond
Angel To11c/1ev and Christo Toncl•ev . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 713
23 Health Care-Based Organizations: hnproving Quality of Ca re and
Performance Mary Beth Edmond, ]onatlwn D. Flanders, ami
James Er Ralston . . . . . . . • . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . • . . . . . . . . . . 757
24 Continuous Process-Based Organizations: Quality Is a Continuous
Operation Brian A. Stockhoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 789
25 Defense-Based O rganizations: Ass u ring No Doubt About
Performance Alexander Eksir . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 833

Section IV Key Functions: Your Role in Performance Excellence

26 Empowering the Workforce to Tackle the "Useful Many" Processes
Mary Beth Edmond and Detmis f. Mo11roe . . . . . . . . . . . . . . . . . . . . . . . . . . . 847
27 T h.e Quality Office: Leading the Way Forward Richard C. H. Chua and
Joseph A. De Feo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 867
28 Research & Development: More Innovation, Scarce Resour ces
Brian A. Stockhoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 891
29 Software and Systems Development: From Waterfall to AGILE
Bruce ]. Hayes . . .. . .. .. . . . . . . . .. . . . . . . . .. . . . . . . . .. . . . . . . .. .. . . . .. . 951
 Contents vii

30 Supply Chain: Bette.; Faster, Friendlier Suppliers Detmis f.Monroe . . . 979

31 Role of the Board of Directors: Effective and Efficient Governance
Marcos £. ]. Bertin and Marcos Bert itt Schmidt ............ . ..... ... .. 1003
Appendix I. The Non-Pareto Principle; Mea Culpa josephM. Juran .. 1021
Appendix ll. Sample Competency Matrices and Job Profil es ....... 1025
Glossary of Acronyms ......................................... 1037
Glossary of Terms ........... .. ... .. ................ • ...... . ... 1047
N arne Index . . . . . . . ...• . ... .. . . . . . • . .. ... .... ... ... . .. .. ... .. . 1061
Subject Index .... . .... • .... • ...... • ................ • ..... • .... 1067
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 Contributors
Marcos E. J. Bertin Director, Bertiu Quality Consultiug, Argentiun (CHAPTER 3]., ROLE OF THE BOARD
OF OLRECTORS: EFFECTIVE AND EFACUNf' GOVERNANCE)

Marcos Bertin Schmidt Director, Bertiu Qualify Consulting, Argentina (cliM''TEn 31, rmu: OF TH~
BOARD OF DIRECTORS: EFFEC11VE AND EFACIEl\11' GOVERNANCE)

R. Kevin Caldwell Execulille Vice ('resident, )nrnn, Southbury, CT (CHAPTER lJ, LEAN TECHNIQUES:
IMPROVlKG PROCESS EFFICIENCY)

Richard C. H. Chua, Ph.D. Former Exewtive Vice President, }urnn, Sout/1bnry, CT (CHAI'fER 27, Tlfll
QUALITY OFFICE: LEADING THE WAY FORWARD)

loS<!ph A. De Feo President and CEO, furnu, Southbury, CT (CHAPTE.R 4, QUALITY PLANNlNC:
DESICNtNG INNOVATIVE PRODUCt'S AND SERVICES; CHAI'TER 5, QUALITY IMPROVE:O.IENT: CREATING
BREAh.'"TiiROUGHS IN P ERFORMANCe,: CH:\PTF..:R 7, STRAlT.<CIC Pl.ANNING ANn OI;.PI_OYi.\fF,-~'JT: MOVJNC l"'RO.M
COOO TO GREAT; CHAPTER 8, SUSI!\"ESS PROCESS MANACE.\ t'E,NI. CREATING AN ADAPTABLE ORCANlZATIO::-J;
CHAPl'ER 9, THE JURAN TRANSfORMATION MODEL AND ROAD MAP; CHAPTER 12, SIX SJCMA: (JI..tPROVLNC
PROCESS EFFECTJVE.I\JESS; CHAPTER 14, CO/".t'fiNUOUS INNOVATION" USJNC DESIGN FOR SIX SICMA; CHAPTER 16,
USIKC INTERNATIONAL STANDMlOS TO &"\!SURE ORCANJZATION COMPLIANCE; Cf.IAPTEil 27, TtlE QUALITY
OFFICE: LEADlNC 11-IE WAY FORWARD)

Joseph R. DeFeo, Jr. Associate, Juran, Southbu·ry, CT (CHAPTER 10, A LOOK AKEAD TO EC<H:::!UALITY
FOR E.'\IVlRONMEI"-'TAL SUSTAlNABIUTY)

Steven M. Ooerman CUeul Re/ntionship Execulh.te rmd Senior Cousultrmt, jurtm, Soutldmry, CT
(CHAPTER 11, LEAN TECH.NIQUES: IMPROVlNC PROCESS EFFICIENCY; CHAPTER 20, PRODUCT- BASED
O.RG..-\NIZATIONS: DEUVERINC QUAUTY WHlLE BEING lEAN ,\NO GREEN)

lohn F. Eu ly E.remlivc Vice Pre$idm!, /1'rm1, S<>l•lhimry, CT (CHAmR 12, SIX SJG~IA; J~IPRO''INC
PROCESS GFFICIE.'JCY; CIIAPTER 14, OONTINVOUS-INNOVATlON USING DI!SICN FOR SIX SIGMA; Cllt\PTER 19,
ACOJRATF. i\NI) RSJAfll.f:. MF.ASURI!M I}r\.~ SYSTEMS ANO ,\I)Vt\NCf:,O TOOI.S)

Mary Seth Edmond E.n:.cuti'IJe Vice President rmd Senior Nurse Executive, Jurnn, Soull1bury, CT
(CI IAPTBR 23, HEALTH CARE~BASED ORCANJZA110NS: IMPROVING QUALm' OF CARE AND PERFORMANCE;
CHAPTER 26, GMI)OWEI\INC 'fHG WOk.KFORCB TO TACKLG TH£ " IJSEf!LfL ·~1.ANY" Pf<0Cf:$ES)

Alexander Eksir, D.M. Via Ptesidenf, !vfission Assunmce Six Sigma EMBB and Qrwlity, Rnytheolt
lutegrnted Defense Sy:i"tems, At~dove~ MA (cH,\PTER 25, DI!FENSE-IJASEOORGANIZATIONs: ASSURING ~o
OOUHT ABOUT J>£RfOR~tANCE:)

ix
x Contributors

Jonathan Flanders \lice President and Patient Safety Executive, Jurnu, Soutlrbzrr_lf , CT ( C HAI1'fER 23,
Ht!Al'l'fi CAR£-aAS£0 OKCANI2.Aii0NS: rMPROVtNC QUAUTY OF CAR£ ANO I)ERPOI~MANC:S)

Bruce J. Hayes Prt?sMeut, Executive Advisor Group. Rockland, MA nnd Cofomuler mut Boord
Dirt-..clor, NeumMdrics, luc., Jacksonville, FL (CHAPTER 29, SOffi\'ARE AND SYSfBMS DEVElOPMENT:
FROM WATERFALL TO AGILE)

Alexander Janssen Executive Vice President, Jurn,l Bv; The Netherlands (CHAPTER 15, BENCHMARK1NG:
DEFlNl NG BEST PRACTtCES FOR MARKBT LBAOERSHIP)

Joseph M. Juran (CHAPTER }, ATI'AININC SUPERIOR RESULTS THROUGH QUAUTY; CHAPTER 2, QUAliTY'S
IMPACT ON SOCIETY AND THE NATIONAL CUlTURE; CHAPTER 3, THE UNIVERSAL METHODS TO MANAGB FOR
QUALITY; CHAPTER 5, QUAUTY lMPROVEME..'JT: CREATING SREA}...'"TiiROUGHS IN PERFO~lANCE; CHAPTER 6,
QUAI.M'Y OONfiOI.: ASSURIN'C t<t:.PSATABU! AND COMPLIANT f•ROCf;SSES)

Dennis J. Monroe Vice Pre$idenl, Jurnn, Southbury, CT (CHAPTER 13, ROOT CAIJSB ANALYStS TO
.\lAINTAJN PERFORMANCE; CHAPTER 26, EMPO\ VERlNC THE WORKFORCE. 10 'I'ACKLE. iHE " USEfUL MANY"
PROCB..C:SES; CHAPTER 30, SUPPLY CHAIN: BETrE.R, FASTER, FRIENDliER SUPPllERS)

Michael J, Moscynski Associate, Jurnu, Southbunj, Cf (CHAPTER 21, SERVICE- BASED ORCANlZAiJONS;
CUSTOMER SERVICE AT ITS BEST)

James Er Ralston Vice Pre::ident~ }urmr, Southbury, Cf (CHAPTER 17, USING NATIONAL AWARDS FOR
EXCELLE..'\JCE TO ORtVE AND MONITOR PERFORMANCE; CHAPTER 23, HEALTH CARE-Ot\SEO ORGANJZATIONS:
IMPROVING QUALITY OP CARE AND PERFORMANCE)

Brian A. Stoekhoff, Ph.D. Sc1Jior COHSulttmf, Jurrm, Southbury, CT (CHAPTER 10, A LOOK AHEAD:
EC~UAI..ITY FOR ENVJRONME.i\JTAL SI:SfAINAtUUTY; CllAPTER 18, CORE TOOLS TO DESIGN, CONTROl., ANO
IMPROVE PIJRFORMA NCf;; CI IAP'J'ER 19, ACCUJV\TF. AND REI..IAPI..E MGASURE..\ f{WT SYSTEM~ ,\NO AOVA.NCIID
TOOLS; CHAPTER 24, CONTINUOUS PROCESs-BASED ORGANIZATIONS: QUAU'I'Y IS A Cot'\JTJNUOUS OPERATION;
CHAPTER 28, RESE..\RCH AND DEVELOPMENT: MORE INNOVATION, SCARCE RESOURCES)

Janice Doucet Thompson Principal with }D Thompson mrd Associates, Sacrmmmto, CA (CHAPTER 9,
THE JURAN TRANSFO~IATION ,\IOOEL AND ROAOMAP)

Angel 0. Tonehev Seu;or Consultaut, Juran BV. The Netllerlnnds (CHAJ'TER 22, SELF-SERVICE BASED
ORCANtZATtONS: ASSURJNG QUALLlY IN A NANOSECOND)

Chrlsto D. Tonchev Senior Consultant, Jurtm BV, The Nelllerltinds (CHAPTER 22, SELF-SERVICE BASED
QF:CANIZATtON$: ASSURJNC QUALilY IN A N!\NOSECONO)

Brad Wood, Ph.D. DirtciOI; Jurnn BV, TIIU Netherlnnrls (CHAPTER 15, BllNOIMARKIKC: DEF!NING BEST
PRA<...ItCE$ fo()R ('.-IARKUT I..EAOGRSf-UP)
 Introduction to the
Sixth Edition

Preface by Joseph A. De Feo, Editor-in-Chief

Dr. Joseph M. Juran and Juran's Quality Hm1dbook were unknown to me until my career led
me to meet this amazing person and resource. He was my te acher, mentor, boss, and later my
friend. Although I was less than half his age at the time we met, he h.e lped me and my
coll~agues implement his un.iversaJ methods to improve ou.r busioess performance. From
the Pareto P rincipl.c he named, to the universal breakthro ugh methods, to quali ty by desig.n
to d evelop new products, we S(X)O learned that these methods were indeed universal. These
me thods improved o ur performance. They work in any co1.mtry, ind us try, o r organizatio n,
and even in families. These methods can and wiU improve financial, organizational, and
cultural periormance by s imply implementing them across your organization.
Dr. jura.n once s tated, "To someone that has no t S<'Cn the miracles, o ne will not believe
that they occurred." I learned the methods he espoused and I St"lw the results; the miracles.
As a customer of the Juran institute in 1986, o ur organization applied his methods and
tweaked them to fit our needs. [n the end we witnessed the miracles. The company I worked
for improved quality and perforrm\nce drama tic.11l)'. We stayed in business and competed
head to head with the japanese. I have seen many organizations improve the ir performance
in the same way. It is time to share one more edition of the handbook w ith another gene ration.
Unfortunately, Dr. Juran left us befo re this sixth edition of the handbook was completed.
He passed away in 2008 at the end uring age of 1031 He left behind his wor~detful wife, Sadie
(who passed away nine months later in 2008 also at 103)_, a re markable family, an organization
be aring his name to promote the me thods to improve performance, and many publications
for future generatio ns to Jearn from. He trained tho usands o f upractitioners" in his methods.
CEOs, CE'Os, COOs,quality officers, and employees from many industries, in m<my countries.
They becam e disciples and applied his methods. Many are now advocates of performance
excellence in their O\'Itn rig ht. At Dr. Juran's 100th birthday over 200 people from around the
globe came to thank him for what he did for them.
To Dr. J<uan, I thank you, and to all the disciples, congratulations. To those who are just
beginning their careers as new practitioners, the best has yet to be learned.
We have chapters that were autho red by Dr. Juran for this s ixth edition of Juran's Q uality
Handbook. TI1e chapters that Dr. Juran completed have o nly his name as the author.
He asked that others "fill in the blan ks." This is noted by my name appearing on Chapter 5,

xi
xii Introduct ion to the Sixth Ed ition

Quality Improvement: Creating Breakthroughs in Performance. For cnapters he did no t

complete, we had some of the finest practitioners-reseru·chers-update those chap ters. To
ensure this edition of the handbook is truly viewed as an important body of knowledge, we
added new chapters, such as Lean and Six Sigma, since the method s fo r managing for q uality
have evolved a.n d ch.ang'c d since the last edition was pub lished in 1999. lr\ these chapters we
included Dr. Juran's input related to that subject. These were from his pape,r s and o ther
publications. 'We want to appeaJ to new practitioners and new lead ers so they can have the
same benefit and chance to Jearn methods and witness their own miracles. We also hope tha t
all O l.lf readers w.ill become acquainted '""ith a new generation of authors who someday may
be g urus as weiJ.
I mus t admit this was no t an easy undertaking. Following in the footsteps o f giants in
our field, such as Dr. Juran, DL Blanton Godfrey, Dr. Armand Feigenba um, Dr. W. Edwards
Deming, Or. Noriaki Kano and man y more, was (werwhelming at times. The g()()(i news is
that Dr. Juran provided me a critique of the fifth edition. His critique p rovided dire<:tion,
what to add, w hat to remove, what to researd 1 prior to his passing. A ltl1ough he was not
here w hen it was time to send this to the publishers, aU readers of the handbook can rest
assured that Dr. Juran is present in this edition.
I hope anyone 1vho reads this will grant me a little leeway when p roviding his or her own
critique. At times 1 wondered, did I d o this book justice? In the end, o ur a uthorscame through
and gave me an o pportunity to shine. I feel J have d o ne my best to honor all the gunls who
have gone before me and all those w ho have yet to come.
I would like to thank Linda Ellrodt, my assistant, who fo ught w ith me many times and
ln the end always won. Also l thank Brian Stockhoff, Tina Pietraszkiewicz, jackie Allard,
Jeremy Ho pfer, Matt Pachniuk, Ceeno Ca rlo ne and so many others for helping me p ull all
the materials together in to o ne big pile o f information. For the authors: \·Vitho ut you this
book would s till be in production. [n addition, I thank the s taff of the Juran Instit ute and
Steve Chapman and his team at McGraw-Hill fo r caring so much aboLtt this text and the
next generatjon who will read it.
To the late Dr. Bill Barna rd, Dr. Frank C ry na, and Mr. Bob Hoogstoel, my mentors while
growing u p at the Juran Insti tu te; Your guidance when I was a rookie mad e this aU possible.
\f\7ho would have ever thought a wood shop teacher from a hum ble beginning could be the
co-OOitor someday with Dr. Juran? I beti~.ve each of you did . You enoouraged me to be
pragmatic, to learn how to research, to make my cust·o mers s uccessful, and to practice what
we p reach. To you I offer my than ks.
To my three sons C hristopher, Mark, and joe-all w ho have learned tl1at becoming a
Lifelong Ieamer, as Dr. Juran was, is the best way to p rovide value to society. Thank you for
p utting up w ith rne when so man y cvcn.ings and '"rcckcJlds I was st-uck typing on a computer.
To my wife, Mo nica, w ithout you I would no t be who I am today-a fa ther, husband,
and now an author of a book with a great legacy. A big thank you.

josepll A. DeFeo

Highlights of the Introduction

1. The fo<mding concept of the handbook was to create a compend ium of kno wledge
in the f:ield o f managing fo r quality. The emphasis h<>s always been on wuver•als-
"the p rinciples tha t are valid no matter wbat the p roduct, the process o r function"
(Dr. joseph M. j uran).
 Introduction to the Sixth Edition xiii

2. These un iversal method s d elive r superior results and perfo rmance excellence in
any company, o rga nization, indushy, country, or process. They can be used to
improve financial, o rganizational, and cu ltural performance by simply learning and
a pplying them.
3. This handbook is a reference text for aU \"rho are invo lved with c reating, producing,
a nd d elivering high-quality goods, services, and processes to attain superior
business results.
4. There are several tables of c<>nte nts. At the beginning of the book is the list of secliou
nml clutpler hendiugs, each of which describes, in the broadest terms, the contents of
that section or chapter.
S. The handbook is a condensation of each author's knowledge; i.e., what she or h e
wrote is derived from ma.tcrials thar aa:c one or two Ol'dcrs o f magni tude more
vo luminous than the published work. ln some cases it is worthwhile to contact the
author for further elaboration. Most a uthors have no objection to being contacted,
and some o f these contacts lead not only to more information but also to visits and
e nduring collaboration.
6. In many cases a practitioner is faced w ith adapting to a specific situation the
knowledge d erived from a totally different technology, i.e., a different industry,
product, or process. Making this transit-ion requires that he or sh e identify the
commonality, i.e., the common principle to which both the specific s ituation and the
derived knowledge correspond.

Dr. Juran on the Creation of Juran's Quality Handbook

The idea of a handbook on qualityt."'ntrol originated late in 1944 a nd was part of my d ecision to
become a freelan ce consultant after World \.Var TL I had in mind a whole series of books: the
Quality C.onlrol Hnudbook, which was to be a comprehensive reference book; and separate manuals
on quality c<>ntrol for executives, engineers, foremen, and inspectors.
I prepared an exl(!nsive outline for the handb<.'lQk plus a brief descrip tion for each o f the
o ther books. My p ublisher was McGraw-Hill, w h o offered me a .:ontrac! (a mere o ne-page
document!} in December 1945. Publication was in 1951. It became a flagship of the man y
books l have v~.rritten. .
The concept of the handbook was to create a compe ndium of knowledge in the field
of managing for quality. The emphasis was on univers.1ls- " the princi!Pies that are va lid
no matter w hat the prod u ct, the p rocess or function. " I was onJy d imly av,rare that I
would be contributing to the evolution of a new science-managing for quality. I ended
up with fifteen c hapters. J wrote six of those; o ther authors wrote the remaining nine,
which l often ed ited. From t he o utset, the hat'ldbook beca me the "bible'' of managjng for
quality and has increasingly served as an inte rnational reference boo k fo r professionals
and managers in the field . With the p ublicatio n of the fifth edition the n ame was changed
to the Juran's Quality Handbook; the jo in t editors-in-chief were Dr. A. Blanton Godfrey
and I. For the sixth edi tion, Jose ph A. De Feo will be editor-in-c hief. As a fine consultan t
nnd practitio ner, he has earned the recognitior'l that comes wi th the p ublicatiOI''I of such a
book as this.

joseph ,ltl. j ura11

xiv Introduct ion to the Sixth Ed ition

Remembering Dr. Joseph M. Juran

From Dr. Armand V. Feigenbaum
Presirtcmt nmf C£0, Geueml Systems Company

The issuance of the Jurmls Qun/ity Hmulbook, s ixth editio n, is a continuation of Dr. Juran's
economic, sociaJ and ed ucational service to the fut·ure o f q ua.lity in America as wcH as the world
community. [knew 01'. Joseph Juran fo r a very lo ng time and f want to express the deep sense of
loss J feel beL""'<' use o f his passing. Many:. many people and organizations are much the better because
of his work, his writings and his guidance and this importance of his infl uence-already very great-
will oon tinue t<> SR'W throughout the world.
I first carne to meet a.nd to know Joseph Juran before quality was recognized as a field a.nd
before q uality organizations <l1'1 d mcanh'lg ful quality literature and g uidance ha d come into being
as an area of explicit impo rtance and a ttention. Already a man of hig h professilonal standing and
of major business and governmental experience, the very fact of Joseph Juran placing his personal
emphasis upon quality brought enormous a ttention and meaning to the s ubject of quality which
previously had been though t of as a technical factor in inspection. The subsequen t more tha.n half
century of the grow th and evolution of q uaJity into the importance of its global recogni tion and
high effectiveness througho ut the world owes a very great deal to the contribution of joseph Juran.
As he is no longer with us, we can, however, take some comfort that his guidance and inJJuence
will conlii, UC through the availability o f the co,, tent of his wriLi1' gs and of the .s pirit o f his personal
commitment that continues t'o come Lhl'ough them.

From Dr. Noriaki Kano

Professor Emerilus, '«>kyo University of Scieuu

The most widely-utilized to<>ls among those in the quality world a.re probably the "Pareto Chart"
and the "Cause and Effect Diagram" {also known as the "Fish bone Diagram'' or the " Ishikawa
Djagram "), Among these two, the number of people who know the Pareto Chart was initially
proposed by Dr. Juran have d rastically decreased in recent years while it is well k nown that "Cause
and Effect Diagram" was proposed by Dr. Tshikawa. The Pareto is nam ed after the Italian Economist,
Vilfrcdo Pareto (1848-1923) w ho is known for his s tudy o f income distribu tion. Dr. Juran called it a
principle of "Vital few and Useful many" as the Pareto Principle because the cumulative curve of
freq uency distribu tion by q uality d efects does have a shape similar to that of income distribution
Pareto revealed.
ln response to Dr. Jura.n's article (1975) on Pareto, a motion to rename the p rinciple to the "Juran
Principle" was proposed. Dr. Juran (1975) respond ed that: "I hope lnmybepnrdone·dfor suggesting 1/tnl
sucl1 a dtmrse irl name, if it comes to pass, mvnil my journt>,lf to llu~ Great Beyoud. I hope 1 mny alsn be
pnrdomul for Itoping tlwt t!Jh; joumcy will be- delnyed for some decndes to come." and then the discussion
was left over. l tried to make this happen in the event of Dr. Juran's lOOth year celebration, but I had
to give it up without being able to receive consent from Dr. Juran. 1 am thinking to make a proposal
to change Juran Principle and Juran Chart h·om current Pareto Principle and Pareto Chart again in
the near future according to Dr. Juran's wish of over a quarter century ago. I am certain it is the
oontribution toward the Q uality Innovation of japanese products that Dr. Juran was most p roud of
in his life i\nd we thank him for that.
 Introduction to the Sixth Edit ion XV

From Ken lhkatori

Acting Mmwgcr, luternntional Relations
Union offnrJnnese Scientists and Engineers (/LIS£)

Thank you for your email in p roviding JUSE an oppo rtunity to give a tribute at the j uran 6th
edition handbook issuance. First of all, the /urnn's Quality Handbook was translated into ja panese,
and taught the Japanese top management th a t the Quality Management can be applied as the
sign ificant "management tool." \IVeconsider Dr. Juran as a foster paren t who actually raised and
d eveloped the Jap an ese Q ua lity Management, whereas Dr. Deming as a b irth paren t.

From Dr. Le:n nart Sandh olm

$tJndlwlm Associates

Dr. Juran is the pe rson, outsid e my family, who has had the greatest influence on ffi}' life, both
professionally and personally. The firs t time l met him was 1965. He was my mentor fo r almost
40 yeaiS. According to his memories he visited Sweden 3 1 tim es. It was a delight for me to
orgaruze his courses and seminars in Sweden from 1966 to 1991. These events gave me a
tremendo us insight in Dr Juran's thin king and philosophy. The meetings d id n' t just mean being
together professiona lly, but also personally. My w ile and I had tl1e pleasure to have Dr. Ju ran
several times as g uest in our home. A personal and warm frie ndship emerged. He s howed a
keen interest in the children. When I met him a t confe rene<?S, he used to ask abou t the child ren
a nd a lways recalled the l'l<llllcsof them. I wi ll forever keep Dr. Jutan in g ratcr-uJ memory.

From Madam Tang Xiaofeng

Former Denu ofJurmr lnslilules of Slttmglwi
Hend of Slwt~ghni Associntio" for Qunlif_y
President of Slmnglwi Academy of Quality Mnnng~ment

O n behalf of the Shanghai Association for Q uality, Shan ghai Academy of Quality Management
a nd myself, the passing o f Dr. Jura n still a shock an d deep regret to us. Dr. j uran is a well-known
great fa ther for modem q uality management worldwide. 1 a lways remember the time when I
met w ith him in 1998 Spring, his happiness when l sent him the Chinese ver;;ion of Architect of
Quality in 2006. His gentlemanly SJ"'aking, mentor style behavio r a nd h is great knowled ge,
always make him un forgettable to me. Since 1960s, Dr. Juran and his Q uality Trilogy made great
contribu tion to the worldwide quality management, and wiU be remembered all the time by
people. EspeciaUy the impact o f his contribution to China and Shanghai q uality management
will last forever. Both my orgaruza tion and myself are benefit from his past encouragemen t and
suppo.rt, we will commem orate h im for long. In his a utobiography; he used to w rote "When I'm
d ying, don' t cry to me because my life is so splend id". With h is life joun'ley. we observed the
colorfuln ess of the develo pment of quality management as well as his ext:<'llent lifestyle. We
sincerely <••ish our qu ality b usiness, Mr. Joe De Feo and his Juran Institutes grow contin uously
under inspiration of Dr. Juran's spirit.

From H<$am Acef Kashfi

AcndemicianFl tlfemntior-ml Academyfor Qunlity

Dr. joseph M. Juran w ho deservedly won the e pithet, "Father of Q uality Management,"
fo unded this n ew science on his Trilogy and specially on Q uality Planning and sincerely
practiced it fo r the welfare o f people all over the world and left us a thoughtful message: "My
jo b o f contribu ting to the w elfare of my feiJow man is the great unfinished b us iness." He
solidly origina ted the theory and ftmctionally evolved this new science. If we compa re Quality
XYi Introduct ion to the Sixth Ed ition

to a tree, which he prophesized to nourish in the 21st <-entury, his legendary Quality Handbook
is the roots, and as he joined the selected etemals d ue to h is admirable integrity. honesty and
conviction, his legag~ as his product, thanks to its authenticity and comprehens iveness, will be
increasingly appreciated as the unique pioneer dassic o n Quality.

Fro m Tom Pyzdek

President, Pytdck Institute

('vc known Dr. Juran s ince tha t day in 1967 when I, a quality technician a,t a co:t1'1 factory,
picked up that thick green book and looked up control charts. It was the Quality Omtrol
Handbook, .e<:ond .dition and it introduced me to the wonderful, magical world of quality.
The book divulged the secrets of statistics and quality management and inspired me, an
18 year old just entering college, to consider making quality a c.1reer. As th e years went by, I
continued reading the work and investing in ne\v editions of the handbook. VVhen I made
my first presentation at an ASQC conference I joined Dr. Juran o n an e levator trip to the
o pening presentation, where he delivered the keynote address. ! was surprised by how small
he was, physically. On the da.is, howcvef, ht! was a giant as he told those of us assembled
there that we had a big responsibility to he lp America recover her position as the world 's
quality leader. In 1988he and 1rode the bus together to the White House for the presentation
by President Reagan of the first Malcolm Baldrige National Quality Award . We chatted
briefly. That wening 1 was waiting lor a restaurant table outside the door of the room where
the Baldrige Board of Overseers was about to meet. When he asked me to joln the group I
was delighted. 1 was thrilled to be able to chat with so many of the leaders in the quality
movement. Of course, he sat at the head of the table, w here he belonged . 1l1e last time we
met was in 2004, to celebrate his lOOth birthday. Jt was only May 6 and his birthday wasn't
until December 24 and he quipped that his people weren't sure that he would make it to
De<.-ember. He stood tall and his voice and handshake were strong and w e in the a udience
had no doubt that he would blow by 100 like it was no big deal. It has been over 40 years
since I first picked up his book. It's s till on my bookshelf. Like me, it's physically showing its
age a bit these days. But like Dr. Juran, its creator, the ideas are fresh and full of meaning and
value. Today, some\vhere, some young person ls reaching for one of works, about to be
i11spired by him. Inspired to consider a career of he lping people and org.a.nizations achieve
excelJence. Or maybe just inspired to try harder, to do things better. Dr. Juran is no t gone . He
will never be gone.

From Pau l Borawski CAE,

Executive Directo-r nud Ch;e[Stralegic Officer, Amerkm-1 Society for Quality

l met Dr. Juran for the first time in 1986 and it didn't take but a minute or two to know I was
in the presence of an extraordinary leader and a management prophet. I had many subsequent
opportun.itics to lca._m from Dr. Jw:an. He taught us aU about the science of mnna_g cmcnt. The
lang uage of executives. The process of improvement. He embodiet.i the example of disciplined
devotion to excellence. I doubt w e will again experience business wisdom as profound as
Dr. Juran?s or kno\vledge as practka1as his teachings.

Uses of the Handbook

'"'e set out to make this s ixth edition handbook a reference for aU who are involved with
leading, creating, producing, and delivering high-quality products (goods and services},
 Introduction to the Sixth Edit ion xvii

and p rocesses to attain superior results. Experience w ith the first five editions has s hown
that "those w ho are involved " include the following:

1. All levels jn lite orgmriznliounl hierarchy, fro m the board members, chief executives,
and operational managers to the workforce. lt is a m istake to assume that the sole
purpose of the book is to serve the needs of just the q uality managers and engineers.
Tht! purpose of the book is to serve the entire organ.iZ<'"ltion including the workforce
at all levels o f the orgardzation.
2. The various functious engaged in producing products (goods, services, o r information),
such as research and development, marke t research, finance, operations, marketing and
sales, h uman resources, sup p lier relations, customer service, ad ministration, and s upport
activities.
3. The various specinlisfs associated \vith the processes can ying o u t the s trategic and
metical tasks to • nslue all products, and business processes are properly designed,
controlled, and continually improved to meet customer and societal needs.
4. The various iJtdustric~t> that make up the global economy: manufacturing, co nstruction,
services of nil kinds- hig h-tech, transpor taHon, communication, oil and gas, energy,
utj]jties, financial, healthcMe hospitali ty, government, and so Of'-

The handbook is also a.n aid to certajn gatekeepers and stakeholders w ho, al tho ug h
not d irectly h w o lved in lead ing, prod ucing, or markctiflS prod ucts, ncve r thelt~$S have
"a need to kno w " a bout the qual ities pl'Od uced a nd the associa ted posi tive and negative
s ide effects. These s takeholders includ e the executive lead ershi p,. q uality officers,
and engineers who are g iven the respons ibility to i mpro ve managing fo r q ua lity from
day to day; customers looking to better understand how to i mprove the ir s u ppliers;
the supp ly chaini t he users; the publ ic; the o wners; the med ia; and even go vernmen t
reg ula to rs.
\Ne have co nducted many focus groups and Je.am ed that our readers, the practitioners,
make a w ide variety of uses of Juran 's Quality Handbook. Experience has sh own that usage is
d o minated by the follov,•ing principal motives:

1. To use as a "one-stop shopping" reference gujde for the methods, tools, and road maps
to create a susta inable bu.sincs.o; operation driven by h ig h-q:uaUty produclc;.
2. To u tilize as a guide to ed uca te their spedaHsts, such as quali ty managemen t
and assurance d epartment's , systems engineering, o rga nizational a nd o pera tiona I
effectiveness d epa rt men ts, finance, a nd the like.
3. To find special tools <>r methods and examples of their use .on to pics s uch as
leadership's role in leading q uali ty, incorporating the voice o f the cus to mer in the
design of goods and services, reliability engineering, design of experiments, or
statistical tools.
4. To study the narrative material as an aid to solving their own o rganizational and
b usiness p roblems.
5. To review subject matter fo r s pecific self-training or to secure material fo r teaching
o r training o thers.
Using the handbook appears to be more frequent during times of change such as when
developing new business initiatives, working o n new processes and projects, o rganizing
d epartments and functions, o r just trying out new ideas.
XYiii Introduct ion to the Sixth Ed ition

Organization of the Handbook

[rrc..o;;pcctivc of intended use, the information p rovided in this handbook Jnust be found
easily.ll1e problem for the user becomes one of (l ) knowing where to find it and (2) adapting
the information to his or her specific need•. Although there is a !,'Teat deal of know-how in
this book, it is important to understand how it is organized. There a.re four sections with a
total of 31 chapters. Each chapter is a topic on its own and collectively makes up a robust
performance excellence system. Here is a brief look at the layout of the book.

1. 1l1e Introduction answers tho question, V\~1ya handbookonquality?Thc Introduction

includes the preface, dedications .. and acknow ledgments and how to use the
handbook. 1l1ere is a short but important .ection called "Remem bering, DL Joseph
M. Juran" and rus contribution to society. This part of the handbook has therefore
been designed t<> help the reader find and apply the spe<:ific content that relates to
the problem a t hand. To know where to locate it requires understanding how tho
handbook is structured. The handbook consists of the Introduction, Sections 1 to 4,
and the Appendix I and Appendix U. The sections are outlined as follows.
2. Section 1: Key Concepts: What Leaders Need to Know about Quality (Chapters 1
thro ugh 10). This section deals with basic concep ts thro ug h w hich quality is
managed (planning, con trot and improve ment) and why it is crucial to the s uccess
of most orgartizations. It deals with the evolution of managing for quality in the
past to managing fo r organizational performance excoiiO!\CC in the future.
3. Section 11: Methods and Tools: What to Use to Attain Performance ExcoiJence
(Chapters 1l through 19). llus section focuses on how to use the management of
quality methods, basic tools, and advanced statistical tools to obtain results. l lte
primary to pics include:
• Six Sigma
• Lean techniques
• Root Cause Analysis
• [nnovation and Des ign for Six Sigma
• Benchmarking
• l.nternational standards
• National awards forexcellence
• Core ar1d advanced tools to desig n, COI''Itrol, and improve
4. Section III: Applications: Most Important Methods in Your Industry (Chapters
20 through 25). This section includes industries tha t we felt have been most
effective in using the methods for managing for quality and whe re performance
excellence has worked:
• Manufacturing
• Sendee and self-service
• HeaJthcare systems
• Processing-based o rganizations
• Software development
• Defense
 Introduction to the Sixth Edition xix

5. Section IV: Key Functions : Your Role in Performance Excellence(Chapters 26

throug h 31). This section illustrates the roles tha t key func tions mus t p lay to
em1ble the organ ization to attain s uperior results.
6. The Appendixes. This part of the text provides additional information and tools to
aid a leader, manager, o r practitioneL

How to Find It
There are four m ai 1'1 road s fot locating info rma tion in the handbook:
Tables of contents
Index
Cross-referenoos
Internet

Table of Contents
TI1ere are tw o tables o f conten ts. At the beginning of the book is the list o f sedious ami 1/Je
cltnpter titles withiu t-.ach section, which d escribes, in the broadest terms, the contents of tha t
chapter.
Next, there is the clwpler collt<mts list that appears on the first page of each chapter. Each
e nt:ry in the c hap ter ron ten ts is a mnjor headit~g w ithin that chapter.
tn a good many cases, it w ill s uffice merely to fo Uow the hierarchy of chap ter contents to
find the information sought. In many other cases it will not. For such cases, an alternative
approach is to use the index.

Use of the Index

A great dea l of effort has gone into preparing the index so tha t the reader can loca te all
the material bearing on a subject. For example, the topic "Pareto prin.c iple" is found in
severa l sections. The index entry for "Pareto p rinciple" assembles all uses of the term
"Pareto p riJ.\C_
i plc" and s hows the page: numbers on which they may be fo und . Tile fact
that info rmatio n about a s ingle topic is found in more than one cha;pter (and even in
many chapters) gives rise to criticism of the organizatio n of the handbo.ok, i.e., Why can't
a ll the info rmation o n one topic be brough t together in one place? The answer is tha t we
require rnultiple and interconnected uses of know ledge~ and hence these rnultip le
appea rances canno t be avoided. In fact, w hat must be done to minimiz-e d u plicatio n is to
make one and only o ne exhaus tive exp lanation at some logical place and then to use
cross-relerencing else.\"•here. ln a sense, aJI the information on one to pic is brought together-
in the index.
Some key words and phrases may be explained in several places in the handbook.
However, there is a lways o ne passage that constitutes the major explanatjon o r definition. In
the index, the word "defined" is used to identify this majo r definition, e .g., "Evolutionary
operation, defined."
Tile index also serves to assemble all case examples or applications under one head ing for
easy reference. Forcxample, Chapter5 deals with the general approoch toquaHty improvement
and ind udes examples of the application of this approach. However, additional examples are
fotmd in o ther chapters to illustrate and support their specific topics. The index enables the
reader to find these additional examples readily, sine;: the page numbers a re given.
XX Introduct ion to the Sixth Ed ition

Cross-References
The handbook makes extensive use of cross~refet'ences in the text to (1) guid e the reader to
further information o n a s ubject and (2) avoid duplicate explanations of the same s ubject
matter. The read er s hould regard these cross-references, w herever they occur, as extensions
of tlte text. Cross-referencing is to either (1) specific major headings in various chapters or (2)
sp~cific figure nu mbers or table n u mbers. Study of the referenced materia l wiU provide
further illum ination.

A Note on Abbreviations
Abbreviations o f narnes O l' organi zations are usually used o nly after the full name has
previo usly been speUed out, e.g., American Society fo r Q uality (ASQ). In any case, all s ud1
abbreviations are listed and defined in the index.
The text of the handbook emphasizes the "main road" of q<ta[jty management know-
how, i.e., the comparatively limited number o f usual s ituations that ncvctthele.. :. <:> occupy the
bulk of the lime and a tten tion of p ractitioners. Beyond the main road a 1·e numerous "side
roads," i.e., less usual sHuations that are quite diverse and require .special solutions. (The
term "side road" is not used in any derogatory sense. The practjtioner who faces an unusual
problem 0\LtSt nevertheless find a sol<ttion lor it.) As to these side .r oads, the handbook text,
whiJc not complete, nevertheless points the reader to avaj labte solutions. This is dooe in
several ways.

1. Citations. The handbook cites n u merous papers, books, and o·ther bibliographic
references. In most cases these citations also indicate the nature of the special
contribution made by the work cited to help the reader decide whether to go to the
original source for elaboration.
2. Special bibliogmpllies. Some chapters provide supplemental lists of bibliogr<lphical
ma terial ior furtlter reference u.ndcr ReferenC<lS. The editors have a ttempted to
restrict the t."'ntcnts of these lists to i tcms that (1) bear direc-tly Or\ the subject matter
d iscussed in the text o r (2) are of uncommon in terest to the practitioner.
3. Uteralure searclr. Papers, books, and other references cited in the handbook contain
fu rther references which can be found for h tr lher study. Use can be rna de o f available
abstracting and indexing services. Various other specialized abstracting services are
availableonsuch subjects as reliability, statistical methods, research and development,
and soon.
4. Tl,e/ulerncl. It is now possible to find almost any book or article in print and many
that arc out of p rint in just a few min utes by using a "\IVcb search." Using search
eng·ines, one can fi nd thousands o f art ides on numerous top ics or by selected
autho rs. Manyspecia lsi tes focus o n performance excellence and qu ality management
in the broadest sense. Asimple e-mail contact with a website author may bring forth
even more unpublished works or research in progress. Sites developed by t.tniversity
departments doing research in q uality are especially useful for searching for specific
exam ples and new methods and tools.
5. Author contact. The writ-t en book or paper is us ually a condensa tion of the autho(s
knowledge, i.e., w hat he or she wrote is derived from materials that are o ne or two
o rders of magnitude more voluminous than the published work. In some cases it is
•vorthwhile to contact the author for further elaboration. Most authors have no
objection to being contacted, and soone of these contacts lead not only to more
Lnformati01' but also to visits and enduring collaboratinn.
 Introduction to the Sixth Edition xxi

6. Societies nnd oilier sources. Resourceful people are able to find still o ther scJurces of
information relating to the problem at hand. They contact the editors of journal. to
discover which organizations have faced simila1· problems, so that they may contact
these organizations. They contact suppliers ~md c-ustomers to learn if competitors
have fo und solutions. They attend meetings, such as courses, seminars, and
conferences of professional societies, a t which there is discussion of the problem.
There is hardly a prob.lem faC<ld by any practitioner that has not a lready been
actively stud ied by othe!'s.

Adapting the Handbook to Your Special Needs

In many cases a practitioner is faced with adapting to a specific situation the knowledge
derived from a totaUy different techno logy, i.e., a different industry, product, o r process.
Making this transition requires that he or she identify the commonality, i.e., the common
principle to which both the specific situ.a tion and the derived knowledge correspond.
Often the c-ommonality is managerial u> nature and is comparat.ivcly easy to grasp. For
example, the concept o f self--control is a universal management concept and is appHcable to
any person in any organization.
Commonality o f a s tatistical nature is even easier to grasp, since so much information is
reduced to formulas that are indifferent to the nature of the technology involved. Even in
technological matters, it is possible to identify comm onalities despite gre.a t o uhvard
differences. For example, concepts such as process capability apply no t only to manufacturing
processes, but to healthcare services and administrative and support p rocesses as welJ. ln
Uke manner, the approaches used to make improvements by discovering the causes of
fai lures have been classified into specific categol'ies that exhibit a great deal o f commonali ty
despite wid e differences in technoJogy.
In aU these s ituations, the dlallenge to practitioners is to establish a linkage between
their own situations and those from which the expertise was derived-the discovery of a
commonality.
This page intentionally /eji blank
 SECTION I
Key Concepts: What
Leaders Need to Know
about Quality
CHAPI£Rl CHAPTER 6
A ttaining Superior Results Quality Control: Assuring Repeal<lble and
through Q uality Compliant Processes
CHAPTER2 CHAPTER7
Quality's Impact on Society OI>d Strategic P lanning and Deployment
the National Culture Moving from Good to Great
CHAPTER3 CHAPTERS
The Uni versal Methods to Business Process Management
Manage for Quality Creating an Adaptable O rganization
CHAPTER4 CHAPTER9
Quality Plan ning: Designing Innovative 1l1e j ur·an Transformation
Products and Services Model and Ro.1dmap
CRAPIEJI s CHAPTERIO
Q uality lmprovcm'""' Crea ting A Look Ahead: Eco·q uality for
Breakthroughs in Pel'formance Environmental Sus tainability
This page intentionally /eji blank
 CHAPTER 1
Attaining Superior Results
through Quality
Joseph M. Juran

About Tkis Chapter 3 Contrast in Views: Costomers" an~ Prodacm' 17

Higll Poiots of This Chapter 4 Needs Related to OissatisfacliOll 23
Qul~y, Petfomance Excel .. co, and Superior Oiscoveriog Hiddeo Costo11er Needs 14
Resolts 4 Perfoclioais.m 26
Qulity l11pacts lev ..ue aod Costs 6 Quality: Brief History of Quality and the
Qul~y, Earning~ and the Stocll Maotet 7 Maugemeot of It 26
Maotet Quafity leadersllip and Tke rw ..ty·First Cttrtury '"d Qu lity 37
Busioess Strategy 7 Lessoas Learned 37
Qul~y aod Sh11 of Maotet 9 Ackoowledptents 33
Macroecooomic lnftmces on Res~~~s IS Refereoces 33

About This Chapter

This chapter defines the role and import.1.1'ce of the qualily of products, services. and pm-
cesses in an organiz.ntio i'L An o rganization that is superior to its competition in q uality is
considered the market quality leader or, as used recently, in ua state of perfon nance excel-
lence." The goods and S(:>rvices that an organization produre..s m us t meet its custo mers'
needs. If they do, then customers purchase these goods and services, and the organization
receives sales revenue as a result. All organizatjons ca.n achjeve superior results through the
applica tion of the universal methods l'o manage quality, w hich design, maiJ'ttain, and con..
tinually improve the q uality of goods and services.

3
4 Key Concep t s: What Leaders Need to Know about Qua l it y

High Points of This Chapter

1. Organiza tions tha t engage in a relentless pursuit of de livering h igh-quality
products and services o utperform those that do not. Custome rs' satisfaction
depends on having the right quality of goods and ser vices to meet their
needs.
2. High-quality goods and serv ices impact an organization in two ways. First, quali t~t
can improve financial results by deHvering products, seJ·v'ices, a nd p rocesses that
are superior to those of the competition. Second, the relentless p ursuit of high
quality transforms the culture w hich leads to s ustainability.
3. High-quality goods and services can increase the sales revenue . Revenue can be
derived from sales, budget appropriations, tuition, government agency grants, and
soon.
4. Q uality superiority can be translated into higher market share·, but it requires a
systematic approach that is moving at a pace greater than that of the competition.
5. Quality has come to mean " fitness for p u rpose." This means that no matter what
you produce-a good or a service-it must be "fit" for its purpose. To be fit for
purpose, every g._'K.XI or service mu.st have the right features to satisfy customer
needs with Uttle or no failures (Six Sigma levels and greater).
6. Customers s tate their needs as they see them, in their language. Suppliers (prod ucers)
''ccd to u ndetstand the real need s behind the stated needs and t-m nslatc those needs
into the s uppliets1 language.
7. Organi1.ations that were s ucc..-essful a t creating superiority in q uality mad e u se of
nu merous strategies. Our analysis sh ows that despite differences in these strategies
among the o rganizations, there was a long Jist of common p ractices.
8. n ,is handbook provides both the details of those common strategies and insight
into how your o rganization can benefit from them.

Quality, Performance Excellence, and Superior Results

An organization that creates high-quality goods and servic.:s can be affected by this in two
ways. Fi.rst, quality can affect its financial results because products and servicvs that are
s uperior to the competitors' products are more salable, thereby increasiAg sales and lower-
ing costs and thus leading to greater profitability. Second, the p ursuit of h igh quality trans-
forms a culture. This happens after repeated s uccess in eliminating pocr quality, process
waste, and customer d issatisfaction. The transformational changes required of an organiza-
tion do not happenhapha.z ardly. They are a result of an organization's relen tless pursuit to
be the best in quality and implementing a systematic method to get there. This destination
has had multiple names over the decades. Organizations that a ttain superior results, by
designing and contin uo usly improving the quality of their goods and services, are often
caJJed 1.vorld class, best prnctice.s, vn11g11nrd comptmics, and m08t recently perfurmnnce excellence.
Y.le define this as an o tganization that has altained a slalt• of perfornumce excellence because its
products and seri!icc>s exceed customers' expectations; th~ty n·re regarded by l11eir peers and have supe·
rior, sustainable results.
Titis pursuit of performance excellence through quality creates high sta.keholder and
employee satisfaction, which enables the organization to s ustain the pi.U'Suit for the long
term. These orga,niza tions have reached a st.., tc of performauce excellence.
 Attaining Superior Results through Quality 5

How to Think about Quality

One of the first tasks is to provide a de fit'lition o f the word "quality." \•Ve m ust first agree o n
a meaning of the word 5<1 that an organiz.;tion will know how to manage "it." lfonecan define
it, then one can manage it; if one can manage it o ne can deliver it to the satis factio n of
1

customers and stakeholders. lf one does not agree on a common meaning of quali ty for an
organization, then one wlll not be able to manage it efficiently.
\Ne have seen so many meetings where leaders argue when asked the question, "Does high
quality cost more, or does high qua lity oost Jess?" Seemingly tl1ey disagree. One-half agree that
it oosts more, and the other half fuel it costs less. The fact is that some people literally do not
know what the otl1ersare talking about. ll1e culprit is the word "quality." It is spelled the same
way and pronounced the same way, but has multiple meanings. To manage for results, one
must agree on Lhe definition o f the word "quality" from the perspective o f customers-those
people who buy the goods, services, and even reputation of your organization.
At one financial services company the leaders w ould not s upport a proposal to reduce
wasteful business pwcesses because the s taif had labeled them "quality improvemen~"
Some of the leaders felt improving quality would cost more money. In their view, hig her
qua lity meant higher co.t. Others felt it would cost less. The s ubordinates were forced to
rename the proposal "productivity improve ment" to secure approval and avoid confusion.
Such confusion c.1n be reduced if each organi.zation makes clear the distinction between the
multiple meanings of the word "quality.'' However1 some confusion is in.e vitable as long as
we use a .single '..vord to convey very different ideas.
There have been efforts to darify matters by adding supplemental words. To date, none
of these efforts has gained broad acceptance. There also have been efforts to coin a. s hort
phrase that would clearly and s imultaneous ly define both tl1e major meanings o f the word
"quality." A popular definition was first presented in the tl1ird handbook. "Quality" \vas
defined as meaning "fitness for use." Dr. Deming used "conformance to requil'ements."
Robert Galvin, Chairman Emeritus of Motorola, used "Six Sigma" to di stinguish the high
level of quality as it related to defects. Others s tated that quality means world-class exceUence
or best-in-class and now performance excellence.
For this sixth edition we have fOlmd that many o f these defin itions fall s hort for s ervice
oq;anizations. To find a term that is universal, and can be applied to an y s ituation, we mod-
ified our previous definition found in prio r Juran handbooks. For many dec-ades we have
sajd that qunlity menus fihwss for use. Tile use js defined by the customers that pUichase, use,
or are affected by the good o r service. If an organi zation tmderstands the- needs of its many
customers, it should be able to design goods and services that are fit for use. Howewr, as
more and more service industries use the methods of managing for quality, the prior defini-
tion of quality is not applicable enough.
We ha\'e settled on a new definition. Quality means fituess for purpose. So no matter what
you produce-a good or a service-it must be lit fo r its purpose. To be fit for purpose, every
good and service must have the right features to satisfy customer needs and must be deliv-
ered with few failures. It must be effective to meet the customer requirements and efficient
for supe rior business performance.
It is unlikely that any short phrase can provide the depth of meaning needed by leaders
and managers w ho are faced w ith choosing a course o f action to improve quality. The best
you can do it to understand tl1e distinctions set out in Figure 1.1 and define quality based on
these distinctions.
Fjgure 1.1 presents two of the ma.ny m eanings of the word "q ual ity. ~~ These two are of
critical importance to managing for quality.
6 Key Concepts: What Leaders Need to Know about Quality

Features That Meet Customer Needs Freedom f1·om Failures

Higher qu ~1Jity cnahlcs or:gml.izmions w Higher qm1lity enables O®-UJiU:•tions w

+ lnc.·cas.e customer sati$fttctiOll + Reduce e•·r<u· r-.ttes
+ M<1ke pro<luc1s salable + Reduce rework, waste
"'" .Meet competitjon o1o Reduce field l~ti l ures. warranty charges
• lnc.rease market share • Reduce custome.r dissatisfaction
+ P•·ovide sales income + Reduce inspectjQil, test
+ Se<::urc premium plicc..'i + Shorten time 10 put new products on the market
"'" Reduce risk o8o Inc rease yields. c.~tpacity
+ Improve. deli\•ery pe.rfo rmance

Major effect is on revenue. Major effect is on costs.

Higher quality costs more. Higher quality costs less.

FtouR! 1.1 The Meamng of Quality.

Quality Impacts Revenue and Costs

Fli:'St, qu.ality has a b ig effect on costs: In this case, "quality" has come to mean freedom from
troubles traceable to office errors, factory defects, field failures, a nd so on. "Highe r quality"
means fewer errors, fe \ver defects, and fev,•er field failures. Wh e n cus tomers perceive a ser-
vice or good as low-quality, they usually refer to the failures, the defects, the poor response
times, etc. To increase this type of q uality, <In organization must master the universal of qual-
ity improvement. This is ofte n cal.led b,.,,,klluough or Si.< Sigmn. lt is a system<ltic method to
reduce tl'lc number o f such deficiencies o r the "costs of poor quality" to create a greater level
of q uality and fewer costs related to it.
Second, quality has an effect on reve11ue: In this case, "higher quality" means delive ry of
those features of the good or service that respond bette r to customer needs. Such features
make the product or service salable. Since the c ustomers vahte the highe r quality, they b uy
it an d you get revenue from it. It is well documented that being the q uality Jeader can aJso
generate p remium prices and greater revenue.
The authors will periodically define words that often have m ultiple meanings. 'We have
provided a G lossary of Key Terms at the end of the book. This will make it easy for the prac-
titioner to have a common ground while using Lhe handbook to drive performance.
TI1ese important terms will be used throughout the book:

"Organizations" in dude any enterprise, company, operating institu tion, an industrial

organization, a government age ncy, a school. a hospital, and so o n.
"Revo>~\ue" means gross receipts, whether from sales, b udget appropriations, tuition,
government agency grants, a nd so on.
"Costs" refer to the total amount of dollars spent by an 0'1,>anization to meet custo me r
needs. With respect to quality, costs include the expenditure to design and e nsure
deUvery o f h.igh ~qu alj~y goods and services p i LLS the costs or losses as the r~sult of p oo r
q uality.
 Attaining Superior Results through Quality 7

The effects on costs an d o n revenue interact w ith ead'l other. Not on ly do goods or ser-
vices with deficiencies add to suppliers'" and customers' costs, bu t also they d iscourage
repeat sales. Custo mers wh o are affected by field failures are, of course, less willing to b uy
again from the guilty s upplie r. ln addition, s uch customers do no t kee p this information to
the mselves- they publicize it so tha t it a(fcc ts the decisions of other pote ntial b uyers, w ith
negative effects on the sales revenue of the supplier.
TI1e effect of poor quality on organizational fina nces h as been s tudied broadly. 1n con-
trast, s tudy of the effect of quality on revenue h as lagged. This imbalance is even more s ur-
p rising, since most upper man agers g ive rugher priority to increasing revenues than to
reducing costs. This same imbalance pi:'CScots an opportuttity fo r improving organjzation
e~'OnOJnic.~ through better u nderstanding o f the effect of quality o n revenue. (See Chapter 12,
Six Sigma: 1mproving Process Effective.ness.)

Quality, Earnings, and the Stock Market

At the most senior levels of management and among board membe1·s, there is keen interest
in finan cial rnetrics such as net income an d share price. It is clear that diffe'r ent levels of qual-
ity can grea tly affect these metrics, b ut so do o the r variables. Varjables such as market
choices, pricing, and financial policy Cittl influe nce these metrics. Separat.ing o u t the market
benefits of managing fo r q uality has just become feasible.
During the ea rly 1990s, some of the fin an cial press published articles questioning the
merits of the Malcolm Baldrige National Q uality Award, Six Sigma, and other s imila r initia-
tives to improve performance. These articles were challenged with an an alysis of the s tock
price performance of organizations known to practice these meth ods. Th e Bald rige winners
were compared to that of the S&P 500 as a wh ole. The resu lts were s triking. The Malcolm
Baldrige National Quality Award winners o utperformed the S&P 500. The Baldrige winners
had advanced 89 percent, as compared to on ly 33 percent for the broad Standard & Poor's
Index of 500 s tocks ("Be ttLng to Win o n the Baldic Winners" 1993, p. 8.) This set o f '"inncrs
became known as the "Baldie Fund .''
1l1e impact of the q uality universals is also clear fo r organizations that are not measured
by the performance of their asset values. Michael Levinson, City Manager of 2007 Award
Recipien t for the City of Coral Springs stated i t trus way: "People ask, 'Why Baldrige?· My
answer is very simple: Triple A bond rating o n Wall Street from all three .ratings agencies,
bring ing capita_) projects i11 o n time and within bud get, a 96 pt:>rcen t business satisfaction rat.-
ing, a 94 percen t resident satisfaction rating, an overall quality rating of 95 percent, and an
employee satisfaction rating o f 97 percent . • . that's why we're involved \;vith Baldrige.n

Market Quality Leadership and Business Strategy

Building Market Quality Leadership

Market leadership is often the result of e ntering a n ew ma rket first and gaining s uperiority
that marketers calJ a frnnchis-t!, Once gained, this franchise can be maintained through con-
tinu.ing product or service improvement and effective promotion. However, a no ther organi ..
zarion may dccidt:> h_"') redefine that market by improvi11g the performance of the good or
sel'vice- improving its q uality- a nd gainjng s uperiority over the market leader. Then it
becomes the "quality leader" in the eyes o f the custt>mers. O rganizations that have a ttain ed
this leadership have usually done so o n the basis of two pdn cipalstra tegjes:
8 Key Concepts: What Leaders Need to Know about Quality

• l~t nature take its cou.rse. In this approach, organiz.1tions apply their best efforts,
hoping that in time these efforts will be recognized as the leader c reates a failure o r
gives up its position.
• Help natui"C out by ado ptil1g a positive strategy- establish leadership as a formal
business goaJ and then set out to reach that goal. That goal, o nce attained, can lead
to superior results and s ustain that position for long periods.

Thos.. who decided to take action to make s uperior quality a formal goal won found that
they also had to answer the question, "Leadership in what?" Leadership in quality can exist
in any of the multiple aspects of fitness for purpose, but the focus of the orgaruzation will
differ depending on which aspects are chosen. If quality leadership is to consist of

1. Superior q uality of design

2. Superior quality of conformance
3. Availability
4. G uarantees
5. Speed of field repairs

Then the Ol'ganization must focus on

1. Product development of its goods and services

2. Strong q uality control and systematic quality improvement
3. Operational controls
4. Reliability and maintainability programs
5. Creation of a field service capability that is rapid and hee of defects

O nce attained, qua.lity leadershjp endures until the re is clear cu.m uln t'ivc evidence tha t'
some competito r has overtaken the leadership. Lacking such evidence, the leadership can
e ndure for decades and even centuries. However, superior quality can also be lost through
some catastrophic change.
A brewery reportedly .:hanged its formulallon in an effort to reduce <osts. Within sever~J yertrs,
its share of market declined shtlrply. The origiJu,J iormuJa was then restored but market share did
no t recover. (See "The Perils of Cutting Quality," 1982.)

In some cas..>s, the q uality reputation is built not arou.nd a specific O'b>a.n.izat·iol\ but
around an association of o rganizations. In that event, this association adopts and publicizes
some mark or symbol. The quality reputation becomes identified w ith this mark, and the
association goes to great lengths to protect its quality reputation.
The medieval guilds imposed strict specifications and qualily controls on I heir members. Many
medieval cities imposed ''exportrontrols" on selected finished goods in order to protect the qual·
ity reputation o f the city Qunm 1995).

The growth of competition in q"ality has stimulated the expansion of strategic bliSi·
ness planning to include planning fo r quality and q uality leadership. (For elaboration,
see Chap ter 7, Strategic Planning and Deployment: Moving from Good to Great.)
One approach to s uperior quality is through product development in collaboration with
the leading user of the goods or ser vices-a user who is influential in the market and hence
is likely to be followed. For example, in the medical field, an individual is ~'i nte rn ation a ll y
renowned; a ch airman of several scientific societies; is inv ited to congresses as speaker o r
 Attaining Superior Resu lts through Quality 9

d 1airman; writes numerous scientific papers" (Ollson 1986). Determining the identity of the
leading user requires some analysis. (In some respects, the situation is similar to the sales
problem of d iscovering who w ithin the client organization is the most infl uentiaJ in the deci-
sion to b uy.) Oli:;o n Usts 10 leader types, each playing a <liffere nt role.

Quality and Share of Market

Growth in market share is ofte n a mong th e highest goals of upper managers. Greater marke t
share means higher sales volume. 1n turn, higher sales vol wne accelerates return o n invest-
ment <lisp<oportionally due to the workings of the break-even chart.
lo Fjgurc 1.2, to the right of the break -even line, a_n increase of 20 perc:cn_t in sa.lcs creates
an increase of 50 percent in p rofit, s ince the fixed costs do not increase. (Actually, constant
costs do vary w ith volume, but not at all in proportion.) 'The risks in volved in increasing
ma rket share are modest, since the technology. product or ser vice, facilities, market.. and so
o n are already in existence and of proved effectiveness.

Effect of Quality Superiority

Quality s uperiority c.an often be translated into higher sha re of market, b ut it may require
special effort to do so. The s uperio< q uality must be dea<ly based o n the customer needs and
the benefits the c ustomer _is seeking. [f the quality s uperiority j_s defined o n ly in terms of the

Units sold (000) 100 120

FIGUR! 1.2 Break-even chart. (Juran. J. M .. Juran's Quality Handbook, 5th ed.. McGraw-Hill. New York.
1999, p. 7.13.1
10 Key Concep t s: What Leaders Need to Know about Qualit y

con'lpany's interna l stan dards, the customer may not perceive th e value. Patie nts may be
w illing pay the exb·a cost of a trip to the Mayo Clink in the United Sta tes ra tl1er than visit a local
p ractice because they perceive the s upedor clinical o utcomes available at the Mayo Clinic.

Superiority Obvious to the Buyer

ln s uch cases, the obvious su.pedority can be tn.'l.nsla ted int o highe r sha.re o f market. Tl:tis
COJ'I cept is fully understood by mark~ ters, a nd from tim e to time they have urged product o r
service developers to come u p with product o r S{'rvice features, which can th e n be promoted
to sec m e higher sh are of marke t. Examples of s uch cases a re legio n.

Superiority Translatable Into Users' Economics

Some p roducts o r services a re o utwa rdly aHke b ut h ave d issimilar performan ces. An
ob,•ious example is the difference in the electric power consumption of appliances with
otherwise identical features. In this and similar examples, it is feasible to tran slate the
techno logical difference into the lan guage of money. Sud1 translation makes it easier for
amateurs in technology to un derstand the s ignificance of the q uality s uperiority.
TI1e superior reliability of a power tool can be translated in to the language of money to
secure a p rice p remium. The superior reliabmty could also have been u:;ed to secure h igher
share o f market. 1l1e superior quality of a truck tire can be translated into cost per u nit of
d istance traveled.
TI1e initia tive to transla te may also be taken by the b uyer. Son1e users of grinding wheeJs
keep records on w heel life. This is then transla ted in to mo ney-grin ding \\'h eel costs per
1000 pieces processed. Such a w'lit of measu.rc makes it uru1ecessary for the b uyer to becorne
expert in the tech nology of abrasives.
Collectively, cases such as the above can be generalized as follows:

• There is in fact a qual ity difference among competing p roduct o r senrices.

• This difference is techn o logica l so that its s ign ificance is not un derstood by many
users.
• It is o ften possible to translate the difference into the lan gu age- of mone)' or into
other fo rms w ithi n the users' systems of values.

Superiority Minor but Demonstrable

In some cases, quality s uperiority can secure added share of market even though the com-
petitive "inferior" product is nevertheless fit for p urpose.
A manufacturer o f a J"'tif-riction bcari_ngs refined it."'' proces.-;;cs to s uch an extent tha t its
product or services were clearly more precise than those ol the competitors. However, the
competitors' product o r services were fit fo r p urpose, so no price differe ntial was feasib le.
Nevertheless, the fact of greater precision impressed the client's engmeers and secured
increased share o f market.
ln consumer good s or services, even a seemingly small diffe rence may be trans lated into
increased market share if the consumers a re adequately sensitized to the differentials and
value them.
An executive of a manufacturer of candy-coated chocola tes seized on the fact that his
product did not createchOL---olate smudge marks on consu mers' hands. He d ramatized this in
televis ion advertisements by contrasting the appearance of th e children's ha nds a fter eatin g
his and the competitors' (uncoated ) chocola te. His share of marke t rose dramatically.
 Attaining Superior Results through Quality 11

Superiority Accepted on Faith

Consumers can be petsuaded to accept, o n faith, assertions of good O l' service superiority,
which they themselves are un able to verify. An example was an in genious market research
o n electric razors. The sponsoring organization (Schick) employed an indepe ndent labora-
tory to con duct the tests. During the research, panelists shaved themselves twice, using two
elect ric razors, one after the other. On o ne day, the Sch ick razor was used fjrs t a.nd a com pet·
ing razor immediately after. O n the next d ay, the sequ e nce was reversed . In all tests, the
con tents o f the second razor were \veighed precisely. TJH:o data dearly sho'"'ed that w he n
the Schick was the second razor, its contents weig hed more than those of the competitors.
The implication was that Schick razors gave a cleaner shave. Within a few months, the Schick
share of market ros.e as foUows:

• Scptem her, 8.3 petcet\1

• December, 16.4 percent
[n this case, the con sumers had no way to verify the accuracy of the asserted superio rity.
They had the ohoice of aocepting it on fillth or not at all. Many accepted it on faith.

No Quality Superiority
[fthere is no d emonstrable q uality superiority, then share of n'tarket is determined by rnar·
keting skills. These take s uch forms as persuasive value propositions, a ttractive packaging,
and so on. Price reductions in various fo rms can provid e increases in share of market, b ut
this is usuaUy temporary. Competitors move promptly to take similar action. Such price
reduction can have permanent effect if the underlying cost of prod ucttion has also been
reduced as the result o f process improvements tha t g ive the company a competitive cost
edge over its competitors.

COnsumer Preference and Share of Market

Consumers rely heavily on their own senses to aid them in judging q uality. Thi.s fact has
stimula ted research to design means for measuring quality by using human senses as mea·
s uring instruments. This research has led to development of objective methods for measux·
ing consum er preference and o the r forms o f cons umer response. A la rge b ody of literature is
now availab le.. setting out the types of sensory tests and the methods for cond ucting them.
At firs t.. these methods were a pplied to making process con tro l and product or service
acceptance decisions. But the applications were soon extended into areas. s uch as consumer
p reference testing, new~product or new-service development, advertising, a nd marketing.
For some products or services, it is easy to secure a measu re of consumer preference
thro ugh "forced-choice" testing. For example, a table is set up in a department store and
passersby are invited to taste two cups ol coUee, A and 8, and to express their preference.
Pairs of swa tches of carpet may be shown to panels of potc11tial buyers with tl1c request that
they ind k""a tc thclr prcfcreJ't ces. For comparatively simple consumer goods or se rvices, s uch
tests can secure good d ata on cons u mer p reference. M ore complex produ cts such as ins ur·
ance or finan cial instruments m(ly require more sophis ticated analysis s uc h as conjoint anal·
ysis or discrete choice methods.
The vaJue of consumer prefere11ce data is grea tly multiplied throug:h correlation with
data on share of market. Figure 1.3 sh ows s uch a correlation for 41 d ifferent packaged con·
sumer food products, "lnis was a n uncommonJy useful analysis and deserves careful study.
Each dot on Figure 1.3 represents a food product sold on ~upermar ket s helves. Each prod-
uct has competitors for the available shelf space. The competing products seU fo r identical
12 Key Concepts: What Leaders Need to Know about Quality

100
•
• •
80 . • •
- - •• .--• ••
ti' •• ••••• •
•• ••
::;
~
"
60
• ... •
E
.....
0
••
E 40
"'
: • • •
"'
20 •
••
•• 'A
20 40 60 80 100

FIGUR! 1.3 Consumer preference versus share of market. (Juran, J. M .. Juran's Quality Handbook,
5th ed.• McGraw.Hi/1. New York. 1999. p. 7.17.)

prices and arc packaged i.n id<mtically sized boxes containi ng id entical amou1'1ts o f product
or service. \.Yhat may influence the consurner?

• The contents of the package. as judged by senses and usage, which may cause the
consum er to prefer product A over product B
• The marketing features s uch as attractiveness of the package, appeal of prior
advertising, and repu tation of the manufacturer

In Figure 1.3 the horizon tal scale shows consum er p reference over the leading competi-
tor as determined by statis tically sound preference testing. The vertical scale shows the share
of market versus the leading competitor. considering the two as constituting 100 percent.
ln Figure 1.3 no product showed a consumer preference below 25 percent or above
75 percent. The 75/25 preference levels mean that the product is so s uperio r (or inferior) that
three users o ut of four can detect the differe nce. Since aUo ther fac tors are essentially equal,
this result implies that a product that is preferred by more than 75 peocent ol consumers
eventually takes over the entire market, and its competitkm disappears.
In cmlt rast to the: vacant areas on the hol'i7..ontal scale of consu mer preference, the: verti·
cal 51..---ale of share of market has data. along the entire spectrum. One p rod uct (marked A in
Figure 1.3) lies squarely o n the 50 percent consu mer preference line, w hid1 probably means
(under forced-choice testing) that the users are guessing as to whether they prefer that prod-
ucl or scrvi~ or that of its competitor. Yet product or service A has only]() per~nt share of
market and its competitor has 90 pctccnt. In addition, this inequality in sha re of market has
persis ted for years. The reason is that the 90 percent organization was the firs t to bring tha t
product to market. As a result, it acquired a ''p rior franc hise" and has retained its position
through good promotion.
 Attaining Superior Resu lts through Quality 13

The conclusion is that when co mpeting p roducts or services are quite sim ilar in con-
sumer preference, any effect of s uch s mall q uality differentials is obscured by the effect of the
marketing skills. In consequence, it is logical to conclude that when q uality preferences are
evident to the user, such quality d ifferences are decisive in share of market, all o ther things
being equa l. \'Vhcn q uality diffcrCI)CC$ arc slight, the decisive fac to r in share of ma rket is the
marketing s ki lls.
As a coro llary, it appears that organizations are well ad vised to undertake q uality
improvements, ' vhich will res••lt in either (I) bringing them from a dearly weak to an accept-
able preference or (2) bringing them from an acceptable preference to a clearly domi nant
preference. However" organizations are no t well advised to undcrt,;'lke qua ljty improvements
that will merely make m inor improvements that are not largely perceived .,,, d valued by
their custo mers, since marketing s kiJJ is usuaUy the dominant fac tor in determining the
share of market when the differences in q uality are small.
It is easy for technologists to conclude that what they regard as important in the good or
service is also of p rime concern to the user. [n the carpet industry, the engineers devote m uch
effort to i mproving wear qualities and o ther tech nological aspects of fi tne.ss for purpose.
However, after a market research s tudy was conducted, it was determined that consumers'
reasons for selecting carpets \"tere prim arily sensory, and no t dur('lbility:

• Color 56 percent
• Pattern 20 percent
• Other sensory q ualities 6 percent
• Nonscnsory qualities 18 percent

For more complex consumer goods or SCJ'viccs it is feasible, in theory, to study the rela-
tion o f quality to market sha re by securing q uantitative d ata on (1) actual changes in buying
patterns o f consumers and (2) actions of suppliers that may have created these changes. ln
practice, such information is difficult to acquire. It is also d;{ficult to conclude, in any o ne
instance, why the purchase was of model A rather than B. \-\'hat does emerge is "dem o-
graphic'' patterns, i.e., age of buyers, s ize o f family, and so o n, that favor model A rather than
B. For goods O l' services sold th rough merchants, broad consumer dissatisfaction with qua l-
ity can translate into merdmnt preference, w ith extensive damage to share of market.
A maker of household appliances was competitive \•lith respec-t to product or service
features, pri~. and promptness of delivery. However, it was not competitive w ith respect to
fjcld fajl u re, a1'd th is became a major source o f complain ts from consumers to H' e merchants.
\!Vi thin several years the maker (B) lost all its leadership in share of market, as shown in the
table be)o\~'. This table stimulated the u p per managers of organiZatio n 8 to take action to
improve its prod uct reUabj)jty.

Leader& In Market Share during:

Model
Price Base Year I Base Year Plus 1 Base Year Plus 2 I Base Year Plus 3
c
High
.........:....
Medium
A
B B
-cc -cc
Low c c c c
Special B B B c
14 Key Conc epts: What Le aders Need to Know about Quality

Industrial Products and Share of Market

[ndustrial good s or serviC\.~ a re sold more o n tech nological perfon nance than o n sensory
q ualities. However, the principle o f custo mer p reference applies, as does the need to relate
q ua lity d iffe rences to custo mer preference and to share of market.

Quality and Competitive Bidding

Many ind us trial p roducts are bought through competitive bidding. Most gove rnment agen-
cies are ~q ..ired by Jaw to secure competitive bid s before awarding laiS<: contracts. lnd..s-
tria I o rgan izarions require their p u rch asin g managers to d o the same. The invitations to bid
usually includ e the parame ter of q uality, v.rhich may be specified in d etaiBO J' thou gh perfor-
man ce .specifications.
To prospective s uppliers the ra tio of awards r~-eived to bids made is of great signifiCMce.
The volwne of sales and profit depends importantly on this ratio. In addition, the cost of pre-
paring bids is s ubstaJIIia.l. Finally, the ratio affects the morale of tho people in volved. (Me mbers
of a w inning team figh t with their competitors; members of a losing te-am figh t w ith o ne
another.) It is feasible to analyze the record of prior bids in order to improve the percentage of
successful bids. Figure 1.4 s hows s uch an analysis involvin g 20 tmSuccessfuJ bids.
To create Figure 1A, a multifunctional team analyzed 20 unsuccessful bid s. It id entified U1e
main and con tribu ting reasons fo r failure to win the contract. The tea mss conc.llLSions show
th a t the installation price was the most in fluential factor-it was a contribu ting cause in 10 of
the 14 cases tha t in cluded bids fo r instaJlation. This fin din g resulted in a revision o f the process
for estimating the installation p rice and an improvem ent in the bidding/ su ccess ratio.

Carryover of Failure-Prone Features

Market leadersh.ip can be lost by perpetua ting failure-prone features o f predecessor models.
The g u ilty features are well known, since lhe resulting field failu res keep the field sendee
force busy restor ing service. NevertheJess, there has been much carryo voer of faiJure-pron e
features into new models. A t the least, such carryover p erpetua tes a sales detriment an d a
cost bmden. At its worst, it is a cancer tha t can destroy seemingly h ealthy product or service
Lines.
A no torious example was the original xerographic copier. ln th at case the " top 10" list of
field failure modes remained e.sentiaUy ide ntical, model after model. A simila r phenom e-
non existed for years in the automobile industry.
The reasons behind this carryo ver have much in common with the chronic inte rne\!
wastes, which abound in so many o rganizations:

1. The alan n sig nals are disCQn_nected. V\'hc t'l wastes continue, y.car after year-, the
accotmtants incorporate them into the bud gets. That d isconnects the alarm s ignals-
no alarms ring as Jong as actual waste does no t exceed budgeted waste.
2. There is no clear responsibility to get rjd of the wastes. There are o the r reasons as
well. The technologists have the capability to e liminate much o i the carryover.
However, those technolog ists a re usu ally under intense p ressure from the marketers
to d evelop new product or servioe and process feat"'es in order to increase sales. In
addition , they share distaste for spend ing their time clean in g up old p roble ms. In
their culture, the greatest prestige comes from developing the new.

The s ur prising result can be that each d epartment is carrying out its assigned resp onsi-
bilities, a nd ye t the product or service line is d y ing. Seemingly nothing ~hort of upper manage-
ment in tervention-setting go.<ls for getting rid of the cacryover-<an b reak up the impasse.
 Attaining Superior Resu lts through Quality 15

Bid No1 AcccplCd due 10

Conlr::1c1 Qunljly of Product lnsla llation Reciprocal O lhcr
Proposal Design Price Price Buying

AI X X X
A2 XX
A3 XX X
A4 XX X
AS XX
A6 XX
A7 XX
A8 XX
A9 XX
AIO XX
Bl X X
B2 XX
83 XX
B4 XX
B5 X X
B6 X XX
B7 XX
[l~ X X
89 X
BIO X X X
To•• ls 7 8 J0 (OUt Of 14) 4
X = conlribuling reasons; XX= m::tin reason
Only 14 bid;; we1·e made for installation.

F1ouRt 1 .4 Analysis of unsuccessful bids. (Juran, J. M., Juran 's Quality Handbook, 5th ed., McGraw-Hm.
New York, 1999.)

Macroeconomic Influences on Results

The ability of an organizaHon to secure revellue is strc.>ngly influenced by the economic e li·
ma te and by the cultural habits that the various econo mies h ave evolved.. These overriding
influences aflect product or service quality as \\•ell as other elements o( commerce.

National Affluence and Organization

TI1e form of a nation's economy and its d egree of affluence strongly influence the approach
to iR; problems .

Subsistence Economies
In s ubsistence economies the nwnerous impoverished users have little choice but to devote
the ir revenue to basic h u.rnan Meds. Their protection against poor q ua lity is d erived more
from th ~ir coiJective po ljt-ica l power than from their collective economic power. rvtud' of the
world's ,population remain s in a s tate of subsiste nce economy.
16 Key Concepts: What Leaders Need to Know about Qua li ty

Shortages and Surpluses

Ln aU economies, a shortage of goods (a usellers1 market") results in a relaxing of q uality
standards. The demand for goods exceeds the supply, so users must take w hat they can get
(and bid up the price to boot). In contrast, a b uyers' market results in a tighte ning of quality
standards.

Life with the Risk of Failure

As societies industriali ze, they l'evisc their lifestyle in order to secu re the benefits of techno)..
ogy. Collectively, these benefits have grea tly improved the q uality of life, b ut they have also
created a new dependence. Jn the industrial societies, great masses of human beings p lace
their safety, he-1Ith, a nd even their daily well-being behind numerous "quality dikes." For
instance, many ph armaceuticals often enable a person to n.><:eive quick short-term h ea]th
benefits, but in the long term the illness may get worse.
For ela boration, see Chapter 2, Quality's Imp act o n Society and the National Culture.

Voluntary Obsolescence
As customers acquire affluen ce, economic organizations increasingly bring out new goods
ot services (and new models of o ld ones) tha t they urge prospective u sers lo buy. Many
of the users who buy these new models do so whi le possessing old er models that are still
in working order. This p ractice is regarded by some reformers as a reprehensible eco-
nomic waste.
In their efforts to put an end to this asserted waste, the reformers have a Hacked the orga-
nizations who bring o ut these ncv,r models and who promote their sa le. Using the term
"planned obsolescence/' the reformers imply (and state o utright) that the large organiza-
tions, by their clever new models and their powerful sales promotions, break down the
resistance of the users. Under this theory, the responsibility fo r the waste Hes w ith the orga-
nizations thal create the new models.
ln the experience and judgment of the author, this theory o f planned obsolescence is
mostly nonsense. The simple fac t, o bvious to both producers and consum ers, is that the
consu mer makes the decision (of whether to discard the o ld product or serv ice and b uy the
new). Period ically, this fuct is dramatized by some massive marketing fai'lurc.

• The early models of h ome refrigerators lacked many features of modern models:
freezer compartments, lee cube makers, shelves in the d oor, and so on. As these
features were added to new mod els, homeowners who had bought the original
models became increasingly unhappy until they bought a new mod el despite the
fac t that the old model was s till running. Note that the decision to b u)' the new
model was made by the customer, not by the manufacturer.
• The latter half o f the 1970s saw the introduction of recorded e nterta inment into
the ho me o f the consumer with the crea tio n of the video cassette recorder (VCR).
For two d ecad es this invention was a staple in millions of peopme's d omestic lives
across the globe. TI1e introductio n o f the digital video d isc (DVD) p layer, a
machine whose ultimate utiHty was the same as a VCR, replaced it w ithin years,
not d ecades. Offered improved quality and adrlitional fea tures but with the same
basic functio n as a VCR, consumers chose the DVD even w her"ll they aln~ady had
an o perating appUance with equivocal fu nctio nali ty in thei r ho mes. New forms
o f downloadable video through the Internet are beginning to revolutioni ze this
mar_ket again .
 Attaining Superior Results through Quality 17

Involuntary Obsolescence
A ve ry different category of o bsolescence cons ists o f cases in which long· life products con·
tain failure-p rone components that wilJ not last for the life of the product or service. TI1e life
of these compo nents is determined by the manufacturer's design. As a res ult, even though
the user d e<:ides to have the failed compo nent replaced (to keep the product or service
active).. the manufacturer has 1nadc the r.eaJ decision because the design determined the Ufc
of the component.
This s ituation is a t its worst when the original manufact urer has d esigned the product or
service in s uch a way that the s up plies, spare parts, and so on are nonstandard, so that the
sole source is the origin al manufacturer. In such a situa tion, the user is locked into a single
source of supply. Collectively, s uch cases have lent themselves to a good d eal of abuse and
have conttibutcd to the cons umctis fn movement

Contrast in Views: Customers' and Producers'

Industrial organizations d erive their revenue from the sale of their goods or services. These
sales arc made to "cus to mets," b ut customcts vary in thejr functions. C usto mers may be
wholesalers, processors, ultimate users, and so o n, wilh resulting variations in cus to mer
needs. Response to customer needs in o rder to sell more goods or services requires a dear
understanding of just what those needs are and how the organization c-.tn meet them.
Human needs are complex and extend beyond technology into social, artistic, status, and
o ther seemingly intang ib le areas. Suppliers arc nevertheless o bUgcd to Ltnde rst.·md these
intangibles in o rder to be abl e to provide products o r sen•ices that respond to such needs.

The Spectrum of Affluence

In all economies the aff1uence of the population varies across a \·\ride spectrum. Suppliers
respond to this spectrum thro ugh variations in product or service feat ures. These variations
arc o ften called grades.
For example, all hotels provide o vernight sleeping accommodations. Beyond this basic
service, hotels vary remarkably in their o fferings, and the grades (deluxe suites, four-star,
and so on) reflect this variation. [n Like manner, any model of automobile provides the basic
service o f point· to-point transportation. However, there arc mt.tltiple g ra d es of a utomobiles.
T11crc are luxu ry b ronds such as Po rschc, BMW, Mercedes, Cadi llac, and Lex-us; and there
are more a ffo rdable o nes such asGM, Hyundai, Ford, and Toyota. T he h igh er g rades s upply
services beyond pure transportation. They may pro vide mo re featur~ tha t r~.suJt in higher
levels of s.-Uety, comfort, appearance, and status.

Fitness for Purpose and Conformance to Specification

Customers and suppliers sometimes differ in their definition o f q uality. Su ch differences a re
an invita tion to trouble. To most customers, quality means those features of the product o r
service that respond to customer needs. In addition, q uality includes freedom from failures,
p lus good customer service if failures do occur. One comprehensive d efinition fo r the above
is " fitness for p ur pose."
ln contrast, for years many s uppliers had d efined quality as confo rmance to specifica-
tion at the time of fin a l test. This definition fails to consider numerous factors that influence
q uality as defined by custo mers: packaging, s to rage, transpol't, installation, reliability, main-
tainability, customer service, and so on.
Figure 1.5 ta bulates some of the differences in viewpoint as applied to long·life goods.
18 Key Concepts: What Leaders Need to Know about Qua l ity

Prindp:rl ViC\\'S
Aspects Of Customers Of Produ«..-ers
A produc1needed by lhc customer Goods made by 1he p roducer

De11nition of quaUty Fitness for purpose Conformance to specification

duriug the life of the on ti nal 1est
product or service
Cos1 Cost of usc. includi ng Cost of producers
+ Purchase price
"" Operating cos1.:;
• .Mai ntco~tncc
• Downtime
+ Depreciation
"" Loss on re!>ale

Rcsponsibilily for Over the cn1irc uscfol l ife During th~ w~rrftn1y period
keeping in se1·vice
Spil.rc parts A ncccsstll1' evil A prori1able business

f iGURE 1.5 Contrasting views; customers· and prod ucers' ,

The Ol'•going revolution in quality has cons isted ir1 pa.r t o f revising the s up p lie rs' defi ni ..
tion of q ua lity to con form more nearly to the custo mers' definition .

Cost of Use
For consumable goods or man y services, the pluchase price paid by the cu stomer is q uite
d ose to the cost of using (consuming) the good or service. However, for long-lived product
or services, the cost of use can diverge cons iderably from the p urchase p rice because of
added factors s ud1 as operating costs, mainte nan ce costs, d o wntime, depredation, license
fees, new releases, and transaction service ch a rges.
''01e centuries-old e mphasis on p urch ase p rice has ten ded to obscure the subsequent
cosLc;; of usc. One resu lt has been subo ptimizatiorl; j.e., suppliers o ptimi7:e their costs ra the r
tha n the combined costs of sup pliers a.nd c ustomers.
TI1e concept o f Jife-cyde costin g offers a solution to this problem, a nd progress is bein g
made in adopting this concept.

Degrees of User Knowledge

Ln a competitive market, customers have multiple sources of supply. ln making a choice,
q uaJjty is an. obvious consideration. Ho wever, c us tom~ts vary greatly in tlleir abWt)' to eva.l·
uatc q uality, especialJy prior t'o purchase. Figu re 1.6 s u mmarizes the extent of cus tome r
knowledge and strength in the marketplace as related to quality matters.
The broad conclusions that can be drawn from Figure 1.6 are as follows:

• Original equipment manufactmers (OEMs) can p rotect themselves through theiJ·

technological Md/ or economic power as .much as through co!Hract provisions.
Merchants an d repair shops must rely main ly o n co n tract provisions supplemented
by some economic power.
 Attaining Superior Results through Quality 19

As peels of the Original Equipment Dealers and Consumers

Problem Manufacturers (OEM<) Repnlt Shops

Makeup of Lhe marke.l A few. very large Some large customers Very many. very
CU$10mers pl us rnany smollcrones Sl'nall customers

Economic strength Vet) ' large, cannot 1\•todest or low Negligible

of any one customer be igoo•·ed

Tcc.:hnoJogical strength Very high: has engineers: Low or nil N.il (requires technical
or customer and laboratories a:;;sistance)

Political strength of l\•todest or low Low or oil Valiable. but can be

customer ''ery great coUectively

FiLness fo r purpose is Qualification te-sting Absc.nce of consumer Successful us...1.ge

j udged mainly by: CQillJ>Iaints

Qualily spccific~ll i o ns Customers Manur-acturcr l\1tmufttcturcr

dominated by:

Usc of incoming Exlensivc tesl for Low or oil fo r dealers; f ill-USC lCSl
inspection conformance to irl -use test~ by repail·
specification shops

Collection and analysis Good to fair

Poor lO 1l il Poor to ni l
of failul'e data

FtGURE 1.6 Customer influences on quality. (Juran. J. M.. Juran 's Quality Handbook, 5th ed., McGraw-Hill.
New Yor~. 1999, p. 7.5.)

• Small users have very limited knowledge and pro tection. The situation of the small
user requires some elaboration.

VVith some exce'Ptions, small users d o not fu lly understand the techno logica l nature of
the product or s.<rvice. The user does have sensory recognjtjon o f some aspects of fitness for
use: the bread smells fresh-baked, the radio set has clear reception, the shoes are good-looking.
Beyond such sen sory judgments, and especially concerning the long-life perfo rma nce o f the
prod uc t or service, the s ma11user must re ly mainly on p rior pe rsona l e xperience with
the s uppUer or merchant. J..acking s uch prior experien<:<l, the small user must choOS(! from
the p ropaganda of competing suppliers plus o ther available inp uL< (neig hbors, merchants,
independe nt laboratories, and so o n).
To the extent that the user d oes und erstand fitness fo r use, the effeC't on the s upptier'"s
revenue is somewhat as foJJows:
20 Key Concepts: What Leaders Need to Know about Qua l ity

As seen b}' the user, th e good o r service or service is

• Not fit for pt.trpose

• Fit for purpose but noticeably infedor to competitive prod.ucts or services
• Fit for purpose and competitive
• Noticeably superio r to competitive products or services

The resulting revenue to the supplier is

• None, or in immediate jeopardy

• Lower: due to los.o; of market s hare or need to lower price-S
• At ma rket prices
• High d uo to premi.u.m prices or greater share of market

ln the foregoing table, the terms '' fitness for purpose/' 11inferior," ucompetitive," and
"superio r" aU relate to the situation as seen by the user. {The foregoing table is vaJid as
applied to both large c ustomers a nd small users.)

As Seen by the User, the Product or Service Is Tho Resulting Income to tho Supplier lo

Not fit for purpose None, or In Immediate jE>opardy

Fit for purpose, but noticeably Inferior to l ow due to loss of market share or need
comPE>titlve products to lower prices
Fit for purpose and competitive At market prices
Noticeably superior to comPE>tltlve products Hlgll due to premium prices or greater
share of market

Stated Needs and Real Needs

Customers s tate their need s as they see them, an d in their language. Supplie rs are faced with
understanding the real needs behind the stated needs and translating those need s into s up-
pliers' lan gu age.
[ t is q uite comm on for customers to state their need s in the (or•n of goods, when their
real needs are for the servic-es p rovided by those goods. For example:

Stated Needs of Customer Real Noods of customer

Food A pleasant taste and nourishment
An automobile Transportation, safety, comfort
A flat screen TV Enter tainment. news, movies in tthe home
- -- - -
Toothpaste Clean teeth, sweet breath, etc.
7/24 Banking Ability to deposit or get money anytime as
needed

Preoccupation with selling goods can d ivcrt attention from the rea I needs of custome rs.
 Attaining Superior Results through Quality 21

ln the classic, widely read paper "Marketing Myopia/' Levitt (1960) s tressed service
orien tation as distinguished from product orientation. In his vie\.v, the railroads missed an
o p portunity for expansion due to their focus o n railroading rnther than om transportation. Ln
like manner, the motion picture industry missed an o pportunity to partkipate in the
growing television indus try d ue to its foc us o n movies rather than 01'1 en tertainment
(Levitt 1960).
Understanding the real needs o f customers requires answers to q ue.stjons sud1 as these:
Why are you buying this pn>duct or service? What service do you expect from it?

Psychological Needs
For many p roducts o r services, custo mer need s extend beyond the technological fea tures
of the good o r service; customer need s a lso indude ma uc rs of a psycholog ical nature. Such
needs apply to both goods and services. "A person in need of a haircut has the option of
going to (1) a 'shop' inh a bited by ' barbe rs' o r (2) a 'salon' inh abited by ' h airstylists.' Either
w ay, s he/he is cut by a skilled artisan. Either way, her/his resulting o u l\¥ard appearance
is essentially the same. What d iffers is her /his remaining assets and he r / his sense of w ell·
bei.ng." Qura.n, 1984)
\Vhat applies to services .:dso applies to phys ical good s. There are fac t-o ries in w hich
duxola te-<:oated candies are conveyed by a belt to the packaging d eparhnent. At the end of
the belt are tlvo teams of packers. One team packs the chocola tes into modest cardboard
boxes destined for budget-priced merchant shops. The o ther team packs t he chocola tes into
satin·lined wooden boxes desti~>ed to be sold in d eluxe shops. The resulting price i<>r a like
amount of chocolate can differ by several fold. TI1e respective p urchaser-s encoun ter o ther
differences as welJ: the shop d ecor, Jevel of courtesy, promptness of service, sense o f impor-
tance, and won. However, the g<.X>d.s are. id entical. Any given chocolate o n that conveyer
belt has not the faintest idea of whether it will e nd up in a b udget shop or in a deluxe s hop.
Techno logists may wonder , ...rhy cons umers are willing to pay s uch price premiums
when the goods are identical. However, for many cons umers, the psychological need s are
perceived as real needs, and the consumers act o n their perceptio ns. Most s uppliers design
their marketing s tr.>tegies to respond to customers' perceived needs.

"User-Friendly" Needs
The "amateur" status of many users has g iven rise to the term " user-friendly# to describe a
condition that enables amateurs to use technological an d o ther complex product or services
with e<>niidence. Consider the following example.
1l1e language o f published info rmation sho uld be simple, unambig uo us, and readily
understood. Notorio us offenders have included legal d ocu ments, owners~ operating manu-
als, forms to be filled out, an d so o n. Widely used forms (such as fed e ral tax re turns) should
be field-tested on a sample of the very people who will later be faced with filling out the
forms.
Good s or services sho uld be b roadly compatible. Much o f this has been d o ne through
s tandardization co mmittees or through natu ral mo nopolies. An example of the lack of s uch
compatibility d uring the 1980s was the personal computer-many personal computers w e re
able to ' 'taJk" to computers made by the sam e manufac turer but no t to compu ters mad e by
other manufacturers.

The Need to Be Kept Informed

Customers so metimes find themselves in a stnte of uncertainty: Their tra in is late, and they
don't know when to expect it; there is a powe r o u tage, and they d o n' t know when power
22 Key Concepts: What Leaders Need to Know about Quality

will be restored . }n rnany such cases, the supplier organization has no t establish ed the p o li-
cies an d processes need ed to keep customers info rmed. In actuality, custo mers, even if kept
info rmed, usually have no ch o ice but to wait it out. Nevertheless, being ke pt informed
reduces the anxiety-it provides a degree of assuran ce that human beings a re aware of the
probJem '-'-''d tha t it is in the proccs.c; of being solved.
T11e New York City subway system rules require conductors to explaln all delays lasting
2 minutes o r more. One su rvey reported that this rule was fo llowed o nly about 40 percent of
the ti me. A City Hall report concluded that "shortage of information is"' significant source
t>f public antagonism towaid the Transit Authority" (Levine 1987).
fn contrast, some airlines go to pa ins to keep their c ustomers infotm.ed o ( the reasons fo r
a delay and of the progress being made in prO\' iding a remedy.
A different category of cases involves organizations .secretly taking actions adverse to
quality but without informing the customer. The most frequent are those in which goods or
services not conforming to specifica6on are shipped to unwary customers. In the great
majority o f such cases, the products or services a re fit for use despite the non conformance.
In o the r cases, the matter may be debatable. In s till other cases, the act of shipme nt is a t least
lmethkal and at worst iiJegal.
The partnership between Firestone 1iieS and Ford Ex-plorer SUVs in the late 1990s cre-
ated on e of the most d efective a nd u ltimately deadly relationships in modern a uto motive
history. Firestone tires were continually fa iling u nder the frame o f the Ford Explorer, often
causing the SUV to flip and roll. More than 250 people lost their lives because of this defect
while 3000 o the r incidents were re ported due to this imperfection. \.Yhat made this s itua-
tion sordid was the fact tha t neither Ford nor Firestone took responsibility for this obvious
problem. Ford Explorers wlth Firestone tires were still being sold to t he general public
even w hen, in lhe early s t-ages, unusually high rates o f crashes were taking place. Ins tead
of recalling the models in question, the manufacturer let this problem p• rsist fo r years
until the incident rate and death count became so high tha t the problem could not be
ignored further.
O nce discovered, any secretive act-ions tend to arouse suspidons, even if the product o r
service is fit for custo mer use. The customers wonder, "Wha t else has been done secre tly
without o ur being informed?"
The usua I reason fo r not informing the c ustomer is a faiJure to raise the question, \t'Jhat
shall we tell the custome rs? It would help if every non conforma nce document inc1ud ed a
blank space titled "\.Yhat is to be communicated to the customers?" TI1e decision may be to
commun icate nothing, b ut at least the q uestion has been asked.

Cultural Needs
'fhe needs of cus to mers, especiaJiy internal customers, include cultural n eeds-preservation
of status, continuity of habit patterns, and still other elemeniS of what is broadly called the
cultural J>nllem . Some of the inability to discover customer needs is traceable to f.lilure to
underst.c"Uld the nature and even the existence of the c ultural pattem.
Cultural needs are seldom s ta ted openly-mostly they are stated in disguised form. A
proposed change that may reduce the status of some employee will be resiste..i by that
employee. The sta ted reasons lor the resistance will be on plausible grounds, s uch as the
effect on costs. Th e real reason will not emerge. No o ne will say, " I arn agains t this because it
will reduce my status." Discovery of the real needs behin d the stated needs is an important
s tep toward a meeting of the min ds. (For elaboration on the nature o f cultural patterns and
the "rules of the road," see Chapter 5, Quality Improvement: Creating Breakthroughs in
Performance.)
 Attaining Superi or Resu lts t hr ough Quali t y 23

Needs Traceable to Unintended Use

Many quality failures arise because the cus to mer uses the product or service in a manner
different from that in tended by the supplier. This practice takes many forms:

• Untrained patient c-.are workers are assigned to processes requiring trained workers.
• Equ.iprnent is overload ed or is allowed t<> run witho u t adhe~nce to maintenance
schedules.
• The produ.c t or service is used i.n ways never i.ntc1"1ded by the supplier. For instan ce,
a screwd river is used as a hammer. It was not designed to hit tlhings! Jt can break
and cause harm to the user.

All this influences the rebtionship bet\veen quality and revenue. l11e criticaJ question is
whether the product or service or service development should be based on intended use or actual
use. The latter often ~qu.ires adding a factor of s.-tlely d<tring th e d evelopment. For example:

• Fuses and circuit breakers are d esigned into electrical circu.its for protection against
overloads.
• Spell-check softwaxe is designed to detect grammar and spelling errors.
• Public utility in voicing may include a check of customers' prior usage to g uard
against errors in reading the meters.

Such factors of safety may add to the cost. Yet they may well resu lt in an optimal overall
cost by helping to avoid the hig her cost arising from actua l use or misuse.

Needs Related to Dissatisfaction

'v\'hen products or services faiJ to meet the needs of their customers1 a new set of customer
needs arises-how to restore service and get compensated for the associated losses and
inconvenience. These new needs are communicated through c ustomer e<>mplaints, which
th en are acted on by special dcpartmenJs such a.s customer service or caJI cen ters. Inadequate
organi zational response to consum er complaints and to the terms of warranties has contrib-
u ted importantly to the rise of the ''consumerism" movement. (See Chapter 2, Q uality's
Impact on Society and the National Culture.)
Stud ies o f how to respond to customer complaints have id entified the key feat ures of a
response system that meets customer needs.
Complaints also affect product o r service salability.lh is has been researched in sh1dies com-
missioned by the U.S. Office of Consumer Affairs. The findings may be summarized as follows:

• Of customers who were d issatisfied \-\rith products or serv ices, nearly 70 percent d id
not romp lain. The proportiom; varied with th e type of product o.r serv ice involved.
The reasons for not complaining includ ed these: the effort to .complain was no t
worth it; the cus tomers believed that complaining would do no good; customers
lacked knowled ge o f how to complain.
• Over 40 percent of the complaining custo mers were w1happy w ith the responsive
action taken by the suppliers. Here again the percentage varied accord ing to the
type of product or service involved.

Future ,;alabilily is s trong ly influenced by the action taken on complainls. Figu re 1.7 shows
broadly the nature of consumer behavior following dissatisfaction with a p u rchase. This stro ng
24 Key Concepts: What Leaders Need to Know about Qua l ity

100,--------------------------------------------.
90 D Pote.uial loss overS I00
80 ~ PotentiaJ loss overS I to $5
70%
70
60
54%
50 46%
40 37%

19%

Pl'oblem but Complaint not Co lllJ) Ia int

no complaint s;uisrtlctorily satisfactorily
resolved resol ved

FtGUR£ 1.7 Behaviors o f con sumers after they experience product dissatisfaction. {Planning for Quality.
2c1 e<l.. Jvron Ins tiMe, 1990, pp. 4-12.)

influence extends to brand loyalty. Figure 1.8 shows the extent of this influence as app~ed to
large-ticket durable goods, fin a ncial services, an d a u tomobjle services, respectively.
That same resea rch concluded that an organized approach to complaint handling pro·
vides a h.igh retu m o.n investment. The clements of such an orgaitized approach may
include:

• A response center staffed to provide 7/24 access by consumers

• A toll·frc<> telephone n u mber
• A compu terized database
• Special training for the personnel w ho answer the telephones
• Active solicitation of complain ts to minimize loss of customers in the fu ture

Discovering Hidden Customer Needs

The most simplis tic assump tion is that cus tomers a re completely knowledgeable as to
their needs and that market research can be used to extract this informa tion from them.
In practice, customer knowledge can be quite incomplete. In some cases the customer
may be the last person to find o u t. It is unlikely t hat a ny customer ever expressed the
need for a Walkman (a mjniature, portable a udiotape p layer) before such devices came
on the market. However, once they became available, many customers discovered tha t
they needed one.
 Attaining Superior Resu lts through Quality 25

100%
80
,,
"~
.c
i<
5.
~
~ 50% -
0 40
;:
.E"

0%
Complai nt Complaim
~H• ti sfac LO ri ly uns.nlisfac.:torily
resolved re~~o l ved

100%
~0
"I"'
~
.c
~
0
Q.

~
!< 50% - 45
0
;: 40
]"

0%
Compte1ely Response D•ssat1sfied
satisfied acceptable complaint
co•n plolint
100%

"- 71
-==~
0 54
~
0
~ 50% - -
;:
"
;: 22
~

0%
Complclcly Response 0JSS~l11 Sfied
satisfied acceptable complaint
compb)int

F1ouR£ 1 .8 Consumer loyalty versu s complaint resolution: large ticket durable goods, fin ancial
services. automotive services. (Planning for Quality. 2d ed.. Juran Institute, 1990. pp. 4-14.)
26 Key Con cepts: Wh at Le aders Need to Know about Qua lity

These gaps in customer knowledge are filled in mainly by the forces of the competitive
market and by the actions of entrepreneurs.

Inferior Available Product or Services

Wh en availabJc prod ucts a rc pcrccjvcd as inadequa te, a vacuum waiting to be fiiJcd emerges.
H u man ingenuity then finds ways to fill that vacuum:

1. n,e number of licensed New York taxicabs has remained froze n :for years while the
population has increased. The resultingshortageofcabsh asbeen filled by unlicensed
cabs ("gypsy cabs"), limousines, buses, and even bicycles.
2. Government instructions for filling out tax forms have been confusing to many
taxpayers. One result has bee n the publication of some best-selling books and
soft-wa_re on how •o prepare tax I"Cturns.
3. The service pro vided by tradesmen has been widely regarded as expensive and
untime ly. Q,,c result has been the gtO\·Vth of a large d o·it..yoursclf industry.

Reduction of Time for Service

Some cultures exhibit an urge to "get it over \o\fith." In such cultures, those w ho can serve
customers in the shortest time are rewarded by a higher share o f market. A spectacuJar
example of tllis urge is the growth of the fast-food industry. Tltis same need fo r fast food and
quick service is nn essential element in the urge of a p roducer to employ "just-in-time" man-
ufacturin g techniq ues.

Changes in Customer Habits

Customer habits can be notorious ly fickJe. Obvious examples are fashions in c lothing o r con-
cerns over health. Consumerism is now driving lifestyles, Many people have redu~i the con-
sumption of beef and increased that of po ulh·y and fish. Such shifts are not limited to consumers.
lnd.ustr ial o rganizations often la unch ''drives," most of wh.ich briefly take center stage and then
fade away. The associated nbuzzwords" similarly corne and go.

Perfectionism
The human being exhibits an ins tinctive drive for precision, beauty, and perfection. When
unrestrained by economics, this drive has created the art treasures of the ages. Ln the arts and
in aesthetics, this timeless human instinct s till prevails.
In the industrial society, there are ma.ny situations in whkh this urgt! for perfection coin..
cides with human needs. In food and drug prepara tion~ certain organisms must be com-
ple tely e liminated, or they will multiply and create h ealth hazards. Nuclear reactors,
lmderground mines, aircraft, and other structures susceptible to catastrophlc destruction of
life require a determined pursuit o f p erfection to minimize dangers to human safety. So does
the mass prod uction of hazardous materials.
However, there are numero us other situations in w hich the p u rsuit of perfection is
antagonistic to society, since it consumes materials and energy without adding to fitness for
purpose, either technologicaUy or aesthetically. This wasteful activity is termed peifectionism
beca use it adds cost without adding value.

Quality: Brief History of Quality and the Management of It

A young recru.it who joins an organlzaHon soon learns that it has in place n.LUl'lerous pro-
cesses (systems) to manage its a ff-aics, in cluding managing fo r q ua lity The ~ctuit might
 Attaining Superior Results through Quality Z7

assume that humans have always used those prOL"'eSSCS to manage for q uality and will con-
tinue to so in the future. Such assumptions would be grossly in error. The processes used to
manage for quality have tmdergone extensive change over the millennia, and there is no end
in s ight.

Primitive Societies-The Family

QuaHty is a timeless concept. TI1e o rig ins o f ways to manage for quality are hidden in the
nUs ts o f the ancient past. Yet w e can be sure that humans have a h'ltays faced problems of
q uality. Primitive food gatherers had to learn which fr uits were edible and which were poi-
sonous. Primitive hunters had to learn w hich trees supplied the best wood fo r making bows
or arrows. The resulting know·how was t-hen passed down from generation to gcnerntion.
TI1e nudea l' human organizational u ni t was the fami ly. fsolated families \.vere forced to
create self-sufficiency-to meet their own needs for food , clothing, and shelter. l11ere was
d ivision of work among fa mil}' members. P roduction was for self-use, so the design, produc-
tion, and use of a product were all carried out by the s.~me persons. Although the technology
was prim.ilivc, the coordinati01' was superb. The same huma'' bcingsrecc;ived all inpu ts and
took all remedial action. TI1e li miting fac tor for achieving q uality was the prim itive s tate of
the technolol,'Y·

The Village-Division of Labor

Villages were created to serve other essential hum an requirements such as mu tual d efense
and social needs. The village s timulated additional division of labor and development of
spcdaHzed skiiJs. There c1nerged fa.r mcrs, hu nters, fishers, and artisaJ'tS of a.U sorts-weavers,
poltcrs, shoema kers. By going through the same work cycle over and over, the artis..1ns
be._--ame intimately fa miliar with the materials used , the tools, lhe s teps in the p rocess, and
the finished product. The cycle included selling the product to users and receiving their
feedback on product performance. The experience derived from this intimate familiarity
then enabled human ingenuity to take the first s teps toward the evolution of technology.

The VIllage Marketplace-Caveat Emptor

As villages grew, the village marketplace appeared where artisans and buyers met on S<:hed-
uled market days. In this setting, prod ucers and users met face to face with the goods
between them. The goods typically were natural p roducts or were made from natural mate-
rials. The producers and purchasers had long familiarity with the products, and the quality
of the products cotdd be judged to a hi~;;h degree by the unaided human senses.
Under such a s tate of affairs, the village magistrates tended to avoid being drawn into
q ua lity disputes between seller and b uyer. This forced b uyers to be vigilant so as to pl'otect
themselves against poor quality. In effect, the seller was respons ible fo r supplying the goods,
but the buyer became responsible for supplying tl1e quaUty "assurance." This arrangement
was known as caveat rmplor1 which is Latin fo r u1et the buyer beware." Thus b uyers Jeam ed
to beware through prod uct inspection and test. They looked closely at th<> cloth, smelled the
fish, thu mped the melon, and tasted a grape. Any failure to beware was at their own peril
[n the village marketplace, caveat ernptor was quite a sensible doctrine. h. is widely applied
to this day in villages all o ver the world .
A further force in the village marketplace was the fact of common residence. Producer
and buyer both lived in the S.1Jl\e village. Each was s ubject to scrutiny and character evalua-
tion by the villagers. Each also was s ubject to vilJagc discipli.nc. For t-h~ a.ctisan, the stakes
were high. His or her status and livelihood (and those of her or his family) were closely tied
to the person's reputation as a competent and ho nest artisan. ln this \vay, the concept of
craftsmanship became a quiet yet powerful stimulus to maintain a high level of quality.
28 Ke y Con c e pIs: Wh a I Le ad e r s Ne e d I o Ko ow abo u I Qu a Ii I y

Effects of the Growth of Commerce

[n due course villages expanded in to towns and cities, and improved t ranspo rt opened the
way to trade among regions.
A famous example o f organized m ultiregional t rad e was the Hanseatic League w h ich
was centered among the cities of northe rn Europe from about the 1200s to the 1600s. Its
influen ce exh~ ''ded ioto Sca.:nd.inavia a nd Russia as wciJ as to the Medi terraJ'\CaJl a.nd Black
Sea (von d er Porten 1994).
Under trade amo ng regions, producer a nd user cou ld no lo nger meet face to face in the
ma rketplace. Products w e re now made by chains o f sup pliers an d p rocessors. Marketin g
was now done by chains of marketers. The buyers' direct point of contact was now with
some merchant rather than w ith the producer. All this reduced the quality protections i.nhcr·
e n t i.n the village marketp lace to a point requiring jnvention o f new fo rms o f q uality as.c;ur..
ance. One s uch invention was the quality warranty.

Quality Warranties
Early quality warranties were no doubt in oral form. Such warranties were inherently d.iffi·
c ult to enforce. Me mo ries diffe red as to w hat was said a nd meant. The d l!lration of the '""ar..
ranty might exte nd beyond the life of the par ties. Thus the written warranty was inve nted.
An early example w as on a day tablet found amid the ruins of N ippur .in ancient Ba by·
Ion. It involved a gold ring set with a n emerald. The seller guaranteed tha t for 20 years the
emerald would not fall o ut of the gold ri ng. If it did fall o ut of the gold ring before the end
of 20 years, the selle r agreed to pay to the bu yer an ind emn ity of 10 mana o f silver. The d ate
is the eq<tivalent of 429 B.C. (Bursk et at. 1962, vol. l, p. 71).
Quality warranties are now w idely used in alJ fo rms of trade and comme rce. They stim -
u late pi'Od uccts to g ive pri()rity to q uality a nd stimula te sell~rs to seek o ut reliable soutccs
of supp Jy. So great is their importance that recent legislation has imposed stan dards to
e nsure tha t th e wording of w arranties d oes not mislead the buyers.

Quality Specifications
Selle rs n eed to be able to communicate to buyers the n ature of what they have to sell. Buye rs
need to be a ble to communica te to sellers the nature of w hat they want to buy. In the village
marketplace, otal communication cou.ld take place directly between producer an d buyer.
\-Vith the growth o f com mercc, communication expanded to include chains of produce rs and
chains of me rchants who o ften were widely separated. New forms of communications were
need ed1 a nd a majo r invention -w as the writte n q uality specification. Now q uality infor ma-
tion could be communicated directly between designer an d producer or betwee n seller and
buyer no matter how great t11e distance between them or how complex the nature of the
product.
Like warranties/ w ritten specifica tions have an ancient origin. Examples have been
fo<md in Egyptian papyrus scrolls o ve r 3500 years old (Duran t 1954). Early s pecifications
focused m l defining products and the pmcesscs fo r producing them. Tn d,ue course the con -
cept was extended to definin g the materials from which the products w ere made. Then as
conflicts a rose because seUers and b uyers used d ifferent method s of test, it became necessary
to establish inspection and test specific-ations as well.

Measurement
The emergence of inspection and test specifica tions led to the evolu tion of measu ring insh·u-
ments. Instruments for measuring length, volume., and tim e evo lved thousands of year.s ago.
lnstrum ents have continu ed to proliferate, with ever-increasing p recision. ]n recent cen turies,
 Attaining Superior Results through Quality 29

the precision of the measurement of time has increased by more than 10 o rders of magnitude
(J uran 1995, C hapter 10).

Artisans and Guilds

The arti~,_n's posst"Ssion o f the skills of a trade was a source of income an d status as well as
self-respect and respect from the community. However, as villages grew into towns and
ci ties~ the numbers of a rtisans grew as well. The resulting competition was perceived by
artisans as threatening the benefits they d erived from their trade.
To perpetuate their benefits, the artisans w ithin a trade organized trade unions-guilds.
Each g uild then petitioned the city autho rities to confer o n guild members a monopoly o n
practicing their trade.
G uild s flourished for centuries during the Middle Ages until the Industrial Revolution
reduced their influence. They used their mo nopolistic pow ers chiefly to provide a livelihood
and security for their members. The g uilds a lso provided extensive social services to their
members. (Fo r elaboration, see Bursk et al. 1%2, vol. III, pp. 1656-1678.)

The Guild Hierarchy

Each guild mainl<>i ned a hierarchy of (usually) three categories of workers: the apprentice,
the journeyman, and the master. Considerable formality s urrounded the entry into each
category.
At the bottom w as the apprentice or novice.., whose entry \Vas through an inden t ure--a
formal contract that bound the apprentice to serve a master for a specified number of years.
1n turn, the master became responsible for teaching the trade to the apprentice.
To q ua lify for promotio n, the apprentice was o bliged to sel've out the full term of the
indenture. ln addition, he o r she was required to pass an examinatio n by a committee of
masters. Beyond the oral part of the examinationl the apprentice was req uired to produce a
perfect piece of work-a masterpiece-that was then inspected by the examination comm.it-
tet:". Success in the examina tion Jed to a ceremonia l admissio n to the s tatu.s of journeyman.
TI1e journeyrnan's right to p ractice the ~rade was limited. He or she could become an
em ployee of a master, usually by the day. TI1e journeym an also could traveJ to other towns,
seeking employment in his o r her trad e. O nJy after admission to the rank of master could the
journeyman set ~p shop on his or her own.
Ad missjo n to th~ rank o f master requited firs t that there be an opcnjng. C uild s .imposed
li mits on the numbers o f mas tel'S in their areas. O n the death or re tirement o f an active mastel',
the g ltild would decid e whether to fill that opening, H so, a journeyman would be selected
and admitted, again through a formal ceremony.

Guilds and Quality Planning

G uilds were active in managing for q uality, including q uality plan ning. They established
specifications for input materials, manufacturing processes, and finished products as weiJ as
for methods o f inspection a.nd test.

Guilds and Quality Control

Guild i.ovolvcmen L in quality contro l W<o1S exten$ive. They mainta ined inspcct_ions and a udits
to ensure that artisans followed th<- q uali ty specifications. They established means of "trace-
ability" to id entify the producer. In addition, some applied ~1eir "mark" to finished products as
added assurance to consum ers that quality met guild standards. Control by the guilds also
extended to sales. n,e sa le of poor-<}uality goods was forbidden, and offenders s uffered a
range o f punishment.<-all the way from fiMs to expulsion from membership. The guilds
also established prices and terms of sa le and enforced them.
30 Key Concep t s: What Leaders Need to Know about Qua l it y

Guilds and Quality Improvement

An overriding guild policy was solidarity- to maintain eq uality of opportunity among
members. To this end , internal competition am ong members was li mited to "honest" com-
petition. Quality improvement through p roduct o r process innovation was no t consid ered to
be "honest" competition. This limitation on quality improvement did indeed help to main-
tain equality am01)g members.. b ut it a lso O'l<'l de the guild increasingly \ru lnerablc to compet i-
tion from o ther cit'ies that did evolve superio r prod ucts and processes.

Guilds and External Forces

The guilds \~·ere able to con trol internal competition, but external competition was some-
thing else. Some external competition came in the form of jurisdictional disputes with other
guilds, which consumed endless ho urs of negotiation. More ominous was competition from
o ther cities, which l."'Uid be in q uali ty ns well as in p rice and value.
The policy of solidarity stifled quality impro,•ement and thereby became a handicap to
remaining competitive. Th us the guilds urged the authorities to restrict imports of foreig n
goods, They also imposed strict rules to prewnt their trade secrets from falling into the
hands o f foreig n competitors. (fhe Venetian glass ind us try th reatened capjtal punish ment to
those who betrayed such secrets.)

Inspection and Inspectors

Th e concepts of inspection and inspectors are of ancient o rigin. Wall pain tings and reliefs in
Egyp tian tombs show the inspections used d uring s to ne cons truction projects. The measur-
ing instru ments incl uded the square, level. and plumb bob fo r alignn1ent control. Surface
fla tness of stones was checked by "boning rods" and by threads s tretched across the faces of
the s tone blocks.
As shops grew jn size, the !;unction of inspcx."iion gave rise to the fu(J..time job of inspector. [n
due course, inspectors multiplied in nu mbers to become the basis for inspection d epartmen ts,
which in turn gave birth to modem quality departments (Singer et al. 1954, vol. I, p. 481).

Government Involvement in Managing for Quality

Governments have lo ng iJwolvcd themselves i n O'lilJ"'agiJ' 8 Jor quality. Their purposes have
includC(.i protecting the safety and health o f citizens, d e fe nd ing and improving the econo rn.ics
of the s tate, and p rotecting consumer~ against fraud. Each of these purposes includes some
aspect of managing for quality.

Safety and Health of the Citizen s

Early forms of protection of safety and health were after-lhe-iact measures. The Code of
Hammumbi (c. 2000 B.C.) proscribed the death penalty for any builder of a house that later
collapsed and killed the owner. In me-dieval ti mes, the sa.mc fate awaited the baker w ho
inadverten tly had mixed rat poison with the flour.

Economics of the State

With the growth of trade between cities, the quality reputation of a city c<mld be an asset or
a liability. Many cities took s teps to protect their reputation by imposing quality controls on
exported goods. They appointed inspectors to inspect finished products and affix a seal to
certify the quality. This concept was widely applied to high·volu me good s such as tcxti.les.
Co ntinued growth o f commerce then created competition among n ations, including
competition in quality. Guilds tended to s tifle quality improvement, but governm•nts
favored improving the quality of domestic goods in order to reduce imports and increase
 Attaining Superior Resu lts through Quality 31

exports. For example, in the late s ixteen th century, james VI of 5L""Otland imported craftsmen
from the Low Countries to set up a textile factory and to teach their trade secrets to Scottish
workers (Bursk et at. 1962, vol. IV, pp. 2283-2285).

Consumer Protection
Many states recognized that concerning some domestic trade practices, the rule of caveat
emptor did not apply. One such practice related to measurement. The sta tes designed official
standard tools for measuring length, weight.. volu me, and so on. Use of these tools was then
man dated , an d inspecto rs were appointed to ensure compliance. (See, e.g ... Ju ran 1995, Chap-
ter 1.) The twentieth century witnessed a considerable expansion in consumer protection
legislation. (For elaboration, see Juran 1995, Ch11pter 17.)

The Mark or Seal of Quality

A mark o r seal has been applied to products over the centuries to serve multiple p urposes.
Marks have been used to

• Identify the prod ucer, whether artisan, fac tory, town, merchan t, packager, or stj)J
others. Such identification may serve to fix resp<>nsibility, protect the innocen t
against unw~~rran ted blame, enable buyers to choose among multiple makers,
ad vertise the name of the maker, an d so on.
• Provide traceabili ty. ln mass productiOI"', usc of lot nu mbers helps to rnaintai.n
unifo rmity of product in s ubsequent processing, designate expiration dates, make
selective p roduct recalls, and so on.
• Provide product information, s uch as type and quantities of ingredien ts used, date
w hen made, expiration dat~, model n u mber, ratings (.such as vol tage, current), and
soon.
• Provide quality assurance. This was the major purpose :;erved by the marks of the
guilds and towns. It was their way of telling buyers, "This product has been
independently inspected a11d has good qua lity."

An aura of romance surrou.nds the use of seals. The seals of some medieva l cities arc
masterpieces o f artistic design. Some sea ls have become world··renowned . An example is the
British "hallm ark" that is applied to products made of precious metals.

The Industrial Revolution

The industrial Revolution began in Europe during the middle of the eig hteenth century. Its
origin was the sim ultaneous development of power·dl'iven machinety and sources of
mechanical power. It gave bir th to fac to ries that soon outperformed the artisans and small
shops and made them largely o bsolete.

The Factory System-Destruction of Crafts

The goals of the factorie..o; were to raise prod uctivity a1"1d reduce costs. U nder the craft sys·
tcm, prod uctivity h.ad been low due to p rirnitive techno logy, w hereas coste; had been high
d ue to the high wages of skilled artis~~n:;. To reach their goals, the factories reengineered the
manufacturing processes. Under the craft system, an artisan perfor med every o ne of the
numerous tasks needed to produce the final product-pins, shoes, barrels, and so on. Under
the fac tory system, the tasks withjn a craft '"'etc d jvided up among scver-aJ or many factory
workers. Special tools were designed to simplify each task down to a short time cycle.
32 Key Concepts: What Leaders Need to Know about Quality

A worker then could, in a few ho u rs, carry out eno ugh cycles of his or her task to reach high
productivity.
Adam Smith, in his book The Wrallh ofNnlions, was one of the first to publis h an explana-
tion of the s triking differe nce between manufacture under the craft system and under the
facto ry syst~rn. He no ted that pin making had been a distinct craft, con$isting o f 18 separate
tasks. \•Vhen these tasks w ere divid ed among 10 factory w o rkers, production rose to a per·
wo rker equivalent o f 4800 pins a d ay, a level that was orders o f magnitud e highe r than
would be achieved if each worker were to prod uce pins by performing .alliS tasks (Smith
1776). For olher types of processes, s uch as spinning or weaving, power-driven machinery
could o utp roducc hand artisans while employi.ng semiskilled '" unskilled wo rkers to "'d ucc
labor costs.
The broad economic result of the factory system was mass production at low costs. This
made the ...suiting products more affordable and contributed to economic grow th in indus-
trialized countries as well as to the associated rise of a large "middle class."

Quality Control under the Factory System

Tho factory system rcq u;,..,d associa ted changes in the system of q uality control. When craft
tasks were divid ed amo ng many workers, those workers were no longer their own custo m ..
ers, over and over. The respo nsibility o f w o rkers was no longer to provide satisf<"ction to the
buyer (also custo mer, user}. Few facto ry workers had contact with buyers. Instead, the
responsibility became one of "make it tike the sample" (or specification).
Mass production a lso brought new technological problems. Products involving
assemblies of b iL1.0 and pieces demande-d interchangeabili ty of those bit's and pieces. TI1cn
with the growth of technology and of ever-wider commercial territories, the need for
standardization emerged as well. All this req uired greater precision throughout-machinery,
tools, measurement. (Under lhe craft system, the artisan fitted and adjusted the pieces as
needed .)
[n theory, such q uality problems could be avoided during the original planning of the
manufacturing p rocesses, Here the limitation rested w ith the planners-the " master mechan-
ics" and shop supervisors. They had extensive, p ractica l experience., bu t their ways w ere
empi.tical, bci_ng rooted in craft practices hand ed d own through the gene rations. TI1ey had
little understanding of the nature o f process varia tion and the resulting product variation.
TI1ey were unschooled in how to coUect and analyze d ata to ens ure that their processes had
"process capability" to enable the production ' "orkers to meet the specific.ations. Use of s ur h
new concepts had to await the coming of the twentieth e<~ntury.
G iven the li1n itationsof q uality plan ning, wha t emerged \'\ras a.n e):pallsio.n of inspection
by d epartmental supervisors s upplemented by full· time inspectors. \·Vhe:re insp-ectors were
used, they were made respo nsible to the respective d epartmental p roduction s uperviso rs.
The concept of a special department to coordinate quality activities broad Iy also had to await
the coming of the twentieth e<~ntury.

Quality Improvement
TI1e Ind ustrial Revolution p rovid ed a climate favorable for continuous q uality improvement
thro ugh p roduct and p rocess develo pment. Fo r exam ple, p rogressive im.p rovements in the
d esign of s team engines increased their thermal efficiency from 0.5 percen t in 1718 to 23.0
percent in 1906 (Singer et al. 1958, vol. JV). Inventors and entrepreneurs emerged to lead
ma11y COUll t ries into the new world of tcch n.o logy and ind ustrialization. In d ue course, some
organiz.'ltions created in ternal sources of in vento rs--research laborato ries to carry o ut p roduct
 Attaining Superior Results through Quality 33

and process developrnent. Some created market research departments to .carry out the func-
tions of e ntrepreneurship.
In contrast, the concept of continuous q uality improvement to red uce chronic w aste
mad e little he.adwa y. One likely reason is that most industrial man agers give higher priority
to increasing income thar) to reducing chronic waste. The guilds' policy of soljdarity.. w hich
s tifled q uality improvement., also may have been a factor. In a ny e vent, th e con cept o f qun l~
ity improvement to reti.uce chronic w aste did n ot find fulJ application until the Japanese
quality revolution of the twentie th century.

The Taylor System of Scientific Management

A further blow to the craft system came fwm F. \•V, Taylor's system of ''scientific management."
Thi~ o riginated in the late n ineteenth cc1ltury w hen Taylor, a1l. AmericaJl manager, wanted to
increase production and productivi ty by improving manufacturing p lann ing . His solu tion was
to separate p lanning from execution. He brough t in engineers to do the planning, leaving the
shop supervisors and the '"'o rkforce with the narrow responsibility of carrying o ut the plans.
Taylor's system was s twm.ingly successful in raising productivity. [t \\''as wjdely ndopted
iJ' the Vnitc<i States bu t n o t so widely <)dopted elsewhere. It had negaaivc sid e effects in
human relations, w hidl mo.cot U.S. managers chose to igno re. It also had n ega tive effec-ts o n
q uality. TI1e U.S. managers responded by taking the inspectors o ut o f the production d e part-
ments and pladng them in new ly c reated inspection depa rtments. In due course, these
departments took on ad ded func tions to become the broad-based q uality departments of
today. (For elab<.1ratio n, see Juran 1995, Chapter 17.)

The Rise of Quality Assurance

The anatomy of "q uality assura nce" is very s im ila r to that of quality control. Each evalua tes
actu al quality. Each compa res actua l q uality with the q ua Uty goaJ. Each s timula tes corrective
action as needed. What differs i.s the p l"ime p u rpose to be served.
Under quality control, the p rime p urpose is to serve those who are directly respo ns ib le
for conductin g o perations-to help them reg ulate c u rren t o perations. Under q uality assur-
ance, the prime purpose is to S<!rve those who are not directly responsib le for oonduct.i ng
opera tions b ut who have a need to know-to be informed as to the state of affairs and hope-
fu ll)' to be assured tha t all is well.
[n this sense, q ua liLy assurance has a similarity to insurance. Each invo lves spending a
small s um to secure protection against a large loss. In the case of q uality assurance, the pro-
tectjon consists o f an early warning that may avoid the large loss. In the case o f insurance,
the protection consists of compensation after the loss.

Quality Assurance in the Village Marketplace

In the village marketplace, tl1e buyers provided much of tl1e quali ty assurance tluough their
vigilan ce-through inspectio n an d test before b uying the p roduct. Added quality assura nce
came from t-he craft system-producers were tr:ained as apprentices a.nd were then req u.ired
to pas.c; an examination before they could practice their trade.

Quality Assurance through Audits

Tile growth o f commerce intr:oduced chains of s upplie rs and merchants tha t separated con..
s ume rs from the producers. This required n ew forms of q uality assurance, o ne being q uality
' "arran ties. The guilds created a fo rm of quality assurance by establishing prod uct an d pro-
cess s tnndards and then a uditing to e nsure complia nce by the artisans. [n <\ddition, some
34 Key Concep t s: What Leaders Need to Know about Qualit y

political aulhorities establis hed independent product inspections to protect their quality
reputations as exporters.

Audit of Suppliers' Quality Control Systems

The b,dustrii\1 Revolution stimulated the rise of large industrial organizations. These bought
equipment, ma terials, and p roducts o n a largo scale. Their early forms of q uality assurance
were mainly t·h rough inspection and test. Then, during the twentieth century, there emerged
a new concept under which cus tomers defined and mandated q uality control systems. These
systems were to be institu ted and foUowed by suppliers as a condition for becoming and
remaining s uppliers. TIUs concept was then enforced by audits, both before and during the
life of the supply contracts.
At firs t, this conrept created severe problems fo r suppliers. One problem was the lack of
standardization. Each buying company had its own idea of what was a proper quality con-
trol system, so each supplier was faced with designing: its system to sa tisfy m ultiple custom-
ers. Another problem was that o f multiple audits. Each supplier was subject to being audited
by each cus to mer. TI'ere was no provision for pooling the results of audits into some com-
mon data bank, and customers generally \Vere unwilling to accept the findings of audits
conducted by personnel other than their own. The resulting multiple audits were especially
burdensome to small suppliers.
[n recent decades, s teps have been taken towa rd standardization by professional socict·
ies, by natio nal standardjzation bodies, and most recently by the International Organization
for Standardization (ISO). ISO's 9000 series of s tandards for quality conh·ol systems are now
widely accepted among European organizations. There is no legal reqwremen t for com-
pliance, but as a marke ting matter, organizations are reluctant to be in a position in which
their cornpotitors arc ccrtifi.cd as complying with ISO 9000 standa rds but they themselves
are not.
TI' ere remains the problem of multiple a udits. !J, theory, it is feasible for one a udit to
provide information that would be acreptable to all b uyers. This is already the case in qual-
ity a udits conducted by Underwriters Laboratories and in financial audits oonducted b)'
leading financial auditing firms. Single quality ~1udits may become feasible in the futtu·e
under the emerging process for certification to the lSO 9000 series, b ut cons iderably greater
maturity would be required.

Extension to Military Procurement

Governments have always been large buyers, especia lly for defense pur:poscs. Their. early
systems of quality assurance consisted of inspection and test. During the hventieth century,
there was a notable shift to mandating quality control systems and then using audits to ensure
coniormanoo to the mandated systems. The North Atlantic Treaty O rganization (NATO)
evolved an international standard-the AWed Quality Assurance Publications (AQAP)-that
includes provisions to .mi.,imi7..c multip le audiLo;;. (For c_laboratio.n, see Juran 1977.)

Resistance to Mandated Quality Control Systems

At the outset, suppliers resisted the mandated quality control systems imposed by their
customers, None of this could s to p the movement toward q uality assurance. The economic
power of the buyers was decisive. Then as suppliers gained experience with the new
approach, they realized tha t many of its provisions v~.rere s imply good business practice.
TI'us the concept of mandated q uality control systems seems d estined to become a perma-
nent feature of managing for quality.
 Attaining Superior Results through Quality 35

Shift of Responsibility
Note that the concept of manda ting q uality contro l systems involves a major change in
respo ns ibility for quality assurance. In the village ma rketplace, the prod ucer s upplies the
product, but the buyer has m uch of the respo ns ibility fo r s upplying the q uality assur-
ance. Under mandated quality contro l systems, the p roducer bectlmes responsible fo r
s upplying both tho product and the q uality assurance. Tho producer supplies the quality
assu rance by

• Adopting the mandated system fo r cont rolling q ua lily

• Submitting the data that prove that the system is being followed

The buyers' audits then consist of seeing to it that tl >e mandated system is in place and
that the system is i.ndeed being followed.

The Twentieth Century and Quality

The twentieth century w itnessed the emergence of some massive new forces that req uired
responsive action. These forces includ ed an explosive growth in science and technology,
threats to hum a_1'1 safety and health and to the cnvjronmcnt, the rise of the consumerism
movement, and in tensified international competition in q uality.

An Explosive Growth in Science and Technology

This growth m(ld e possible an o utpouring of n umerous benefits to human societies: longer
life spai'•S, s uperior commu•' ication and tr'<-'l nsport, reduced household drudgery, new for ms
of education and entertain men t, and so on. Huge new industries emerged to t ranslate the
new technology into these benefits. Nations that accepted in d us triali zation found it possible
to improve their econo mies and the w elJ-being o f their citizenry.
The new technologies requi red complex designs and precise execution. The empirical
met-hods of earlier centuries were LU' able to provjdc appropriate product and process
d esigns, so p rocess yields were low a 1'd field failures hig h. O rganizations tried to d eal with
low yields by add ing inspections to separate the good from the bad. They tried to deal with
field failures through warranties and cus to mer service. These solutions were costly, and they
d id no t red uce customer dissatisfaction. The need was to prevent defects and field failures
fn.>m happenu>g in the first place.

Threats to Human Safety and Health and to the Environment

' ith benefits from techno logy came w1invited guests. To accept the benefits req uired
'vV
changes in lifestyle, w hich, in turn, made q uality of life dependent on con timuty of service.
However, many prod ucts were failure-prone, resulting in many service it,tcrruptions. Most
of these were minor, bu t some were sel'io us and even frightening- threa ts to human safety
and health as well as to the environrnent.
Thus the critiC'•.tl need becam e quality. Con tinuity of the benefits of teclhnolog}' depended
o n the q uality of the goods and services that provided those benefits. T he freq uency and
severity o f the interruptions also d epended on q uality--on the co,, tin uing performance and
good behavior o{ the p roducts of technology. Th is d ependence came to be known as "life
behind the q uality dikes." (for elaboration, see Chapter 10, A Look Ahea d: Eco-Quality for
Environm enta l Sustdinability.)
36 Key Concepts: What Leaders Need to Know about Qua li ty

Expansion of Government Regulation of Quality

Government regulation of q uality is of ancient origin. At the outset, it focused mainly o n
human safety and was conducted "after the fact"'- laws provided for punishing those whose
poor q uality caused death or injury. Over the centuries, there emerged a trend to regulation
''before the fact"-to become preventive in nature.
This trend was intensified during the twentieth century. Tn the field of human health,
ltnvs were enacted to ensure the quality of food, pharmaceuticals, and medical d evices.
Licensing o f practitioners was expanded. Other lav~o'S were enacted relating to product safety,
highway safety, occupational safety, consumer protection, and so o n.
Growth of government regulation was a response to twentieth-«lntury forces as well as
a fo rce in its own right. The rise of technology placed complex a.nd dangerous products in
the hands of amateurs--the public.
Government regulation then demanded product designs that avoided these dangers. To
the Oq,'anizations, this intervention then became a fo rce to be reckoned with. (For elabora-
tion, see Juran 1995, Chapter 17.)

The Rise of the Consumerism Movement

Consumers welcomed the fea tures ofiered by the new prodLtcts but not the associated new
q ua lity problems. The new products were unfumiliar.-most consumers lacked expertise in
technology. Their senses were unable to judge which of the competing products to b uy, and
the claims of competing o rganizations often '"'ere contradictory.
\A'h en pr<.xlucts failed in service, consumers were frustrated by vague warranties and
poor service. "Tile system'~ seemed u nable to provide recourse when things failed. lndiv id·
ual consum ers were unable to figh t the system, b ut collectively they were n u merous and
hence potentially powerful, both economically and potitica lly. During the twentieth century,
a "consumerism" movement emerged to make this potential a re.-1lity and to help consumers
dea.l more effectively with these problems. Tllis same movement also was s uccessfuJ in stim-
ulating r-.ew government legislatior-. for consumer protection. (For elaboration, sec Juran
1995, Chapter 17_)

Intensified International Competition In Quality

Cities and COlmtries have competed for centuries. The o ldest form of such competition was
probably in military weaponry. 11Us competition then intensWed during the twentieth cen-
tury under the pressures of two world wars. It led to the development of new and terrible
weapons of m ass d estruction.
A further s timulus to competition came from the rise of m ultinational o rganizations.
Larse organizations had found that foreign trade barriers \~tere obstacles to export of their
products. To get around these barriers, m<'ln)' set up foreign s ubsidiaries that then became
their bc.1ses for compeli118 in fo reign markets, including cornpetiti011 in quality.
TI1e most spectacular twentieth-century demonstration of the power o f competi tion in
quality c,,me from the Japanese. Following World War li,Japanese organi:z.1tions discovered
that the V\'est was unwilling to buy their products-Japan had acquired a reputation for
making a.nd exporting shoddy goods. The inability to sell beca.Dle a.n "!arm signal a.nd a
stimulus for launching the japanese quality revolu tion during the 1950s. \IVithin a few
d ecades, that revolutio n p ropelled Japan into a position of world leadersh ip in q uality. TI1is
q uality leadership in turn enabled Japan to become an economic superpower. lt was a phe-
nomenon without precedent in industrial history.
 Attaining Superi or Resu lts t hr ough Quali t y 37

The Twenty-First Century and Quality

The c um ula.tivc effect of these mas:;;ivc fo.I"'CeS hns becr1to "move q uality to <.::enter stage." Such
a massive move logically sh ould have s tim ulated a correspo nding re.sponse-a revolution in
managin g for quality. However, lt was d ifficult fo r oq,"(''nizations to recognize the need for such
a revolution-they Jacked the necessary alarm signals. Technological mea$ures of quality did
exis t o n the shop floors, but rnanagerial measures of quality d id not exist in the boardrooms.
Thus, except fo r japan, th e needed quality revolu tion d id not start until very late in the tvven-
tieth century. To make this revolution effective th roughout the \~·orld, economies will require
many decade&-the entire twenty-firs t century. Thus, w hile the twentie th century has been the
'\."'Cntury of productivity/' the twen ty-first century l'lill be known as Lh e: "century of quality.''
T11e fail u re of the \.Vest to l'espond p romptly to the need for a revolution in q uality led to
a w idespread crisis. The 1980s then w itnessed quality initiatives bein g ta ke n by large num-
bers of organizations. Most of these initiatives fel1 far sho rt of their goals. However, a few
were stunningly s uccessful and produced the lessons learned and role models that will serve
as guid es for the West irl the decades ahead.
Today all coun tries can a ttain superiority in q uality. Tile method s, tools, a nd know-how
exist. A country tha t is an emerging country today may prov ide highe r q u ality than one that
h as been producing it for centuries. Today and into the fo reseeable fu ture all organiZ<1tions
in nll ind ustries 1nust continue to s trive for perfection. Tiley need to be in a state of perfor-
mance cxcdJence. Tilat is why this sixth edition ha ndbook is subtltled The Complete Guide lo
Performtmce Excdleuce.

lessons learned
Organizations that were successful in their quality initiatives made use of numerous strate-
gies. An alysis sh ows tha t despite differences among the orgartizations, there was m uch com-
monality. These com.mon s tra tegies included the fo llowing:

1. Custome-rs and qualily lmve top priorUy. Thus cuslo mcl' $<ltisfact ion was lhe ch ief
operating goal embedded in th e vision and s trategic p Jans. This was v~rrilten in to
corporate policies and scorecards.
2. Crealt~ a performauce excellence system. AU organizations that a ttained superior results
did so w ith a chan ge program or a systematic model for ch an ge. This model e nables
organiz~tiona.l breakthroughs to occur.

3. Do slmtegic plmmit~gfor qunlity. The business plan was o p ened u p to inclu de q ua lity
goals and be1 lanced scorecards, year after year.
4. Benchmnrk best practices. This approach WClS adopted to set gQ(,ls based on superior
results already ach ieved by o thers.
5. Engage in continuous innovation aud process improvement. The b usine.ss plan was
opened up to include goals for improvement. (t was recogn ized that q ua lity is a
moving t~rget; therefore there is no end to improving p rocesses.
6. Offi'-r training in mm111ging for qrmlily, the mefhods tint! fO{)I$. Training was extended
beyond the q uality department to aU ftmctions and levels, .indudi.r.g upper man~gers.
7. Crentenu orgnuizntiou-wirleaMurnucefocus. Th is focus is on improving and e nsuring
that a ll goods, servic~s, p rocesse-s, and fu nctions .iJl an m·ganj zation arc o( hig h
quality.
38 Key Conc ep ts : What Le aders Ne ed to Know about Quality

8. Project by projet·t. creole mulliftmcliounl Iemus. Multifunctional teams, ado pted. to give
p riority to organization resu.lts rather than to functional goals? and later e xte nded to
include suppliers and customers, are key to creating breakthroughs in current
perfo rmance. 'They focus on the "vital fev.•" opportunities for improvement.
9. Empower employees. This includes training and empowering the workforce to
partidpate in planning and improvement of the '1useful many" opportunities.
Motivation was supplied through extending the use of re.:ognition and rewards for
respo nding to the changes demanded by the quality revolution. Measurements were
developed to enable upper managers to fo llow progress toward providing customer
satisfaction, meeting competition, improving quality, and so on. Uppe r managers
took charge of managing for quality by recognizing tha t certain respon sibilities were
I'IOt delegable- they were to be carried out by the up~t ma.nager,s.. personally
10. Build an ndnptnble nnd sustainable vrgnuizafivu. Quality is defined by the c ustomers.
Customers are dl'iven by societal problems. Quality now includes sa fety.. no harm to
the e nvironment.. ]0\.v cost.. ease of use.. etc. To s ucceed, aU o tganiza tions m ust focus
o n attaining sustainable organizations.

Acknowledgments
This chapter has draw•n extensively from the following:
De Feo, J. A.,and Bernard, W. W. (2004). Jumlllllsliltlle's Six Sigtt~n Brenktlmmglt n11d Beyond.
McGraw-Hill, New York.
Gl')"'"· F. M., Chua, R. C. H., an d De Fco, J. A. (2007). Qunlil!l Plmurittg n'rld A~~nlysis, 5th cd.
McG ra w~H i ll , Ne w Yo rk.
J uran,J. M. (ed.) (1995). A History o[Mmmgi11g[or Quality. Sponsored by Juran Foun dation,
Inc. Q uality Pre,;s, Milwaukee, WI.
Juran, ). M., an d Godfrey, A. B. (1999). Junm's Quality Haudbook, 5 th cd. McGraw-Hill,
New York.
Juran, J. M. (2004). Arcltitect of Quality. McGraw-Hill, New York.
TI'Ie author ls grateful to the copyright ho lders for permission to quote from these works.

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Firestone lire Recall, legal Info rmation Center http:/ /www.firestone-tire-.recall.com/ pages/
overview.html
juran, J. M. (1% 4, 1995). Mattagerin/ Breaktltrouglt. McGra w-Hill, New Yo rk.
Juran, J. M. (W70). "Consumerism and Product or Service Q uality." Quolity Progress, July,
pp. 18-27. American Society for Q"ality. ·
Paraphrased fro m Juran QuaUty Minute: Hair Nets.
Paraphrased from u,e )lU'an Quality Minutes (2004) Planning Quality an d Meeting Customer's
N eeds, Discussion Guid e, p 19. Southb ury, CT. Juran , J. M. (1977). "Quality an d Its
Assurance-An Ove rview." Second NATO Symposium on Quality and Its Assurance,
London.
 Attaining Superior Resu lts through Quality 39

Juran,). M. (ed.) (1995). A History of Managing for Qtwlily. Q uality Press, Milwaukee, WI.
Levine, R. (:19S7). "Breaking Rou tine: Voice of tl1e Subway." The New York Times, jan uary 15.
Levitt, T. (1960). "Marketing Myopia." Haroard Business Review, j uly-Aug ust, pp. 26-2Sff.
Levinson, M. S. (2008). City Mnt~ager; City of Com/ Springs, FL. P repared remarks Malcolm
Baldrige Na tio nal Q uality Award Ceremony, April 23, 2008 http :/ /www.nist.gov/
speeches/levinson_042308.h tml
O llson, J. R. (1986). "The Market-Leader Method; User-Oriented Development." Proceedittgs
3011• EOQC Amwal Confereuce, pp. 59-68. European Organization for Q uality Control.
"The Perils of Ct>tting Qt>ality." (1982). Tl•c New York Time$, August 22.
Singer, C., H olmyard, E.)., and Hall, A. R. (cds.) (1954). A HisloryofTec/mofogy, vol. [,Fig. 313,
p. 481 . Oxford University Press, New York.
Srruth, A. (1776). The Wealth of Nations. Random House, New York. Originally p ublished in
1937.
von der Porten (1994). "The H<mseatk League, E..rope's First Common Market." National
Gt•ographic, October, pp. 56- 79.
This page intentionally /eji blank
 CHAPTER 2
Quality's Impact on Society
and the National Culture
Joseph M. Juran

About Tkis Chapter 41 Caltoral Differeoces 54

Higll Poiots of This Chapter 41 Covenment Reg.latioo of Qulijy 54
L~e Bekiod the Qua~ty Dikes 42 Produet Safety aod Pro duet Uability 60
The Growth of Consomerisln 43 Environll..tal Proteetioo 64
Qulijy ud the Natioaal Cuijures 52 MoHiutional Collaboration 66
QuJijy in Global Ecooomies 52 Refereoces 66

About This Chapter

The subsequent growth of commerce and of science and techno logy gre-atly expanded the
extent and variety of nonnatural goods and services. As a result, human beings in many
modern indus trial societies live longer and safer lives. They are largely shielded from the
perils that their ancesto rs faced. However, aU those nonnatural good s and serv ices have cre-
ated a new depend ence and therefore new risks. Years ago 1 coined the p hrase "life behind
the q uality dikes"' to designate these risks Ouran 1969). This chapter is about the effects of
poor quality o n o ur society and environment

High Points of This Chapter

1. Human society has depended o n q uality since Lhe dawn o f history. h'l indust-rial
societies, we place ou r safety, health, and even daily well-being behind numerous
protective "dikes" of q uality control. However, all these nonnatural goods and
ser vices have created a ne·w dependence and therefore new risks o n our society.
These risks must be mitigated, or we will have many losses, both financial and
cultural.

41
42 Key Concep t s: What Leaders Need to Know about Qualit y

2. The goal of high quaHty is common to all countries. This common goal mus t compete
w ith o the.r national goals amid the massive forces--political. economic, and social-
that determine the national prio rities.
3. Consumerism is the name for the movement to help consumers solve their problems
tluough collective action. No one knows whether the rate of consumer grievances
has grown o ver the centuries. However, we know that the volume of grievances has
grown to enorrnous numbers due to the growth in volume of good s and services.
4. Consumers exhibit a wide range o f product knowledge, includ ing the lowest Ln
conseqLtence, actual use of the product can differ significantly from intended use.
Many designed products and services are d esigned not for actual usage bu t rather
for intended usage. Man y lawsuits occur because peop le are hurt as a result of using
a product in a way that was not "fit for purpose."
5. Governing bodies have established and enforced s tandards of q ua lity. Some of these
have been po litica l: national. regional, locaL Others have been nonpolitical: guilds,
trade associations, s tandardization organizations, and so on. Th~se governing
bodies have attained a status that enables them to carry out programs of regulation
and can become a hidden custo mer to the salability of o ur products and services.
A U o rganizations must plan fo r these regulations or face penalties.
6. During the twentieth century these lawsuits have, in the Uni ted Sta tes, g rown
remarkably in numbers. This growth in number o f lawsuits has been accompanied
by an equally remarkable growth in the sizes of individual claim~ and damages. All
p roducts and services must be created to minimize potentia l suits brought because
o f poor q uality

Life Behind the Quality Dikes

Human society has depended on quality since the dawn of history. In primitive societies this
dependence was on the quality of natural goods and "services." Human. life can exist only
w ithin !"'ather narrow limits of clima tic temperature, air q uaUty, food q uality, and so o n. Fo_r
most primitive societies,life even within these narrow limits is marginal, and h u man beings
in most primitive societies live p recariously. Hours of work are o ften lorng and exhausting.
Life spans are shortened by malnutrition, di,.,.se, natural d isaSter$, and so on. To reduce
such risks, primitive societies created normatu ral aid s to their mental and physica l capabili-
ties, aids such as

• Division of labor
• Communal forms of society, such as v illages
• Artificial shelter, e.g., houses
• Processing of natural materials to produce nonnatural goods s uch as pottery, textiles,
tool<, and weapons
• Lessons learned fro m the experience of the past. such as when Ito plant crops and
w hich berries arc poisOI'IOUS, handed d own from gcner:ation to gcncratjon

The subsequent growth of commerc-e and of science and technology greatly expanded the
extent and variety o f nonnatural goods and sen rices. As a result, human beings in man y mod-
ern indus trial societies live longer and safer lives. They are largely shielded Jrom the perils that
their ancesto rs faced. How ever, all those nonnatural good s and services have created a new
 Qua lity ' s Impact on Society and the National Culture 43

dependence and U1erefore new ris ks. Years ago I coined the phrase " ~fe behind the q uality
dikes" to designate these new risks (Juran 1%9).
In industrial societies, great masses of human beings place their safety, health, and even
daily well-being behind numero us protective "dikes" of q uality control. E'or example, the
daily sa fety and health of the citizenry now depends absolutely o n the quality of manufac-
tured products: drugs, food, aircraft, a uto mobiles, elevators" tunnels, brid ges, and so on. In
addition, the very continuity of ou r lifestyle is built aroun d the continuity of numerous vital
services: power, transport" communication, water, waste remova l, and many others. A major
power faHure paralyzes the lives of miiHons.
TIH~rc are n umerous mj nor break..<; i_n the quality dikcs-occasjonal fai lu res of goods a.nd
services. These are a nnoying as well as costly. Far more serious are tt\e terrifying major
breaks such as occurred at Chernobyl and Bhopal.
Not only inruv iduals but also nations and their econorrties Jive dangerously behind the
d ikes of q uality control. Nationa.l productivity relies o n the quality of product and process
d esign. Natlon nl d efense relies o n the quality of complex weaponry. TI1e gro\',rth of the
national economy is keyed to the reliability of its syste ms for en e rgy, cotnmunication, trans-
po rt, and so on.
So w hile technology confers wonderful benefits on society, it also makes society depend-
e n t on the continuing performance a nd gooc.:l beh avior o f techno logica l good s and services.
This is life behind the quality dikes-a form of securing benefits but living dangerously. Like
the Dutch \vho h ave reclaimed much land from the sea, we secure be,n efits from technology.
However, we need good dikes-good quality-to protect us against the nume ro us service
interruptions and occasional disasters. T11ese same risks have also led to legislation that a t
the outset was bitterly opposed by industria l org<1nizations. Since lhcn ii h as become clear
that the p ubHc is serious about its concerns. \•Vhat is encouraging is that users{wheth er indi-
viduals o r n ations) are w illing to pay for good d ikes.
The ability to cope with breaks in the quality dikes varies remarkably among users.
Large organizations (industrial organizations, governme•\ts) employ technolog.ists or o ther-
wise use lhei.r economic a.nd political s t-reng ths tQ p la n, control, and im prove quality. In
con trast, individuals (consumers, the citizenry) find themselves pitted agajnst forces that
seem to them as mysterio us and overpowering as natural forces appeared to their primitive
ancestors.
Any o ne individ ual has on ly a very limited capaci ty to d ea l w ith these fo rces. How-
ever, there are very many individ ua1s. Collectively their econo mic a nd political powers
a re formida ble. These p o wers have emerged as a movement generally called consumer-
ism, This movement, though loosely organized, has become influential in p rovid ing
indi v-i d ual members of sodcty w ith protectio n and recourse: when faced with breaks in
the q uality dikes.

The Growth of Consumerism

Consumerism is a popular nam e for the movement to help consumers solve their problems
through collective action. No one knows whether the rate of consumer grievances has grown
over the cent uries. However we know that the vol ume o f g ricva.nccs has grown to enormo us
numbers d ue to the growlh in volume of good s an d services. By lhe midd le o f the tvventieth
century, consumer frustrations h ad reached levels that stimulated attacks on industrial
organizations for their alleged responsibility for consumers· problems. Then w hen most
oq,-..:mi?.;.'l.tions failed to take appropriate actjon, the resu1ting vacuum attracted numerous
con tenders for leadership of a consumerism movement: government agencies, po liticians,
social reformers/ consumer advocates, consumer associations, s tandardization organizations,
44 Key Concepts: What Leaders Need to Know about Qua l ity

independen t test laboratories, and still others. A risk arose that a bargaining agent would
emerge to intervene betvveen ind us trial organizations and their customers.
Note: T he text for this to pic includes some extracts and paraphrases of material from
Jurnn's Qunlit_v Hnnrlbook (1995, Chapter 17).

COnsumer Perceptions
Starting in the 1970s, researchers began to identify the d ominant consumer problems as well
as the perceptions of the groups in interest: consumers, consumer o rganizations, govern-
ment, business, insurance organizations, and so on. Table 2.1lists the major quaUty-oriented
consumer problems as derived from one such study.
Cortsu.mer expectations sometimes rise faster than the market rat~ of improvement.
Ln addition, consumer perceptions can differ from the realities. For example, many consum -
ers believed that quali ty of p rod uct was getting worse, that "products don't last as long as
they used to." Yet the author's s tudies of specific product lines have alm ost a lways fo und
that quali ty has kept improving.
Consumers are generally more negative than positive o n the a ttitudes of business toward
p roblems of consumers. Consumers strongly favo r competition as a means of ensuring
higher q uality, safer products, and better prices. They also feel that most .advertisjng is mis-
leading, and that much .is seriously misleading.
During the late 1970s consumer perceptions of quality in specific in_d ustries varied
w idely. TI1e favorable perceptions included banks~ departmen t s tores, s-mall shopkeepers,
telephone organizations~ supermarkets and food stores, and airlines. At the other end of the
spectrum, consumers had poor perceptions of car manufacturers, the advertising industry,
the oil industry, local garages, auto mechanics, and used car dealers (Sentry 1976, p. 13).
Wh ile oonsuo) cr perceptions arc sometimes i11 error, the perceptions ai'C important in
their own rig h t. People act on their percep tions, so it is important to lmderstand what their
perceptions are.
Consumers generaUy felt that there was m uch they could do to help themselves rela-
tjve to quali ty. They felt that the necessary product inJormatjon was available but the

Poor reliability of many products

Failure to live up to advertising claims
Poor quality and slow responsiveness of afler·sates service and repairs
Misleading packaging and labeling
Futility of making complaints-nothing substantial will be done
Costly guarantees and warranties
Failure of organizations to hand le complaints properly and quickly
Too many dangerous products. especially toys for children
The absence ot reliable information about service qual it~·. par ticularly in health care
Too many self-ser ve diagnostics
Not knowing what to do when something goes wrong with a purchased product
Too many similar, but different models to choose trom

TABtE 2 .1 Major Consumer Quality.Qriented Problems

 Quality ' s Impact on Society and the National Culture 45

in formatio n was no t being used by consumers. They had s imilar views with respect to
product safety. They generally felt that most p roducts were safe if used p roperly and that
many p roduct safety problems arose because o f fail u re to read t he ins tructions p roperly
(Sentry 1976).

Remedial Proposals
111ere are a n umbe r or propos..1ls fo r remedies, amid m uch difference o f o pinion. The d iffer·
ences arise in part because of the impact on costs and prices (see below). Ln addition there are
differences due to a contest for po~ver. The variou~ consumer organizations and government
departments all feel that they should play larger roles, and that certain tradHional powers of
business should be restricted .
[dea iJy, the remed ies s hould eliminate the causes of cons u mer problems at the source.
The consumerism movement has been skeptical that s uch p reven tio n will take p lace a t
the initia tive of the industria] organizations. Hence the main p ropOS<l!lS have related to
establish-ing \'\'ays to enable cons u mers to judge befo rehand w hether they are about to
buy trouble.

Access to Information before Purchase

Consum ers could make better buying decisions if they had access to information on com-
petitive p rod uct test data, field performance, and so on. Many industrial organizations
possess sud1 information but \vi:IJ no t disclose it- they regard it as proprietary. They do
d isclose selected portions, but mainly to aid in sale of the product. The risk of bias is o bvi-
ous. Consumers' needs for information extend also to alter-sale service, respo nse to com-
plaint$, and so o n. Here again, the organiza tions regard such information as proprietary. The
lack of information from industr ial organi7.a.tio ns has create-d a Vilcuum that has attracted
alternative sources o f p roduct information to help consumers judge which products to b uy
and which to avoid. One s uch source is test laboratories tha t a re independent of the organi-
zations making and selling the products.
Under this concept a competent laboratory makes"" expert, independent evalua tiot\ of
prod uct q uality so that consumers can o btain the u nbiased info rmation needed to make
sotmd p urchasing d ecisions. Adeq uate consumer test sen·ices require p rofessionals and
skilJed technicians~ weU-equipped test laboratories, acq uisition of products for teSt, and dis-
semination of the resulting information. Financing of all these needs is so severe a pro blem
that the method o f financing determines the o rganization form and the policies of the test
service.

Product Testing: Consumer-Financed

ln this form the test laboratory d erives its income by publishing its test results, usually in a
monthly journal plus an annual summary. Consum ers are urged to subscribe to the journal
on the g rounds that they wiU s.we money by acquiring the information needed to make bet-
ter p u rchasing d ecisions. Advertisements o f these test laboratories raise quc..o;;tions s uch as
"Would you pay $100 for an appliance when independent tests show that a $75 appliance is
just as good?n
ln their operation, these consumer-financed test laboratories buy and test competitive
products, evaluate their performance and fail ures, compare these evaluations with the prod-
uct prices, and rate the products accord ing to some sca le of relative value. 1l1c ratings, tes t
result summaries, descriptions of tests conducted , and so o n are published in the laboratory's
journals. The industrjaJ organizations play no ro le in the tesUng and evaluation. ln addition,
46 Key Conc ep ts : What Le aders Ne ed to Know about Quality

the o rganizations are not permitted to q uote the ratings, test results, O l' other materia) p ub-
lished in the journals.
Thus the service o ffered to consum ers consists of

1. The laboratory's test results, which are mainJy objective and unbiased.
2. Judgmen ts of values that ate s ubjective and carry a risk of bias_Tha t is.. the stJ·ess
of the advertising (showing the consum er that some low er-priced products are as
good as higher-priced p roducts) creates a bias against higher-priced products.
More importantly, the judgments are not necessarily typical of consumers'
judg ments.

Despite the obvjous p robJems of financing a. t~st service (rom numerous consumer s ub·
scriptions, there are many s uch services in existence in affluent and evert d eveloping coun-
tries. [n the United States, the most w idely known source of such tests is Consumers Union.
The test results are published in the journal Consumer Reporls.

Product Testing: Government-Financed

Governments have long been involved in matters of product q uality, t<> protect the safety
and health originally of the citizenry and later o f the environment. Fo r elaboration, see later,
under Govern ment Regulation of Quality.
Tile most recent extension has been in the aron o f const.Uller eoonomks. Some of this has
been stjm_ulated by the consu merism movement. A by·product has been the avai1ability of
some product test results and other q uality·related information. This info rmation is rnade
available to the public, w hether in published form or on request.

Government-Subsidized Tests
In some countries, the government s ubsid izes test Jaborato ries to test consumer products
and to publish th e results as an aid to const.llllers. The rationale is tha t there is a public need
for this infonllation and hence the co<ts should be borne by the public generally.

Mandated Government Certification

Under this concep t, products arc required by law to be independ en tly appro ved fo r ade-
quacy before they may be sold to the public. TI1is concept is app lied in many cou ntries to
cons umer p roduct-s for which human safety is critical (e.g... pharmaceuticals, foods). For
other prod ucts, there has been a sharp division in practice. Generally, the marke t-based
ecMomies have rejected manda ted government certification for (noncritical) cons u mer
products, and they have relied on the forces of the competitive ma_rkt:!tplacc to achieve
quality. In contrast, the planned econo mies, as exemplified by the former Sov iet Union,
went heaviJy into the setting o f s tandards fo r consumer products and the use of govern-
ment labora tories to enforce compliance to these s tandards (which had the force of
law).

Product Testing: Company-Financed

In this form, industrial organizations b uy test services from independent test laborato ries in
order to secure the mark (certificMe, seal, label) of the laboratory fo r their products. In some
product categories it is unlawfu.l to market the p rod ucts without the mark of a q uali(jed test·
ing service. 1rl o ther cases it is lawful. bu t the mar'k is needed for economic reasons-the
insurance organizations \vilJ d emand extraordinarily high premiums o:r w iU no t provide
insurance at all.
 Qua lity ' s Impact on Society and the National Culture 47

An examp le o f a sough t-after mark is that of Underwriters Laboratories, Inc. (UL). Orig·
inaUy created by the Na tio nal Board of Fire Underwriters to aid in fire prevention, Ul {now
independent) is involved in the general field of fire protection, burglary pro tection, haMrd -
ous chemicals, and stilJ other matters of safety. lts activities include

• Developing and publishing standa.r ds foe materials, products, and systems

• Testing manufacturers' products fo r cornpliance with these standards (or w jth o ther
reCQgnizcd standards)
• Awarding the UL mark to products tha t comply, known as "listing" the products

N umerous other laboratories are similarly in volved in safety matters, e.g., ste.an1 boilers
and marine safety. Some of these laboratories have attained a status in their specialty that
con fe rs a virtual monopoly on performing the tests.
Another purpose of securing a n\ar.k from a.n independ ent test service is to hcJp mar..
kel the p roduct Organizations vary in their views of the value of such "voluntary" marks.
Strong o rganizations tend to fee1 that their own brand or mark carries greater prestige
tha.n that of the test laboratory, and that the la tter has value o nly for weak organizations.
The test services that ofier this category of marks vary widely in their p urpose and in their
objectivity:
[n some countries the voluntary mark is offered by the national standardization bodies,
such as japan Standards Association or the French AFNOR The mark is awarded to prod-
ltcts that meet their respective product standards. O rganizations that wish to use the Japan
lndustrial Standards QlS) mark or the Normale Fran(ais (NF) mark must submit their prod-
ucts for tes t and must pay for the tests. If the products qualify, the organizations are granted
the right to use the marks.

Data Banks on Business Practices

Many consumer grievances are traceable to company busin ess practices, such as evasiveness
in meeting the provisions of the guarantee. The Pareto principle applies--a <'Omparative few
oro>anizations are named in the bulk of the grievances. In this way, a data. bank on company
business practices can help to identify the v ital few nbad guys... and aid in red ucing their
influence.

Consumer Education
Beyond product tests and data banks on busin ess practices, sti U othe• fo rms o f before-
purchase information are available to consumers. Some government deiPartments publish
information describing the me rits (or lack of morits) of products a nd prod uct features in
general. However, the most often used source of product information is advke received
from relatives a nd friends who have experience to share. Consumers reg.nrd such advice as
reliable.

The Standards Organizations

There ar~ mtuly o f these. For ~xamplc, tn the Uni ted States, those o f importance to consum-
ers include

• Leading rnanufacturers and merchants, w hose standards exert wide innuence o n

their s uppliers a nd competitors
48 Key Concepts: What Leaders Need to Know about Quality

• Industry bodies s uch as the American Gas Association (AGA) or the Association of
Ho me Appliance Manufacturers (AHAM)
• Professional organiza.tions such as the American Society for Testing and Materials
(ASTM)
• Independent agencies such as Underwriters Laboratories (UL)
• The American National Standaxds Institute (ANSI), which is a recognized
clearinghouse for committees engaged in setting national s tandards and is the
official publisher of the approved standards
• The National Ins titute of Standards and Technology (NIST), fo rmerly the National
Bureau of Standards (NBS), the government agency that establis hes and maintains
s tandards for metrOlogy

Standards for Consumer Products

A\',•arding a mark presup poses the existence of some standard against whi:ch the p rod uct can
be tested o n an o bjective basis. Provision of such s tandards for C<.l nsumer products has no t
recejved the p.d odtjes given to standards fo.: metrology, bask materials, and other techno~
logical and indus trial need s. However, the consumerism movement has very likely stimu·
lated the pace o f developing these standards. Indust ry associations especially have been
s timulated to undertake more of this type of activity.
A serious limitation on creating s tandards fo r consumer products is the pace of product
obsoleS<:ence versus the time req uired to set standards. Usually, it takes years to evolve a
standard d ue to the need fo.: securing a consensus among the numerous parties i_n ir'l tecest.
For s ubject matter such as metrology o r bas ic materials, the s tandards, once approved, can
have a very long life. However, fo r consumer products the life is limited by the rate of obso-
lescence, and for many products the life of the standard is so short as to raise serious ques-
tions about the econornks of doing jt at all.
In some cases the obsolescence is traceable to the zeal of the marketers. For example, o ne
measure of the quality of mechanical watches has been the number of j e\-..rels. Then some
man ufacturers began to include nonfunctional jewels to p rovide a basis for claiming higher
quality. It became necessary to redefine the word "jewel."
A further problem in standards for consumer products is that the traditional emphasis
of the s tandardization bodies has been o n time zero-the condition of the product when
tested prior to use. However1 many products/especially the most costly, are intended to give
service for years. Many consumer problems are traceable to field failures during service, yet
rnost co.nsumcr ptoduct staJldards do not adequately address the ''abi lities11 -reUabili ty,
maintainability, and so o n.

Objectivity ofTest Services

Unles...o; the testing service is o bjective, consum~rs may be m isled by the very organizatio n on
which they thought they co uld rely. The criteria for objectivity include the following:

• Financial it1depeudence. The income o f the test service should have no influence o n
the test results. This independ ence is at its best when the income is derived from
sources o ther than the company whose products are under test. Failing this, the
payments by the company showd be solely for the testing servjce and in no wa)'
contingent o n_the test results. One example of failure to meet this criteriOI''I is any
test service that carries o n the dual activities o f (1) o ffering a mark based o n product
 Quality ' s Impact on Society and the National Culture 49

test a nd approval and (2) publis hing a journal of geneml circula tion in w hich
organ izations that receive the mark are required to pJace advertisements. ln s uch
cases the risk o f conf lict of interest is very h igh, so consum e rs s h ould be cautious
about g iving credence to s uch marks.
• Orgnnizntionnl independence. The personn el o f the test service sh o uld not be s ub-
ordina te to the organizations whree p roducts are undergoing test.
• 1'eclmologicnl cnpnbility. This obvious need includes a q ualified professio nal staff,
ad eq uate test equip ment, and competent man agement. Whethe r the managers
s hould be the sole judges of such capabilities is open to question.

So importa.n t is the q uestion o f objectiv ity th.at in c.1ses of gowrnment con trols''" qual-
ity it is usual to write into the statute the need for definin g criteria fo r w ha t constitutes a
q ualified test laboratory. The admin istra to r of the act then becomes respon sible fo r certifying
laboratories against these c rite ria.

The Resulting Information

Consume r test services offer consum e rs a w ide range of in fo rmation. The prin cipal fo rms
include these:

• Compara tive data on compe titive products for (1) p rice an d (2) fi tness for use, plus
judgments of comparative v alues. In this form, the information is also a recommen·
dation for action.
• Data on product o mformance to the standards. ln th.is form, consumers are on th.eir
own to disco ver compe ti ti ve prices and to make a jud g ment on comparative fib1ess
fo r use. For ma n y consumers, it is a b urden to p rovide this added information.
• Evidence of p roduct con forma nce to the stan dard (thro ugh the mark). Here the
consum er is largely asked to equate the s tandard with fi tness for use and to use
other means to discove r competitive differences and compe titive prices.

Information tlfi confor mance to stan dard is q uite useful to industrial buye rs, b u t less so
to consum ers. For consumers the optimal informa tion consists of comparative data on fit-
n ess for use plus compaxative d ata o n cost of usage.
Tradition al test services d o not provide ad equate info rmation as to certain important
quality p roble ms faced by consumers: products arrive in defective con diition; p roducts fail
d uring use; response to consume r complaints is poor.

• Products defective on arrival. Test ser vices typically cond uct their tests on a small
sample of o ne or a few units of product. These n evertheless enable the test serv ice to
judge w hether the product d esign can provide fitness for use. H o w ever, the sample
is too s mall to provide information o n h ow often units w ill be defective on arrival.
• Products Jail during use. TradjtionaUy, test services h ave evaluated con sumer pn1d.ucts
.
a t tim e zero-prior to use. For long-life products this is no lon ger good e nough- there
is a need for information on field failure ra tes. Some test serv ices now do conduct a
degree of life testing, but the n umber of units tested is too small to p redict 6 eld failure
rates. There are some efforts to secure such informa tion through q uestionnaires sent
to cons umers. An alternative source is to secure informa tion from th e repair shops.
• Poor response to customer ,~otttplninls . H ere the situation is a t its worst.. 1l1e test
laboratory a nd its instruments a re irrelevant, s ince th e needed informa tion rela tes to
the compete nce, promptness, and integrity of the service organizations.
50 Ke y Con c e pIs: Wh a I Le ad e r s Ne e d I o Ko ow abo u I Qu a Ii I y

Remedies after Purchase

Consumers who e ncounter product q uality p roblems during the warra nty period have a
choice of app roach es. TI1ey may be able to resolve the p roblem unaid ed ; i.e., they stu dy the
p rod uct in formation and then apply their s kills and ingenui ty. More usua lly they m ust turn
to o ne of the organizations directly in interest; the merchant w ho sold the m the product or
the manufuctu.rer w 1'1 o mad e th~ prod uct If none o f thfr.Se provide~ satisfaction, consumer'S
have still other alternatives for assistance (see below).

Warranties
Quality warranties are a major after-p urchase a id to consumers. Ho\\'ever, many con-
s umers feel that warranties are not understandable. ln addition, most feel that warran-
ties a re written mainly to protect manufactu rers rather than consumers. Neverthe less,
consumers a re inc reasingly makin g th e warran ty an input to thei r buyi ng decisions. This
means also t hat war ranties are increasing ly jmp o rta nt as marke ting tools (Sentry 1976,
p p. 14, 15).

Consumer Affalrs ... The Ombudsman

''Ombudsman" is a Swedish word used to designate an official whose job is to receive citizens'
complaints a nd to help them secure action from the govern ment bureaucracy. 'Ine ombuds-
man is fami liar \\1 ith governmen t orgimization channels a nd is able to find the government
official who h as the authority o r the duty to act The ombud sman has no authority to compel
action, but has the power to p ublicize failures to act
The concept of the o mb udsman has been applied to p roblems in p rodu ct q uati ty. Some
oq,>aniz.1tions have created an i.n-hoLtSe ombl.ldsman and have pl.lblicized the name and tele-
p h one number. Consumers can ph one (free o i charge) to air grievances and t'O secure infor-
mation. In lhe Un ited States a more usual title is Manager (Director), Consumer A ffairs
(Relations). Such a man ager usu a lly carries added respo ns ib ilities for stim ulating changes to
improve relations with consumers o n a broad basis. ln o ne compan y the...:;e effor ts resulted in
programs to effe<tl.late a consLLmer "bill of rights," which incl"'des rigbts to s.1fety, to be
iJ't{ormed, to c hoose, to be heard, and to tedress.
An o ther for m is the ind ustry ombudsman. An example is the Major Appliance Con-
sumer Action Panel (a grou p of independent consumer experts) c reated 'by the Association
of Home Appliance Man ufacturers to receive complain ts from consum ers who have no t
been able to secl.lre s.1tisfaction locally.
S tiiJ a no ther form is the Joint Industry-Consumer Complaint Board_ Examples are the
government-funded boards that media te and adjudicate consumer disputes in some Scandi-
navian indus tries. The boards h ave n o pow er to e n force their awards o ther than through
publicity given to unsatisfied awards. Yet they have met w ith w ide acceptance by and coop-
eration from the b us iness people.
Th e concep t of the ombudsma n is fundamentally sou nd . It is widely supported by con-
s umers a nd reguJa tors as well as by a strong minority of b usiness ma nagers (Sentry 1976,
p. 77). Some newspapers p rovide an ombudsman service as part of their department of
Letters to the Editor.

Mediation
Under the media tion concept, a th.i rd party- the m.cd iator- hclps the co_n testants to work
out a setlle ment. TI1e med ia tor lacks the powel' of enforcement- there is no binding agree-
ment to a bide by the opin ion of the mediator. Nevertheless mediation stim ulates settlements.
Be$t (1981) reports that the New York City Department of Human Affair$ achieved a 60 percent
settlement rate dl.lring 1977 and 1978.
 Quality ' s Impact on Society and the National Culture 51

The mediation process helps to o pen up the channels of communication and thereby to
clear up misunderstandings. ln addition, an experienced medjator exerts a moderating
influence which encourages a search for a solutio n.

Arbitration
Under arbitration the parties a~;ree to be bound by the decision of a third party. Arbitration
is an attracti ve form <)f resolving differences because it avoids the high costs and long delays
inherent in most lawsuits. In the grea t majority of consumer claims, the .:ost o f a lawsuit js
far greater than the amount of the claim. Nevertheless there are obstacles to use o f the arbi-
tration process. Both parties mus t agree to binding a rbitration. There is a need to establish
local, low-cost arbitration centers and to secure the services o f volunteer a rbitrators at nom-
i.naJ fee..<l or no fees. These obstacles have Un\ itcd the growth of use o f a rbitra t'jon fo r coJ'l·
sumer complaints.

Consumer Organizations
l11ere are many forms of consumer organ izations. Some are focused on s p eci fic products o r
services s uch as auto motive safety o r truth in ]ending. Others are adjuncts of b roader organ-
izations such as labor unions or farm cooperatives. Still o thers a re organized to deal broadly
w ith consumer problems. In addition, the re are broad co r)Su mer federations, na tional and
internatio nal, tha t try to improve the collective strength of all local and specia lized co.n -
sumer groups.

Government Agencies
These exist a t natiooal, s tate, and local levels o f govern_m er1t. All in vjte oonsu.r ners to brin g
unresolved complaints to them as well as to report i11stanccs o f business malpractice. These
complain ts aid the agency in identifying widespread problems, which, io turn, become the
basis for

1. Con ducting investig.:1tions in depth

2. Proposing new legislation
3 . Issuing new administrative regulatjons

The agen cies also try to help complain.ing consllmers, either in a.n ombud sman role o r by
threat of legal action. However, in practice, broad government agencies are unabl.e to become
involved in specific consurner grievances d ue to the sheer n umbers. See The Enfo rcemen t
Process la ter, under Government Regulation of Quality.

No Remedy
Under the prevailing free-enterprise, competitive market system, many va lid consumer com-
plaints result in no satisfaction to the consumer. Nevertheless the system includes some built-
in stabi lizers. Organizations that fail to provide such satisfaction also fail to attract repea t
business. fn due course they mend their ways or lose o ut to o rga11iZ..1.tions that have a better
record of providing satisfaction. fn the experience of the author, every othe r sys tem is W OJ's e.

Perceptions of the Consumer Movement

There is w ide <1greement, in cluding a mong business managers, th<1t "the co nsumer move-
ment has ke pt industry and b usiness on their toes." There is also wide agreement that the
cons umer movement's demands have " resulted in higher prices." Despite this, most o f the
pub lic feels that the "chan~;es are generally worth the extra cost." Consumers feel s trong ly
that the consumer advocates should consider the costs of their proposals . Howeve r, a
52 Key Concepts: What Leaders Need to Know about Qua l ity

s ig ni ficant minority of the cons umers believe t-hat the advocates d o not consider the costs
involved (Sentry 1976, pp. 39, 40, 42, 47).

Quality and the National Culture

The goal of high q ua.IHy is c:ommon to all c:ountries. This c:ommon goal must c:ompete with
other national goals amid the massive forces-political economic, and social-that deter-
mine the national priorities. This section examines these forces and their effect on the prob-
lems of attaining q uality.
The growth 9f international trade and of m ultjnationa l o rganizations has required that
attention be directed to u nderstanding the impact of national culture on managing for
q uality. To aid in tJUs understanding, the subject is organized Lmder the fo lJowing general
su bdivisions:
ln all types of na tional ec:onomy, there are natural resources and limitations that influ·
ence the priority of goaJs. However, an even greater force is that of hu man 1eadershjp and
d etcrrnination. Historically, these human fotces have been more sig nificant than natural
resources in determining \<\rhether goa.Js are attained.
The\vords ''capitalistic," "socialistic," and "developing" are simple labels for some very
complex c:oncepts. The broad definition of "capitalism" is priva te ownership of the means of
production and distribution, as contrasted with sta te ownership under socialism. Yet all self·
styled capital istic countrie-s include a degree of s tate ownership, e.g., in matters of health,
education, transport, and commtmkation. Similarly, the self-styled socialistic colmtries con-
tain, in varying degrees, some private ownership of o rganizations for production o f goods
and services. [n like manner, cowl tries that a re ''developing'' in the industrjal sense may be
d eveloped. in terms of other aspects of national matudty, e.g., political or social. l11e reader
is u rged to keep in mind that the words "capitalistic," "socialis tic," and! "d eveloping" a re
used in a relative sense and cannot be cons idered as absolutes.
Tiw s ubject mat1er of this chapter is of obvioLc< inten.>st and importance to those engaged
(or contemplating e11gagcment) ·in operations of an intc.-national nature. S.uch opera tions arc
becoming ever more extens ive as trade barriers are progressively removed. However, removal
of government baniers has li ttle effect on cultural barriers. TI1ese remain a continuing
problem until the cultural patterns (and the reasons behind them) are understood, appreci-
ated, and ~<~ken into a<:<:oLU\t.
In the cconootk sense, the capi talistic developed countrie:s arc the "vi t-al fc""'·" The dcvcJ..
oping countries arc the most nume rous~ occupy most of the land s urface., and include most
of the hwnan pop ulation. However_, it is the c-apitalistic developed countries that pr<-xiuce
the bulk of the world's goods and services. This great importance (in th.e e<onomic sense)
s uggests that those who engage in international trade should acquire a working know ledge
of the cultures that prevail in other countries.

Quality in Global Economies

All capitalistic economies exhibit some basic similarities that influence the importance of
q ua lity in relation to o ther goa ls in the economy.

Competition in Quality
Capitalistic societies permit and even encourage c:ompetition among o rganizations, including
competition i n q uality. This con1petition in quality takes m ultiple forms.
 Quality ' s Impact on Society and the National Culture 53

Creation of New Organizations

A freq uent reason for the birth of new organizations is poor q uality of goods or services. For
example, a neigh borhood has o utgrown the capacity of the local food shop or restaurant, so
the clients must wait in long queues before they c.-'\n recejve service. (_n s uch cases, entrepre~
nc urs will sense a market opportu.l'lity and w ill create a new organiza.tlon ttha t attracts clients
by o ffering super-ior service.
Th e ease of creating new organizations is a far greater force in quality improvement than
is generally realized. All economies, whether capitalis tic or socialistic, suffer poor q uality
during shortages of goods. Creation of new organiz.-'ttions is one means of alleviating short-
ages, and thereby of eliminating an invariable cause of poor quality.

Product Improvement
A common form of competition in quality is through improving product5 so that they have
g:reater appeal to the users and can the refore be sold successfully il' the f.ace of competition
from e xistin g products. These product improvements come mainly from internal product
d evelopment carried on by existin g organizations. In addition, some prod!uct imp rovements
are designed by independents that either launch new o rganizations or sell their ideas to
existing organiza tions.

New Products
These may be 'fproducts'' o r even new systems approaches, e.g., d csigr's t h at min imize user
maintenance. The in dustrial giants of today includ e many members fou nded o n new sysM
tems concepts. As with product improvements, the new products may originate through
development from within or through acquisition from the outside.
Competition in quality results in d uplication of products and facili ties. Such duplication
is regarded as wast12fuJ by som.e econoo·dsts. However, the ge1,~raJ effect has bec.n to stim u·
late p roducers to outdo one a no the r, with resulting benefi t to users.

Direct Access to Marketplace Feedback

In the capitalis tic economies, the income o f the organization is dete rmined by its ability
to sell its products, whether direct!)• to u sers or through an intermediate merchant c hain.
If poor q uality results in cxc.,ssive returns, claims, or ina.biUty to sell the prod uc t, the
manufacturers a re provided wi th the warning signals that arc a prereq uisite to remed ia l
action.
This severe and direct impact of poor quality on the manufacturers' income has the use-
ful by-p roduct of forcing manufacturers to keep improving their market research and early
warning signals, so as to be able to respo nd promptly in case of trouble.
Direct access to the marketplace is not merely a matter of receivin g complaints and o ther
informa tion a bout bad q uaUty, importan t though tha t is. Even more important is the access
to the marketplace before products a re launched and ..,]e.,; programs are prepared. In the
capitalistic economies, the auh:momous organizatiOn$ all make their own forecas ts o n how
much they expect to sell. Their ability to thrive depends on how well they are able lo rea lize
their fo recasts. ll'e potential benefits an d detriments force the organizations to pay attention
to the needs of the marketplace, since it provides their income.

Protection of Society
TI1c auto 11omy of capitalist organ izations may permit them to mistcprescnl their products, sell
unsafe products, damage the e nvironment, fa iJ to live up to their warrat, ties, a nd so on, u ntil
these misdeeds become s ignificant enough to generate extensive preve ntive legislation.
54 Key Concepts: What Leaders Need to Know about Qua l ity

Cultural Differences
There are many of these, including the following:

• uwgunge. Many countries harbor multiple languages and munerous dialects. These
are a seriou.s barrier to commLUUcation.
• Customs and tradithms. These and related elements of the Ctthu.re provide the
precedents and ptemiscs that are gtddcs to decisions and actions.
• Ownt>rsl1i1' of the organizations. The pattem of ow.net'$hip determines the strategy of
short•te.rm vctsus long-term results, as well as the motivations of owners versus
nonowners.
• Tlte methods used for managing opcrnthms. Tilcse are d etermined by numerous factors
s uch as reliance on system versus people, extent of p rofess.ional training for
managers, extent of separation of planning from execution, and careers w ithin a
s ingle cc.>mpany versus mobile careers.
• Suspicio11. Ln some ronntries, there is a prior histo ry of hostilities resuJting from
ancient wars, religious differences, membership in dilierent clams, and so on. The
rcsult_ing- m utual suspiciOJ'ISarc then pa.ssed down f rom gcncra tjo,, to generation.

[ t is clearly important to lea tn. about the nature of a culture before negotia ting with
members of that cultu re. Increasingly, o l'ganizations have provided special training to
employees before sending them abroad. Similarly, w hen organizations establish foreign s ub-
sidiaries, they usuaHy train locaJ nationals to qualify for the senior posts.

Government Regulation of Quality

From time immemorial, "governments" have estabUshed and enforced standards of q uality.
Some of these governments have been political: national, regional, local. Others have been
nonpolitical: guilds, trade associations, s tandardization organizations, <md so on. Whether
through delegation of political power or thro ugh lon.s custom, these governing bodies have
attained a status that enables them to carry o ut programs o f regulation as d iscussed next.

Standardization
With the evolution of technology carne the need for standardizing cer tain concepts and
practkcs.

• Meltolc>gy. One early application of standardization \"'as to the unit$ o f measure fo r

time, mass, and other fundan1ental constnnts. So basic are these standards that they
are now international in scope.
• lnlt~rcltnugenbility. This level of standardization has brought ord.er o ut of chaos in
s uch day-to-day matters as household voltages and interchangeability of myriad
bits and pieces of an ind us trial society. Compliance is an economk necessity.
• Teclwological definition. A further application of standardization has been to define
numerous materials, processes, produc.ts, tests, and so o n. These standards are
developed by committees d rawn from the various intctcStcd se-gments o f socic t}~
While compliance is usually volu,, tary. the econom ic imperatives result in a high
degree of acceptance and use o f these standards.
 Quality ' s Impact on Society and the National Culture 55

The foregoing areas o f regulation are all rela ted to standardization, and have encoun-
tered minimal resis tance to compliance. Other areas do encounter resistance, in varying
degrees.

Safety and Health of the Citi zenry

A major segment of politic..1l govern ment regulation has been to protect the safety and
health of its citizens. At the outset the focus was on punishment ... after the fac tn-the laws
provided p unishment fo r those w h ose poor quaHty h ad caused death or injury. Over the
centuries th e re emerged a trend to regulation "before the fac t"-to become p reven tive in
nature.
For example, in the United States there are laws that prescribe and enforce safety stand -
ards for building construction, oceangoing .ships, mine-s, aircraft, bridges, and many o ther
s tructures. Other laws ai m at hazards having their origins in fire, food:;., pharmaceuticals,
d angerous chemicals, and $0 o n. Still other laws relate to the q ual.ifica tions needed to pe1•..
form certain activities essential to public safety and health, s uch as licensing of physicians,
professional engineers, and airline pilo ts. Most recently these Jaws have proliferated. exten-
sive!)' into areas s uch as consumer p roduct safety, hig hway safety, environmen tal protec-
tion, and occupa tiona l safe ty a nd health.

Safety and Economic Health ofthe St ate

Governments have aJways g-iven high prio rity to nationaJ defe nse: the rccruitmel'•t and t rain·
ing of the armed forces and the q uality of the weapo n ry. With the g·r owth -of commerce, laws
were enacted to protect the economic health of the state. An example is laws to regulate the
quality of exported goods in order to p rotect the quality reputation o f the s tate. Another
example is laws to protect the integrity of the ooinage. (Only governments have the right to
debase the Clu·rency.) ln those cases w here the government is a p urchaser (defense weapons,
public utility facilities), governm ent regulation includes the normal rights of a p urchaser to
ensure quality.

Economics of the Citizenry

Govem ment regulation relative to the economics o f the citizenry is highly controversial in
market economies. Some of the resistance is based on ideological grounds-the competitive
marketplace is asserted to be a far better regulato r than a government bureau. Other resistance
is based o n the known deficiencies o f the administration o f government regula tion (see below).
Some of the growth of this catego1y of regulation has been stimulated by the consumerism
movement.

The Volume of Legislation

Collective!)~ the vo lume o f q uality-related legislation has grown to formidable proportions. A
desk reference book (Kolb and Ross 1980) includes lists (in fin e print) of appen dixes as follows:

• 21 pages of exposure limits for toxic s ubstances

• 93 pages of hazardous materials and the associated criteria for transportation
• 24 pages of American National Standards for safety a nd healtl1
• 36 pages of fed eral record -retention tequirements
• 38 pages o f s tandards-setting organizations
56 Key Concepts: What Leaders Need to Know about Qua l ity

ln the United States, much o f this legislation is with in the scope of the Federal Trade
Commission, \'\•IUch exercises a degree of oversight relative to " tmfair or d eceptive p ractices
in commerce/' That scope has led to s pecific legislation o r administra tive action relative to
prod uct warranties, packaging an d labeling, truth in fe nding, and won.
In a sense these actior1s all relate to represct1tations made to cons umers by industria.l otgan·
izations. 1n its oversight the Fed eral Trade Cmnmission s tresses two major requirements:

1. The advertising_.. la beling, and other p rod uct in form a tion must be dear a nd u nequi-
vocal as to what is meant by the seller's representation.
2. The product mus t comply with the representation.

T11csc forms o f government reguJation are a sharp break from ~'" ce.n turies-<>ld rule o f ct~Vet~l
emptor (let the buyer beware). That rule was (and is) quite sensible as a p plied to conditions in the
village marketplaces of developing countries. However it is n ot appropriate fo r the conditions
prevailing in industrialized, developed countries. for elaboration, see Juran (1970).

The Plan of Regulation

O nce it has been d ecided to regulate quality in some new area, the approa ch follows a well-
beate n patl1. T11e sequence of e\•en ts listed below, w hile described in the language of regula-
tion by p o litical governm ent a pplies to n on political government as well.

The Statute
l11e enabling act defines the p u rpose of the regulatio n an d especially the s-u bject matte r to be
regula ted . Ttcstablishcs the " rules of the game'' a nd crea tes a n agency to adm.i.n istcr the act

The Administrator
The post o f administrator is created and given powers to establish st:mda.rds and to see tha t
the standards are e nforced. To U1js end he or she is armed with the means for making awards
and applying sanctions o n ma tters of g reat importance to the regulated industries.

The Standards
The adminisb·a tor has the power to set s tandards and may e xercise this power by adopting exist-
ing industry s tandards. These standards are no t limited to products; they may deal with materi-
als, processes, tests, d e.<eriptive literature, advertising, qwllifi~tioos of personnel. and so on.

Test laboratories
The ad ministrator is given power to establish criteria for judging the qualili~tions of "inde-
pc.ndcnt" test Jabora.torics. Once th.e sc criteria arc cstabJishcd, he or sJ,e a lso '' ''-'Y have the
power to issue certificates of q uaUfica tion to la bo ratories meeting the criteria. In some cases
administrators have th e powe r to establis h their own test laboratories.

Test and Evaluation

Here the re is great varia tion. ln some regulated areas, agency approval i s a prerequisite to
going to market, e.g., new d rug applicati.o ns o r plans for the opera tion an d maintenance of
a new fleet of airplanes. Some age ncies put grea t s tress o.n survejtla.nce,. i.e., revil!w of the
organi zations' contro l plans and adheren ce to those plan s. Other agencies e mp hasize final
produ ct sampling and tes t.

The Seal or Mark

Regulated p roducts a re frequently required to d isplay a seal or ma r k to a ttest to the
fac t of com p liance with the regulatio ns. Wh e re the regulat ing agency does the actua l
 Qua lity ' s Impact on Society and the National Culture 57

testing, i t a ffixes this mark; e.g., gove rnmen t meat inspectors p hysically sta mp the
carcasses.
More usuaiJy, the agency d oes not test and stamp the pr<Xluct. Instead, it d etermin es.. by
test, that the p roduct d esign is adequate. Lt aJso determin es, by surveiJian<e, that the o rgani-
7.alions' systems o f control arc adequate. At'ly con'lpan y w hose system is ad.e quate is then
authorized to affix the sea) or mark. The statutes always p rovide penalties for u nautl1orized
use o f the mark.

Sanctions
TI1e regulatory agency has wide powers of e nfo rcement, such as the righ~ to

• Investigate product failures an d user complaints

• Inspect organizations' _processes and systems of con trol
• Test products in all stages of distribution
• Recall products atre.1dy sold to users
• Revoke orga.niz.1tions' r ight to sell or to apply the m11rk
• Inform users of d eficie ncies
• Issue cease-and-desist o rders

Effectiveness of Regulation
Regulators face the difficult problem of balance-protecting consumer interests w hile avoid-
ing creation of burdens that in the end are damaging to consumer interests. ln part the dif-
ficulty is inheren t because o f the conflicting interests of the parties. Holvever, much of the
d ifficuJty is traceable to unwise agency policies an d practices in carrying out the regulatory
process. Tilc..;;e rela te ma.U·dy to the conceptual approach, setting standards, the enforcement
process, and cost o f regulat-ion.

The Conceptual Approach

An example is seen in the policies employed by the National Highway Traffic Safety Admin-
istmtion (NHTSA) for administerin g two laws en acted in 1966:

1. The National Traffic and Motor Vehicle Safety Act, directed pr imarily at the vehicle
2. The Highway Safety Act, dire<:ted primarily a t the motoris~ and the driving
environment

Even p rior to 1966, thc a.utoroobile makers, road builders,a,,d so oo h ad improved tech·
no logy to an extent that provided the motol'isl with the means of avoiding the " first crash/'
i.e., accldenis due to collis ions, running off the road, etc. The availability of seal bells !hen
provided the motorist with greatly improved means of pro tection against the "second crash."
This crash tnkes place when the sudden deceleration of a collision hurls the occupants
against the s teering wheel. windshield, and so on.
At the time NHTSA was crea ted, the U.S. traffic fa tality rate was the lowest among all
industrial conn tries. It was also known, from o verwhelming arrays of data, that the motorist
was the limiting factor in traffic safety:

• Alcohol was involved. in (lbout one-half of all fa tal accidents.

• Yolmg dri\•ers (under age 24) constituted 22 percent of the d river population but
were involved in 39 per<:ent of the accidents.
58 Key Conc ep ts : What Le aders Ne ed to Know about Quality

• Excessive speed iUld o ther forms of " improper" driving were reported as factors in
about 75 percent of the accidents. (Dlll·ing the oil c risis of 1974 the mand a ted
reduction of highway speeds resulted in a 15 percent reduction in traffic fatalities,
w itho ut a ny change in vehicles.)
• Most motorists did not buy safety belts when they were optional, and most did no t
wear the m whe n they were p rovid ed as s tandilrd equipment.

In the face o f this o verwhelming eviden ce, NHTSA paid lit tle a ttention to the main prob-
lem-improving the performance of the motorists. Instead, NHTSA concentrated on setting
n~.tmerous s tandards for vehicle design. These s tand ards did provide some gains in safety
with respect to the second c.rash. However, the gains were min o r, \vhile t11e added costs ran
to billions of dollars-to be paid for by consumers in tl1e form of highe r prices for ve hicles.
The p olicy is seen to h ave been t>ne of dealing strictly w ith a highly visible political
target- the automobile makers-while avoiding an y confrontation with a large bod y of
voters. It was sa fe po litically, but it did little for safety. For elaboration, see Juran (1977).

Setting Standards
A major regula tory q uestion is whether to establish d esig n standard!s or performance
standards.

• Design standards consist of precise d efinitions, but they ha ve serio us disadvantages.

Th eir nature and numbers are such tha t they often Lack flexibility, are difficult to
understand, become very numerous.. and becom.e prohibitjve to keep up to date.
• Performance standards are gene rally free from the above disadvantages However, they
p lace on the employer the burden of dctc nn injn g how to m eet the performance standard,
i.e., the burden of creating or acquiring a desiSl'· Performance standards also d emand
leve l~f-compliance o fficers who have the education, experience, and training needed to
make the subjective judgments o f whether the standard has been m«t.

These alternatives w ere examined by a presidential task force assigne..i to revie"•' the safety
regula tions of the Occupational Safety a.>d Health Administration (OSHA). Th e task force rec-
o mmended a "pcrfonnan cc/hazard'' concept Under that concept., the stan da.('d would "codify
in to a requirernent the fact tha t a safe workplace can be achieved only by e nsuring that eJnploy·
ees are not exposed to the hazards associa ted with ~1e use of machines. Und er this standard, the
e mployer would be free to determine th e most a ppropria te manner in which to guard against
any hazard whicll is presented, b ut his e<.>mplia.nce with the requiremen t is objective!)' measur-
able by determining whc~1er or not an employee is exposed to the hazard."

The Enforcement Process

A major deficiency in the regulatory process is failure to concentrate o n t he vital few prob·
le ms. Regulatory agencies receive a barrage of grievances: consumer com plaints, rep o rts of
injuries, accusations directed a t specific products, and so on. ColJectiveJy the numbers are
o ve rwhelm in g . There is no possibility of dealing thoroughly with each and every case.
Agencies that try to do so becom e hopelessly bogged d own. 11\c resulting paralysis then
becomes a target for ctitics, w ith associated th reats t'o the te nure o f the i.ldminislratol', and
even to the continued e xistence o f the agency.
In the United Sta tes the Occupational Safely and Health Administration faced jus t sucll a
thre<tt in the mid-1970s. In response it undertook to establish a classification for its cases based
on the seriousn e-<s of the threats to safety and hca.lth. l t also recalled about 1000 safety regula·
tions that were under a ttack fo r adding rnuch to ind us try costs and little to. wo rke r safety.
 Qua lity ' s Impact on Society and the National Culture 59

With experience, the agencies tend to ad opt the Pareto principle of the v ital few and lhe
useful man y. This enables them to concentrate their resources and to produce tangible
results.
Choi~ of the vital fe w is often based o n quantitative data s uch as frequency of injuries
o.r frequency o f COI)Su mct complaints. However, subjective judgment p lays a n importa nt
role, and this e na bles influential special pleade rs to secure h igh priority for cases that d o no t
<}Ua lify as being among tl1e vita l few.
How to deal with the "useful many" needs for assistance has been a perplexing problem
for all agencies. The most practical solution seems to have been to make de<lr that the agency
is in no pos_ition to resolve such problems. Instead the agency p.rovides consumers with
info rma tion a nd educational materia l o f a .sclf·help nature: where t'o apply for assistance;
how to apply for assistance; what a re the rights of the consume.r; what to do and not to do.
l11e failure of regulators to deal forthrightly with s uch consumer problems has no doubt
contributed to the mediocre sta tus given to regulators by the public, in response to the ques-
tion, Which (of four options) would you tike to be primarily responsible for the job of seeing
that consumers get a fair d eal?

A Rule for Choosing the Vital Few

In 1972 the author proposed the foUowing as a quantitative basis for separating the vital few
from the rest, o n ma tters of snfety:

Any hour of human life should be as safe as any other hour.

To effe<tuate s uch a policy, it is first necessary to quantify s.1fety nationally, on some

common basis s uch as injuries per million worker-hours of exposUie. In general, the data for
s uch q uantific~1tion a re already available, although some conversions are n eeded to a rrive a t
a common unit of measure.
For example, statistics o n .safety at school are computed on the ba sis of in juries p er
100,000 s t-ude nlMdays, motor vehicle statistics are on a per 100 million miles of travel basis,
and soon.
The resulting na tional average will contain a relatively few s it uations that a re weJI above
the a verage and a great many tha t are beJow. Those a bove the average would auto ma tically
be no•ninatcd to mcrnbe.r ship in the vital few. Those below the average would not be so
nominated; the butdcn of proof would be o n a ny special p l_cader to show why some thing
belo w the national average should take prio rity ahead of the obvious vita.l few. For e labora-
tion, see ) uran (1972).

The Costs and Values of Regulation

11.\c costs of regu.lation consist largely of two major components:

I. The costs ofm1mi11g the regulatory ngencie.s. These are known with precision. In the United
States they have risen to many billions of dollars per year. These costs are paid for by
cons umers in th e form of taxes that a re then used to fund the regulatory agencies.
2. The costs~Jf complying tvillt llw n:gulatitms. TI1ese costs <lre not knO'I.-Jn with precision,
b ut they are relia b ly estimated to be man y times the costs of run ning the regulatory
agencies. These costs are in the first instance paid for by the industr.iaJ o rganizations,
and ultimately by consumers in the form of higher prices.

The value of all this regulation is difficult to estimate. (There is no agreement on the
value of a human life.) Safety, health, and a clean environment are widely believed to be
60 Key Concepts: What Leaders Need to Know about Quality

enormously valuable. Providing consumers with honest information and prompt redress is
likev,!ise regarded as enormously valuable. However, such general agreements provide no
guidelines fo r what to do in specific ins tances. ldeaUy, e-a ch instance sh_ould be examined
as to its cost-value relationship. Yet the statutes have not required the regulators to do so.
The regulators have generally avoided faci ng up to tl'le idea of quantifying the cost-va lue
relatio ns hip.
Until 1994 the support fo r studying u,e cost-value relationships came mainly from u,e
industrial organizations. For example, a study of mandated vehicle safety s~temsfound that

" .. . states which employ manda tory periodic inspection programs do not have lower
a.ocidcr'lt rates than those stat~ w ithout such requirements."
" .. . on ly a relatively small portion of higlnvay accide nts-some 2 to 6 percent-are
conclusively a ttributable to mechanical d efects."
" .. . hu.man factors (sud1 as excess speeds) are far more important causes of highway
accidents than vehicJe condition." Crain 1980.

The indifference of regula tors to costs inevitably creates some regula tions and rigid enforce-
ments so absurd that in due course they become the means fo r securing a change in policy. The
organizations call such absurdities to U>e attention of U>e media, w hich relish pub~cizing U>em.
(TI'e media ha\•e little interest in scholarly s tudies.) The resulting publicity th en puL< the regula-
tors on the defensive while stimulating the legislators to hold hearings. Du ring such hearings
(and d epending on the political climate) the way is open to securing a better cost-value balance.
TI1e po litical climate is an important variable in securing a ttentio n to cost-versus-value
considerations. During the 1%0s and 1970s the p olitical cli mate in the United Sta tes was
generally favorable to regulatory legislation. TI'en during the 1980s the climate changed,
and -w ith it a trend to \.vard requiring cost jus tifications . Th is trend the n accelerated in late
1994, when the elections enabled the opponents o f regulation to gain majority status in the
n a tjon alleg-islatures.

Product Safety and Product Liability

Growth of the Problem

Until the ea.l"ly h v-cn tic th century, lawsuits based o n inju ries from usc of products (good s and
services} were rarely filed. V\'hen filed, they were ofte n uns uccessful. Even if they were suc-
cessful, the damages a\varded \·vere modest in s ite.
During the twentieth century these Jaw$uits have, in the United St«te$, grown remark-
ably in numbers. By the rnid-1960s they w ere estimated to have read1ed over 60,000 annu-
ally and by the 1970s to over 100,000 per year. (Most are settled out of court.) This growth in
number ollawsuits has been accompanied by an equaUy remarkable growth in the size ol
indi vidual chUms and damages. F'rom figures measured in thousands of dollars, individ ual
damages have grown to a point where awards in excess of SlOO,OOO are frequent. Damages
in excess of $10,000,000 are no longer a rarity.
In some field s the costs of product liability have forced organizations to abandon spe-
cific product lines or go o ut of b usiness altogether.
Twenty years ago, 20 organizations manufactured footb.11J helmets in the United States.
Since that time, J8 of these organizations have discontinued making this p roduct becaLL'>C of
high p roduct liability costs (Grant 1994).
Several fac tors have combined to b ring about this growth in number of lawsujts and in
size of awards. The chief factors include the "population explosion" of products. l11e indush·ial
 Qual ity ' s Impact on So ciety and the National Cultu re 61

society has p laced large nwn bers of technological producls into the hands of amateurs. Some
of these products are inherently dangerous.

• Other products are misused. The injury rate (injuries per million hours of usage) has
p robably been declining, bu t the total number of in jurjes has been rising, resulting
in a rise in to ta l num ber of lawsuits.
• There is erosion of organization d efenses. As these lawsuits came to trial, the courts
proceeded to erode the foimer legal defenses available to o rganizations.

Formerly, a plaintiff's right to sue a manufacturer rested o n o ne of two main gro<mds:

A amtmcl f<>r sale of the product, with a.n actual or imp(;ed warranty of freedom from
hazards. Given the contract relationship, th.c plaintiff had to establish "privity," i.e., tha t
he o r she was a party to the contract. The courts in effect have abolished the need fo r
privity by taking the position that the implied warranty follows the prod uct around,
irrespedive of who is the user.
N!!gligeuce by the com pan)' Formerly the burden of proof was o n the plaiJ>tifl to show
that the company was negligent. The courts have tended to adopt the principle o f ~·stric t
Uability" on the ground that the costs of injuries resulting from defective products should
be borne "by the manufacturers that put s uch products on the market rather than by the
injured persons who are powerless to protect themselves." In effect, if an injury results
from use of a product that is unreasonably dangerous, the manufacturer can be held
Uable even in the absence of negligence. (Sometimes the injured persons are no t
powerless. Some contribute to their injuries. However, juries are-notoriously sympathetic
to injured plaintiffs).

Defensive Actions
TI1e best defense agains t lawsuits is to elirninate the causes of injuries at their source. AU com-
pan y functions and levels can contrib ute to making products Sc-1fe r and to improving company
defun..<es in the event of lawsuits. The respective contributions include the fo Uowing:

• Top mnnngemet~l, Fo rmulate a po licy o n product safety; organize product safety

commjttecs "'' d formal. action programs; demand prod uct da ting and product
t raceability; establish periodic audits of the entire progrnm; and support industry
programs that go beyond U>e capacity of the unaided company. To this list should be
added a scoreboard-a measure of the injury rate o f the company's p roducts relative
to an appropriate benchmark. A useful unit of measure is the number of injuries per
million hours of usage, since most major data banks on injuries ar" already expressed
in this form or are convertible to this form.
• Producl desig11. Adopt product safety as a design parameter; adopt a fail-safe
p hilosophy of d esig11; otganizc formal design reviews; follow the e.c;tablishcd cod es;
secure lis tings from the established laboratories; publish the ratings; and u tilize
modern design teclmique.
• Mnuufacture. Establish sound quality controls, include means for error-p roofing
matters of product safety; and train supervjsor$ and \'I.'Orkers in use of the product
as part of the mo tivation plan; stimulate suggestion on product safety; and set up
the documeotati011 needed to provjdc traceability a11d historical cvjdencc.
• Markelir1g. Provide product labeling for warnings, dangers, antidotes; train the field
fo rce in the contract prov·isions; s upply safety i11fo rmation to distrib utors and
62 Key Concep t s: What Leaders Need to Know about Qua l it y

dealers; set up exhibits o n safety procedures; cond uct tests after installation, and
train users in s.'\fety; p ublish a list of d os an d d on 'ts relative to safety; an d esta blish
a custo mer relations clima te that min im izes an imosity and claims. Contracts should
avoid unrealistic commitments and tm.realistic warranties. jud icious d isdnimers
should be included to discou rage unjustified claims.
• Arlverlisiug. Require technological and let;al review of copy; and propagandize product
safety through cdu~..--ation a nd warnings. Avoid "puffing1 '- it can backfire in liability
suits, e.g, if a product is advertised as "absolutely safe." During advertising review,
one of the q uestions should be, How would this phrasesotmd in a courtroom ?
• Customer service. Observe use o f the product to discove r tl1e hazards inherent during
use (and misuse); feed the info rmation back to all concerned; and _provide trainin g
and warnin gs to users.
• Documentation. The growth of safety legislation and of p roduct liability has
enormously increased the need fordoclUnen tation.Agreatdeal of thisdocu men tation
is mandated by legislation, a long with rete n tion pcrit:x:ls.

Consumers exhibit a wide range of product knowledge, including the lowest. In conse-
q uence, actual use of the p rodu ct cnn diffe r significantly fro m inte nded use. For example,
some s tep ladders include a light platform that is intended to hold tools. or materials (e.g.,
paint) but is not inte nd ed to carry the weig ht of the llSeL Nevertheless, some users do s tand
o n these platforms with resulting injury to themselves.
Most modern policy is to design products to s ta.nd up und er actual usage rather tha n
intended usage.

Defense Against Lawsuits

TI1e growth of product liability lawsuits has led to reexamination of how best to defend
agains t lawsuits once they are filed . Experience has shown the need for special preparation
for such defense, in cluding

• Reconstruction of the events that led up to the injury

• Stud y of relevant documents-specifications, man ua ls, proced ure-s, correspond en ce,
reports
• Analysis of in ternal performance records (or the pertinen t products a nd associated
processes
• Analysis of field performance information
• Physical examinations o f pertinen t facilities
• Analysis of the failed hardware
All this should be done promptly, by qualified experts, and with earl)• notification to the
insu.rance company.
\1\'hether and hO\v to go to trial involves a great d eal of special knowledge an d experience.

Defense Through Insurance

Insurance is v~.ridely used as a defe nse agains t product liability. But U1c costs have e.,.:;caJated
sharply, again because o f the growth in number of lawsuits and si7..e o( award s. In some
field s insurance has become a major factor in the cost of o perations. (Soaring insurance rates
have forced some surgeons to t•ke ea.ly retirement.)
 Quality ' s Impact on Society and the National Culture 63

Prognosis
As of the mid -1990s there remained some formid able un solved problems i n p roduct lia bility
To ma ny ob servers the U.S. legal systern contain ed some serio us d eficiencies:

• Lay ju ries Jack the tedmological literacy need ed to determine liability o n

techn o logical matters.
• ),, most o ther d eveloped countries, judges make such decisjons.
• lay juries a_re too easily swayed cmotlon.ally wheo dctenni.nh'lg the sjzc of awa.r ds.
• In th e United Sta tes, "ptUtitivedamages" may be awarded along witl> compensatory
damages and damages for "pajn and sufferi ng." Punitive damages cor'l trib ute
greatly to inflated awards.
• In the United Sta tes, lawyers a re permitted to work on a contingency fee basis, a
concept that s timulates lawsuits. This arrangemen t is illegal in m ost countries.
• The advers..'\ry system o f conducting trials places the emphasis o n w inning rather
than on rende ring jus tice.
• Only a minority o f the award money goes to the injured parties. l11e majority goes
to lawyers and to pay administrative expenses.

By the mid-1990s some elements of this legal system were under active review in the
na tional Congress. t'Joweve r, the system that has endured these deficiencies is deeply rooted
in the U.S. c ulture, so it is s peculative whether it will undergo dramatic change. A major
obstacle has been the lawyers. They ha ve s trong financial interests in the system, and they
are very influential in the legis lative process-many legislators are lawyers.
In most d eveloped coun tries the legal syste m for d ealing with prod uct liability is gener-
ally free from the above asserted d eficiencies. Those sam e countries are also largely free from
the extensive damage tha t product liabillty is d oing to the U.S. economy.

Personal Liability
An overwhelming majority of p rod uct Hability lawsuits have been aimed a t the indush·ial
organizations; they and their insurers have the grea test capacity to pay. As a corollary, s uch
civil lawsuits are rarely aimed a t individuals, e.g., dcsjgn managers or quality managers.
These individ-uals have little cause for concern wlth respect to civil liability. They are no t
immune fl'om lawsuits, but they are essentia lly irn mune from payment o f darnages.
Criminnl lin~i/ity is something else. Now the t>ffense (if any) is against the state, and the
sta te is the p laintiff. Until the 1960s, prosecution fo r c riminal liability in product injury cases
was directed a lmost exclusively at the corporations rather than the managers. During the
1960s an d the 1970s the public prosecutors bct:amc mor;c aggressive with ("CSpcct to the per..
sons involved. The speciEic targets were usually the h eads of the organizations b ut sometimes
included selected s ubordinate managers such as for p r<>duct development or fo r quality.
A contribu tin g factor has been an earlier provision o f the Food, Drug; and Cosmetic Act
making it a crime to ship o ut adulte rated or misbranded drugs. This provis ion was interpreted
by the U.S. Supreme Cowt to be applicable to the head of a compan y d espite the fact tl>at she
o r he had not participated in the e vents and even had no knowledge of the goings-on.
For the great majority of industriaJ managers the threat of criminal liability is remote.
Bcfnre there can be s ud1 liability, the maJ>ager must be found guilty of (J) having knowing ly
carried out illega l actions or (2) havin g been g rossly negligent These thin gs must be proved
to a jury beyond a reasonable doubt. It is a diffic ult proof. (Many g uilty criminals escape
conviction because o f this difficulty)
64 Key Concep t s: What Leaders Need to Know about Qualit y

Environmental Protection
A special category of government regulation is environmental protection (EP). On the face of
it, EP is a twentieth-century phenomenon. However, there is a school of t.h ought suggesting
that EP o rig inated in a conservation movement to preserve lands that were being explo ited
by European colo nists during the seventeenth and e ig hteenth centuries.
The Industrial Revolution of the mid-.,ighteenth century opened the way to mass pro-
d uction and consumption of manufactured goods at rates that grew exponentially. To s up-
port this g rowth required a correspond ing growth in production of ene_rgy and materials.
The resulting goods conferred many benefits o n the societies that accepted indus trialization.
However, the re were unwe lco me by-products.. and these also grew at expone ntial rates.
Generating the needed energy produced emissions tha t poll uted the air and water.
N uclear pl)wcr created the problem of nuclear waste disposal as well as the rjsk of rad iation
leaks. Mit'ling for raw materials damaged the land, as did disposition of toxic wastes. Omi·
nous threa ts were posed by o zone depletion and the risk o f g lobal warm:ing. Dis position of
worn·o ut and o bsolete products grew to problems of m(lssive proportions. All this was in
addition to problems posed by the nurnerous inconveniences and occasional disasters
caused by product fa.ilures during service. (S~ above under Life behind ~he Quality Dikes.)
Industrial organizations were generally aware that they \vere creating these problems,
but their priorities were elsewhere. Public awareness lagged, but by the. mid-hve ntie th cen-
tury the evidence had become overwhelming. Responding to public pressures, governments
enacted much legislation to avoid worsening the problem, and they provided funds to undo
some of the damage.
TI1e new legislation was at first strongly resisted by industrial organizc1tions because of
the added costs it imposed . Then as it became clear that EP was here to stay, the ingenuity
of indu:;try began to find ways to deal with the problem at the source-to use technoiO!,'Y to
avo id JurLhcr damage to lhe e 1wironmcnt. A s triking example is Japan's achievement in
e nergy conservation. During the 1973-1990 period~ despite continuing growth in industrial
production, there was no increase in e nergy cons umption (\·Vatanabe 1993).
Public and media preoccupation with specific inst'Mces of env ironment~! damage has
tended to stimulate allocation of funds to undo s"ch damage. However, th.e long-range trend
seems to be toward prevention a t the source.
Recognition o f the importance o f EP is nov~· evident in many ways, e ..g.,

• Many countries have created new minis tries to deal w ith the problem o f EP.
• Many industrial organi?...ations have created high ~level posts fol' the same p urpose.
• Numerous conferences are being he ld, including at the international level, with
pa rticipation from governmen t, industry, and academia (Stro ng 1993).
• An ~xt~nsive Md growing l;>ocly of litem\l.tN has em~rged, Some of this is q11ite
s pecific.
• Organizations have ~!so evolved specific pr~ses fo r addressing the problems of
EP. TI' e.se generally consist of
Establishment of policies and goals with respect to EP
Establishment of specific action plans to be carried out by the various com pan)'
functions
Audits to e nsure that the action pJans are carried out

ln addition, the ingen.,ity of organizations has begun to find ways to reduce the costs
of p roviding solutions. Table 2.2 lists sornc of the idct'ltificd problems i?l11d the associated
 Quality ' s Impact on Society and the National Culture 65

Air pollution Smog, tropospheric ozone . indoor air quality, volatile organic
compound
Climate c11ange Global warming, global dimming, fossil fuels. sea level rise.
--
greehhouse gas. ocean acidification
Conservation Species extinction. pollinator decline. coral bleaching. Holocene
extinction event, invasive species. poaching, endangered species
Consumerism Consumer capitalism, planned obsolescence . overconsumption
Dams Environmental Impacts of dams
Electromagnetic radiation and health
EMF
Energy
------ --
Energy conservation, renewable ener.gy, efficient energy use
Renewable energy commercialization
Fishing Blast fishing: bottom trawling: cyanide fishing; ghost nets: Illegal.
unreported. and unregulated fishing
Genetic engineering Genetic pollution, genetically modified food controve,rsies
Intensive farming Overgrazing, irrigation, monocutture, environmental effects of meat
production
Land degradation Land pollution. desertification
Land use Urban sprawl, habitat fragmentation, habitat destruction
Logging Clear-cutting, deforestation. illegal logging
!\•lining Acid mine drainage, mountaintop removal mining. slurry
Impoundments
Nanotechnology Nanotoxicology, nanopollution
Nuclear issues Nuclear fallout. nuclear meltdown. nuclear POwer, radioactive waste
Ozone depletion CFC
Particulate matter Sulfur oxide
Pollution Light POllution , noise pollution. visual POllution
Resource depletion Exploitation of natural resources. overfishing. shark tinning. whaling
Soil Soil conservation, soil erosion, soil contamination, soil salination
Thermal pollution Urban runoff, water crisis, marine debris, ocean acldllflcatlon.
ship pollution. wastewater
Toxins Chlorofluorocarbons, ODT. endocrine disrupters, dioxin, heavy
metals. herbicides, pesticides, toxic waste, PCB, bioaccumulation.
biomagnification
Waste E·waste, litter, waste disposal incidents, marine debris, landfill,
leachate, recycling, incineration
Water pollution Acid rain, eutrophication, marine pollution, ocean dumping. oil spins

(Source: Wikipedia, 2009)

TABLE 2.2 Environmental Problems and Opport unities for U.S. Industry
66 Key Concepts: What Leaders Need to Know about Qua lit y

opportunities for solution (J uran Insti tute, 2009). FoJ' more on environmental problems and
quality see Chapter 10, A Look Ahead : Eco-guality for Environmental Sustainability.

Multinational Collaboration
Collaboration across cultures is a many-faceted p roblem. For example, a system may be
designed in country A, but the s ubsystem designs may come from o ther countries. In like
manner, organizations/rom multiple countries may s upply components a nd carry out man ..
ufacture, rnarketing , ins talla tion~ maintenance, and so o n.
N umerous methodologies have been evolved to help coordinate sud1 multinational
activities. Those widely used include the following:

Standardization
This is accomplished through organ.iza tions s uch as the Interna tional Organization fo r
Standa rd iza tion (ISO) and the Interna tional Elcctrotcchnical Commission (lEC). A spe-
cial application is the Allied Qua lity Assurance P ublica tion (AQAP) s tandards widely
used by the Nor th Atlantic Trea ty Organizatio n (NATO) countries fo r multinational
contracting.

Contract Management
Ln rnany cases, the prime contractor provjdes a o.'lOrdinating service for the sub<:ontractors
(who may include a consortium). [McClure (1979) relative to the F16 aircraft; see also
McClure (1976).)

Technology Transfer
T his is carried o ut in numerous we JJ-known ways: international professional societies
and their commi ttees; conferences; exchange visits; training courses; and seminars. Jn
large, multinational organizations, such activ ities are carried out within the organiza-
tions as well.

References
Best, A. (1981). Wltm Co11sumers Complnitl. Colum bia University Press, New York.
Crain, W. M. (1980). Velricle Safety luspectiou Systems. How Effective? American Enterprise
Institute for Public Policy Research, Washington, DC.
Juran,). M. (1970). "Consumerism and Prod uct Quality." Qunlity P•·ogress, j uly 1970,
pp. 18- 27.
juran, j . M. (1972). "Product Safety." Qunlity Progress, j uly 1972, pp. 30-32.
juran,j. M. (1977). "Auto S.1fety, a Decade Later." Qunlity, October 1977, pp. 26-32; November,
pp. 54--<iO; December, pp. 1&-21. Originally presented at the 1976 Conference of the
E urope an Organization for Quality.
juran,j. M. (1995). A History of Mnnngingfor Qrmlity. Quality Press, Milwaukee, Wl .
McClure, j. Y. (1976) "Quality-A Common Jntmmtioun/ Goal," ASQC Technical Conference
Transactions, Milwa ukee, pp. 459-466.
McCiurc,J. Y. (1979) "Procuremeul Qunlify C()nfrol Witlriu tltc lnte-rnnlioual Enviromncnl," ASQC
Conference Transactions, Milwaukee, pp. 643-649.
O'Keefe, D. F., j r., and Shapiro, M. H. (1975). "Personal Criminal Liability under the Federal
Food, Drug and Cosmetic Act- The Dotterweich Doctrine .~~ Foorl-Dnrg-Cosmetk Lnw
Jourual,January.
 Qua lity ' s Impact on Society and the National Culture ~

O'Keefe, D. F., Jr., and Is ley, C. W. (1976). "Dotterweich Revisited- Criminal Liability under
the Federal Food, Drug and Cosmetic Act." Food-Drug·Cosrnt•fic Lnw Jcmrual, February.
Sentry (1976). Consumerism nt the Crossroads. Sentry Insurance Co., Stevens ])oints, Wl. Results
of a national opinion research survey on the subject.
Strong, M. F. (1993). "The Road from Rio." The Bridge, Summer, pp. 3-7.
Watanabe, C. (1993). "Energy and Environmen tal Technologies in Sustainable Development:
A View from japan." Tile Bridge, Summer, pp. 8-15.
This page intentionally /eji blank
 CHAPTER 3
The Universal Methods
to Manage for Quality
Joseph M. Juran

Ab01t Uis Chapter 69 Mmgemeot of Qul~y: Tb Fimc:ial and

Higll Poiots of This Chapter 69 Cultaral Be11efits 76
The Coocept of Uoiversals 70 How to Maoage for Qual~: Afina:Jicial
What Doos Mau cinc for QuaNty Mean? 70 Auloa n
Organizational Eflecliveness Progralll$ 73 lmplemutinc !be lara• Trilou 79
Oor Glossary of Key Tems 74 Refereaces 81

About This Chapter

11lis chapter deals w ith the ful'•darncotal concept~ that d efine the s ubject of managing fo r
q uaJity. ft d efines key terms a nd ma kes critical distinctions between similar but different
contempo rary p rogrnms to improve pe rformance. It identifies the key processes or wh at r
called the tmiversf//s through which quality is managed and integrated into the s trategic fab-
ric of an organization. It demonstrates that while managing for quality is a timeless concept,
it has un dergone freq uent revo lution in respo nse to the e ndless p rocessi>On o f changes and
crises faced by human societies.

High Points of This Chapter

1. "tvtnnaging for q ualit}"'' is a set of universal methods that an ente rprise, a b usiness,
a.n agency, a unjversjty, a hospital. or any organization can use to attain s uperior
results by ensuring that aU goods, services, an d processes meet s.takeh older needs.
2. '"QuaUty" as stated in Chapter l, Attaining SuJ"'rior Results Through Quality has two
meanings that rnust be clearly und e rstood a nd communicated . T he first relates to
how well the features of the services or products you produce meet customer needs
and thereby provide them satisfaction. "QuaUty" also means freedom from failure.

69
70 Key Concepts: What Leaders Need to Know about Quality

3. The Ju ran Trilogy embodies the universal principles need ed to create high-quality
goods, services, and processes.
4. The universal principles followed to manage for quaUty are applicable to any type
of organizatio n, including a company. an institution, an industd al organization, a
government agency, a schoo), and a hospital.
5. Tmplementing processes to create innovative products and servkcs by discovering
the vOict' of the customer wiJI enable every organization to unde..rstand the
custo mers' needs better and then create or design prod ucts that m eet these needs.
6. Implement processes to ensu re that products conform to the d e-sign criteria w hen
they are produced. We must control quality and predict how it will perfo rm in the
marketplace.
7. Implement a systematic approach to improving q uality or creating breakthro ughs
to cHmioatc those faillU'~S tha.t ace chronk in our procesSt."'S or products.

The Concept of Universals

During my stud its of algebra and g~metry, I s tumbled <tCWS.S 1\V'O broad ideas that [ \·vould p ut
to extensive use i.n later ye.ars. One was the ooncept of "universals"; the other was the distjndion
between theory and fuel.
My study of a l g~bra exposed me forth~ first time to the U st' of symbols to create gt"neralized
models. I knew that 3 children plus 4 children added u p to 7 children, and 3 beans plus 4 beans
added up to 7 beans. Now by using a symbol such as x, I could generalize the problem of adding
3 + 4 and state it as a univerSttl:
3x+ 4 x : 7x

This univc:>:rSal said that 3 + 4 a lways e-q uals 7 no matter what x sta nds fo r- c-hildren, beans. o r
a nything dsc. To me the co ncept of univt.'rsals W<l S a blinding flash of illumination. I soon found
out that universals abo\mded, b\11 they had co be d i.s«>vered. They had various names-ntles,
fo rmulas, laws, models, algo rithms, pattt<rns. Once d isc<>vered, th~y could be ilppli<!d to solve
many p roblems.
By 1954 in my text Mmrngcrial BreaktiJruugh, J outUJ\ed the l>tginnings of the m3ny univers<lls
tho.lt led to superior result. The first w3s the univerSaJ of rontrol- the pf()('t'SS for preventing
adverse change. The ~e«>nd ' "'a!:> the universal !:>equence for breakthrough imptQvement. The lat-
ter went on to become known as Six Sigma today. By 1986, I d isco,•ered that there was 1\J\other
univerS<lL This was the planning for quality. <tf the strategic levd and prod u ~t and service d esign
levels. I also came to realize that those three managerial processes {plann·ing:, control, a nd
impnwemenc) were in terrelated, so I developed the Juran Trilogy diagram, to depict this inter-
rdation.ship. The Juran Trilogy embodies the core processes by which we mana ge fo r qua lity. As
a corolla ry, these same core processes constitute an -impo rtant sector of science in managing: fo r
qmllity. To my kl\owledge there is g-rowing <l War~J\t'SS ln o ur ecoooo\y that mastt"ry o~ those
un i\•ers<~l proces:>es" is critic<' I to attaining J~aderS hip in q uality and superio r results.

What Does Managing for Quality Mean?

For many decades, the p hrase used to define quality was s impl)' "fitness for use". It has been
genera11y accepted that if an organizatio n produced goods that \'ltere ~fit for use" as viewed
by tl1e custo mer, then those goods were consid ered of high quality. Throughout most of the
twentieth centLtry this definition made sense be., use it was easy to grasp. Simply put, if
c ustomers p urch ased a good and it w orked, they were pleased with the q uality of it. To the
 The Universal Methods to Manage for Quality n
prod ucers of that product it was easy to produce as lo ng as the prod ucer had a dear under-
s tanding of the custo mer requirements.
Managing for quality therefore me-ant to "ensure product conformance to requirements."
TI1e majority of tasks largely feU o n the o perations and qual ity d e partments. These ftmctions
were responsible to p roduce, inspect, detect, and ensure the pi"Qduct met rcqu iremenls.
Two developments have led us to modify this time~honored definition. TI1e first was the
rea lization that the quality of a physical good, its fitness for use, was broader than just its
confo rmance to specifkations. Quality was a.lso determined by the design, pad <.1ging, order
fulfillment, delivery, field service, and all the serv ice that surrounded the physical good. TI1e
oper:a tions and quality departments could not ma.nagc quality aJone.
The second development was a shift in the econo my fro m p rod uct ion d omina ted by
goods to production heavHy concentrated in services and information. As s tated in
Chapter L Attaining Superior Results Through Q uali ty and to reflect lhese changes, the
a uthors of tl1is handbook (six th edition) h ave c hosen to use the phrase "fi t fo r purpose"
instead o f "fit for use" to define the q uali ty of a prod uct We w ill use the term "product"
to refer to goods, services, and in formatio n. Regard less of whether a p rod uct is a good,
a service, or in formatio n, it must be ''fit for purpose" by the cus tomers of that product.
Th e c ustomer is n o t just the en d user but a ll those w hom the p rod uct imp acts, includ ing
the buyer, the user, the supplier, the regulatory agencies, and almost anyone \Vho is
affected by the product from concept to disposal With s uch an expanding set of customers
and their needs, the methods and tools to manage for quality must g row as \veil.
For the twenty-first century "managing for quaJity" can be d efined as "a set of universal
m~thods that any orga.r'lizatio.o, whether a business, an agency, a. university. or a hospital,
can usc to ana in superior results by designing, continuously improving, and ensuring that
all products, services, and processes meet c us to mer and stakeholder needs."
Management of quality is not the only set of universal methods to manage an organizn-
tion. [t is o ne set of managerial methods that s uccessful organizations have used and o thers
should use if they want to assi.U'E! thei.r products: goods, servie<>s, an d information meet cus-
to mer requirements . 'This evolution wjll OOI) tinuc as more il'•dustdcs adopt the ll.lcthod$ a.nd
tools used to manage the quality of goods and services. Emerging o rganizations and countries
will create new means to adopt management mt-thods to their unique needs. Today, a full
range of industries, including hospitals, insuran~ organizations, medical laboratories, and
finandaJ service organizations, are managing for business s upe rior performance excellence.
TI1e accelerated ad option o f techn iq ues to manage for quality began in the late 1970s
w hen U.S. businesses w ere badly affected by many Japanese competitors. japanese manu-
fac tured goods w ere gen erally view ed by the purchasers of those goods as having higher
q uality. This Jed to the definitio n of "Japan"'"" or Toyota q uality." TI1esc terms have b«omc
synony mous with higher quality that is required to mee~ the needs o f the customers. As
cons umers or customers had a better choice1 it forced some U.S. organizations into bank-
ruptcy and others to compete at a new level of performance. Eventually many American and
then la te r European organizations regained lost markets w ith h igher q uality.
Ono of the fii'Stto ac~-omplish that was Motorola. Mo torola was affected by japaMse Ofb>a -
nizationssuch as NEC, Sony, and o thers. The rood traveled and the improved quality resulted
in Motorola becoming the first winner of the U.S. Malcolm Baldrige Nation al Quality Award.
Motorola itself evolved the universal quality improvement model and created the Six Sigma
model for q uality improvement. Since then American q uality improved, and the quality revo-
lution contin ued in to a global revolution. Proml986 to today this model of quality improve-
ment has become the most valued mode.) for many industries arotmd the globe. Today
o rganizations s uch as Sams ung, Quest Diagnostics, Oracle, and Telefonica have become more
competitive and are among quality leaders in their industries.
72 Key Concepts: What Leaders Need to Know about Qua l ity

Each o f these organizations and o thers have all contrib uted to the methods to Dl<1nage
quali ty. They all used the basic tools of Six Sigma and q uali ty management to expand in to
busin ess p rocesses an d all parts of the supply chain . Now q uality is not the q uality depart-
ment's respon sibility. It is th e responsibility of the entire hierarchy. Managing q uality has
be-come the way to manage an C:11tirc o rgan ization. It has become the d riv ing fo rce of many
strategies. To be the best in my in dustry, to have the ltighest q ua lity, a nd to provid e the highest
level o f customer d elight are all business strategies. 1f achieved , these strategies will enable
these organizations to a ttain financial success, cultural change, and satisHed customers.
ln this sixth edition of the /urdu's Qu•lily Hmrdlxlok, we airn to provide a concise, simpler,
and hopefully clear set of methods a.nd tools to manage for "quality.'' n , is will include •lot
o nly the q ua lity o f goods or services b ut also the q ua lity o f process a nd fu nc tion, w h ich lead
to overall organ.i:l:ationa l quality.
As th e needs of customers and society have changed, th e means for meetin g their needs
also changed. The methods of managing quality in !980 may not work for your o rganization
today. \tVhat works today may no t work tomorrow. Even the w1iversals that contin ue to
d e liver supe rio r results may one day need to be modified. This han dbook will present the
best of w ha t works and the lessons learned fo r those tha t did n ot. O ne lesson learned was that
many organizations that w ere once q uality leaders failed to s ustain their s ue<:essful p erfor-
ma nce over time. \·Vhy did this happen? Did they fail to sustain results because of weak
leadership? \·Vas it external fo rces? \Vas it a poor execution of their strategies? TI1ese q uestions
have haunted man y professionals who have had to defend th e ir "quality p rograms." We will
try to provide answers to these q uestions and more in this version of the handbook.
[n Figure 3.1 which addresses the mea.n ing of q uality, we have presented two of the
ma ny mea1'1 ingsof the word "quality" as they relate to good s a nd services. These two arc of
critical importance to managing for quality:

1. Q uality as it rela tes to h ow well the fea tures of a service or good meet custo me.r
needs and the reby provide them with satisfaction. Ln this meanin g of th e word,
higher quality usually costs more.
2. Quality as it relates to freed om from failures. ln this sense, the mean ing of the word
is oriented to costs, and "higher quality usually costs Jess."

Features \Vhich Meet CusComer N t~s Freedom fl'om Failm·e s

High er quality euables t>rgtmizatiOII S to H iglrer quality enables: t)rgtmirlltiQIIS tQ

Lncrease customer satisfaction Reduce error rates

!\·teet socicla1Jleeds Reduce rework, wa~He-
Milke products and services salable Reduce failures. warmnty charges
Ex_ceed competition Re-duce customer dissatisfaction
lncre...1Se market share Reduce inspection. tesL and audits
Provide salesreven••c Shonen time to develop new productS
Secure premium prices lncre.ase yields. capacity
Improve delivery perfOmlancc

The major effect ,.son re~·e n ue The maj or effect ,.s 0 11 costs
Usually hjgher qu1-1lity cost:; more. Usually higher qualiry costs Jess.

FIGUR! 3.1 The meaning of quality. (Juran Institute. Inc .. 2009.)

 The Universal Methods to Manage for Quality 73

By adopting these simple d efinitions of q uality as it relates to g001.i s and services one can
create a systematic approach to manage quality by

• Creating processes to design goods and services to meet need s <>f its s takehold ers
(external and internal). Every organization m ust understand w hat the custo mers'
needs are an d then create or design services and goods th at meet those ne<...-.ds.
• Creating processes to con trol quaJity. On re designed.., these services and goods are
p roduced, at which time we must ensure compliance to the d esign criteria.
• Creating a systematic approach for improving continuously o r creating b reak-
throughs. Services, goods, and the processes that produce them suffer from chronic
failures that must be discovered and remedied.
• Creating a functions to ensure you continue to do the three things listed above.

By designing quality, controlling it during operations, and then continuously improving

on it, any organization ca.n be on its way to becoming a "quality organization." TI1e global
q uality leaders as described above arc relentlcs."> in Lhcir p u rsuit of ensuring that all their
gocxis and services meet or exceed their customer requireme.nts-but not a t all costs. Attain-
ing quality that satisfies customers but not the business s takeholders is not a good business
to be in. To be truly a quality organization, the products and services must be produced at
costs that are affordable to the producer and its s takeholders. TI\e quality...:ost-revenue rela-
tionship, however, must be properly tmderstood in making these judgments. Increased fea-
ture q uality must generate enough revenue to cover the added costs of a.d ditional features.
But higher quality from lower failures will usually reduce cost and there by improve finan·
cia] performance. For organizations that do not generate revenue, feature quality must not
cost more than your b udget allows, b u t t.luality improvement against failures will almost
always improve finandal heaJth.
By using these two definitions of quality, and by lmderstanding the impact of good or
poor quali ty on an organization's performance, one can create long.. te.rm plans to maintain
high q ua.lity o f goods, services, p rocesses, and fi.na.ncial perfo rmance. Ma.n aging over the
lo ng term a lso requires that the o rgani zation set up :o;ystems to ensure that the changing
needs o f its custo mers are wellLmd erstood to avoid the failure to sustain performance that
plagues even the most successful organizations.

Organizational Effectiveness Programs

"Organizational Effectiveness/' "Lean Six Sigma," "Toyota Production System.'' and Total
Quality Management (TQM) are "brand" names fo r methods, and som e may find them
synonymo us with the universals to manage for qua lit)~ As Juran's Lmjversals o f managing
for quality become embedded and used in many new industries, a Mw brand may be
fo rmed. Mos t of the tirne these new brands are useful becauso they help advance the need s
to improve performance. Just as the early g uilds led to q ua lity s tand ards, society a1'd chang..
ing customer needs also requi re the universals to be adapted . One comm on problem with
the methods to manage quality was fo und in theserv iresector. Service organizations always
felt that the word "quality" meant product quality. Many services do not see their products
as goods. They are services. Therefore they subs titute the words "service quality" with "ser-
vice excellence." Over tim.c this phrase catches 0 1' and w e have a new brand. Most of the
time this new brand builds positively on the previous brand. Other times the alterations to
the methods resul t in less positive outcomes and shunning of the brand. This happened to
TQM. Tot«l Quality Management was the brand in the 1990s. It was replaced with Six
74 Ke y Con c e pIs: Wh a I Le ad e r s Ne e d I o Ko ow abo u I Qu a Ii I y

Sigm a. \'Vhy? The method s of managing for q ua li ty were evolving as many organizations
were trying to regain comp etitiveness. The p roblem with TQM was tha t jt was no t measur-
able o r as b us iness-focused as need ed. Over time it lost its luster. Howeve r, there w e re
man y organizations that imp roved their performance immensely, an d they continue \vith
TQM today. Others move on l'o the new b(an d . At the ti me o f thjs writirng Lean Six Sigma
and Performance Excellence are in vogue. They too will change over time. In Lhe end it does
no t matter w hat you call your processes to manage fo r q uality as long as you do wh a t is
needed to a ttain superior results. The universals live on. No matter the industry, country, or
cen tu ry, meeting and exceeding th e n eeds of your c ustomers wi ll d rive }'Our results.

Our Glossary of Key Terms

ln the world of managing for q uality, there is still a notable lack o f s tan dard ization of the
meanings of key words. However, any organ ization can d o m uch to minimize internal con-
fusion by standardizing th e definitions of key words and phrases. The basic tool for this
purpose is a glossary. The glo.o;sary then becomes a refer.,.,ce source fo r commu.nkntion o f all
sorts: reports, mcl!''l ua ls, training te xts, and so o n.
The d efin itions o f "quality" include certain key words that themsel·ves req ui re d efini-
tion. A few are important before we co ntinue:

1. Organi zations. In this ha ndbook we use this word to mean any e ntity, b usin ess,
company, institu tion, agency, business unit, hospital. bank, Internet p rovider, casino,
etc., that provjdes a_n o utp ut-a product, service, or infol:'mation-to a customer,
whether fo r profit or n ot for profit.
2. U1l ivcrsa l managcm cnt 1nethods an d tools. A u r• ivcrsa l managcm cnt method, tool,
or process means it t.'"<.m be used in a ny ind us try, any fu nction, a:ny organ ization jn
an y c ulture. (t is truJy un iversal. To most employees of an organ ization the ,.,•ord
1
' man age" means to assign resources, set goals, establish controls, and review results

with respect to products, p rocesses, and peop le. To <>rganizations that are "world-
class" it mea.nsa fuJI sequence o£ activ ities that prod vee th.e inte nded resul ts to me-et
c usto me r and soc.ietal need s. Managerial p rocesses not limited to just fina nce,
human resources, technology, and operations. They also include managerial
processes to understand customer n eeds; to d esign ne\v products and ser vices to
meet those needs; to have systems an d e<.'ntrols in place to ensure the needs are me t
over time; to have systems and initiatives in pia"" to continually improve all of
them: to e nsure society's need s are not negatively im pacted .
3. Product: goods, servkes, or in forma tiOI''L These axe the o u tputs o f a_ny process tha t·
me-ets the needs of your customers. To economists, products include both goods
an d services and can also in clude information. However, under po pula r usage,
"product" wmetimes mean • goods o nly. The authors will generally use "produ ct'•
to refer to both goods and services.
a. A product can also be a physical good such as a toy, a comp o.tte r, o r a documen t
containing information s uch as a propos.-1.1, an architectural drawing, or a w eb
s ite on the World Wide Web.
b. A product ca.n also be a service, wh.ich is work that" is p-erformed for someon e
else. A catpcntcr b u ild s a home for a homeowner, the user; an a utomotive
technicia n repairs cars for their owners; a nurse cares for patients; a nd a w eb
br<)\·vser provides fast information to meet the needs of its users.
 The Unive rsa l Methods to Manage for Qual ity 75

4. Featw·e. A featu re is a property or characteristic possessed by a good or service that

responds to cus to mer needs. A feat ure of an automobile can be the fidelity with
which its stereo system meets the listening needs of its d river. This may have little
o r no impact o n how the automobile d rives and performs, b\.Lt it does meet the
l'u?·eds of the customer in other ways. A feat ure can be the cmcrgcncy· room fast
track for critical patien ts in need of immediate medica l at tention.. Fea tures are what
a compan y? an organization~ a system, o r an agency must include in the design of a
good o r service to meet customer needs. E'eatu res must be created through
understanding exactly how to meet the most important needs.
5. Cost of poor q uality (COPQ). These are the costs tha t woulcl d isappear in the
o rga.nlza6on if all faHu.res were removed from a product, service, or process. They
are measured as a percentage of sales o r total costs.
6. Customer. A customer is anyone external to your compan y, org<"nization,system,
or agency w ho is affected by the use of the product or serv-ice. A customer
receives value for the p roduct o f the organization. A customer may be the
ultima te user of the product or an in termediate customer externa l to your
organization bu t not the user, s uch as a pa ren t who purchases .a game for a child
or a surgeon who implants a device in the patjent. A good or service ca.n have many
customers. A common practice is to differentiate between "externa l" customers
and "interna l" customers. Extetnal customers are d efined as above, and internal
customers are users w ith in the organization. The term "cus tomer" alone w iU
gene ra lly refer to the external customer. Customers are sometirnes called
stakd,ol ders. Thjs terrn is typically intended to encompass externa l customers
and in ternal cus tomers, s ha reholders, management, and employees. Sjncc this
w ide range of roles w ill have divergent and even conflicting needs fo r the
organizatio n, we wiU generally discuss each group separa tely· rather than place
them all in on e category.
7. Processor. Processon:; are employees, departments, func tions, b usiness lmits, and
agencies that produoo or carry out a process within the oq,"<Ulization. To achleve
superior results, an organization must clearly focus on the external customers b ut
ensure that aU p rocessors are able to complete their work as d esigned, on time,
every tim e.
8. Customer satisfaction. Customer satisfaction is the positive state o f custo mers when
their n eeds have been met by the good or servia! they pu rch ase o r use. Satisfaction
is mainly driven by the features o f the good or service p roduced.
9. C ustomer d issatisfaction. Tilis is the negative s tate o f a custo mer when a good or
service has a failure that results in an unmet need and, consequently~ customer
annoya.nc.;, a complaint, a claim, or returned goods.
10. Failure. Failure is any fa ult, defect, failure, or erro r that impairs a service or product
from meeting the customer need s. These can be stated as too many defects or failu.res
(in goods O J' services). Failures take- s uch fo rms as wa iting too long fo r phone
responses from a call center, er rol's on invoices, warranty claims, power outages,
failures to meet d elivery dates, and inoperable goods.
11. C ustomer loyalty. Thls is the d elighted state of a cus to mer when the features of the
good and service meet her o r his need s and are delivered free fro m failure. Loyalty
is also relath' ¢ to the offerings of the competition. A loynl c ust.omer continues to
p uw:chase o r usc your orga.ni7..a tion's goods and services. Loyalty is a stra tegic
76 Key Con cepts: Wh at Le aders Need to Know about Qua l ity

financial measure o f customersalisfac::tion. Creating loyal customers is the goal o f a

superior performer.
12. Customer disloyalty. This is the very nega tive sta te of customllrs who no longer
wan t your p rod ucts o r serv ices. They fi nd better-performing pro d ucts a nd
services an d then become dis loyal to the p rod ucer to whom they had once
been loyal.
13. Superior performers, world class, or best in class. These various labels are used in
the marketplace lor organizations with products that are generally accepted as
having the highest quali ty. These oro>ani>~1tions become the de facto comparatjve
benchmark fo r o thers to attain. Examples include Toyota Motor Compan y.. Samsung
Electronics, the Mayo Clink.. and Coogle/ to name a few.

Management of Quality: The Financial and Cultural Benefits

Features Effect on Revenue
Revenue can include severa l types o f t ransactio ns: (1) mo ney collcdcd from sc11ing a
good or service, (2) t-axes collected by a government, or (3) d onations received by a
chari ty. \>Vha tever the source, the a mo unt o f the revenue relates in va rying degrees to
the abili ty of the good or service features produced to be valued by the recipient-the
customer. [n many ma rkets, goods and services with superior fea t ures are able to
a ttract more revenue through SQJllC com bination o f higher ma rket sh are and premi u m
p r icing. Services and p rod ucts that a re not competitive w ith featu res often are sold a t
lower p r ices.

Failures Effect on Income

The customer w ho enc01.m ters a deficiency may take action that creates .additional cost for
the producer, such as file a complaint, return the product, make a daim,or file a lawsuit. The
customer also may elect instead (or in ad dition) to stop buying from the g uilty producer as
well as to publicize the d eficiency and its source. Such actions by multi ple cus to mers can d o
serious d amage to a p rod ucer's revenue.

Failures Effect on Cost

Deficient quality creates excess costs associated with poor quality. "Cost of poor quality"
(COPQ) is a term that encompasses all the costs that would disappea r if there were no
failures--no errors, no rework, no fjeld fail ures,. a.nd so on. Juran Institut-e's research o n the
cost of poor qw·llity d emons trates that fo r o rganizations that arc not managing q uality
aggressively, the level of COPQ is shockingly high.
Calcula ting the costs of poor q uality can be highly va luable lor an organization.
COPQ shows enterprise leaders jus t how much poor q ua lity has inflated their costs
and cot>SeqLtently red Ltced their profits. Detailed COPQ calcula tions provide a road
map fo r rooting ou t those cost~ by systcma tica11y removing l"he poo .. qua lity that ere·
a ted them.
[n the early 1980s, it was common for many b usiness leaders to make a s ta temen t
that their COPQ was about 20 to 25 percent of sales revenue. This astonishing number
was backed up by many indepel\dent organizations cakula ting their own costs. For this
 The Universal Methods to Manage for Quality n
handbook we cond ucted additiona l research to dete rm ine a more p recise and curren t
estimate for COPQ in the economy.
The task was not as easy as it may sound. Many sources were in disagreement as to what
costs should be inclu ded in the total. In addition , the actua l (orm of the statistic was pre-
sented ln myriad ways: percentage of sales, percentage o f operati''S cxpernses.. pcr"Centagc of
value ad ded, an absolute d ollar value, a d o llar value per employee, and even a n urnber of
d eaths in the health care industry. While many sources provided hard p r imary data, others
would cite vague "experts" or "studies." \•Vhen specific sources were cited, they sometimes
referred to one another in circular fas!Uo n.
Based oo fi nd ings a nd extrapola tions from published li terature~ as well as a report
conducted by the Mid west Business Group on Health and Ju ran Institute, and the rca·
soned judgment o f know ledgeable h ealth care p ractitioners, it was "stimated tha t 30
percent of a ll d irect costs of health care are the result of poor-quality ca re, consisting
primarily of overuse, mis use, and \\•aste in the system. The impact of under use on costs
is not dea r. With national health expenditures of roughly $1.4 trillion in 2001, the 30
percent figure trans la tes into $420 billion spent each year as a d irect resuJt of poor qual·
ity. In addition, the indirect costs of p oor quality (e.g ., reduced producti,•ity due to
absenteeism) add an estimated 25 to 50 percent, o r 5105 to 5210 billio n, to th e national
bi11. Private purchasers absorb abo ut one-third o f these costs . In fact,. we estimate that
poor-quality health care costs th e typ ical employer between $1900 a nd $2250 p e r cov-
e red emp loyee each year. Even if these figures a re o ff by 50 percent, poor-quality health
ca re exacts a several hundred-billion-d ollar to ll on our nation each year (Midwe-St Busi·
n ess Croup on Health eta I. 2003).
Our best synthesis suggests tha t by the year 2003 the COPQ was in the range o f 15 to
20 percent fo r manufuch..ring o rganizations, with many achieving even lower levels as the
result of systematic p rograms to reduce it. For service organizations COPQ as a percentage
of sales was s till a staggering 30--35 percent of sales. These numbers included th e costs of
redoing what had already been d one, the excess costs to control poor processes, and the costs
to correctly satisfy customers. Failures that occu r prior to saJc o bvio usly add to a producc.r 's
costs. Failures that occu r after sale add to customer's costs as weU as to producer's costs. Ln
addition, post sale failures reduce p roducers' future ~les because custom~rs may be less apt
to purchase a poor quality ser vice.

How to Manage for Quality: A Financial Analogy

To ma nage qua lity, it is good to begin by establishing a vlsion for the otrganization .. along
with policies, goals, and p la ns to atta in that vision. This means that quality goals and
policies must be built into the organization's strategic plan. (These matters are treated
elsewhere in this hand book, especia lly in C hap ter 7, Strategic Plan ning and Deployment:
Moving from Good I<' Great.) Conversion of these goals into resl.lltS (making quality
happen) is then achieved through estab lished ma.nagcrial proccs..oe;es- sequcnccs of activj ..
ties that produce the inte nded results. Managing for quality makes extensive use of three
s uch managerial processes:

• Designing or planning for quality

• Compliance.. co ntrolling or assuring q uality
• Imp rovin g or creating breakthroughs in q uality
78 Key Concepts: What Leaders Need to Know about Qua l ity

TI1ese three processes are interrela ted an d are known as the Juran Trilogy. They para11el the
processes long used. to man age for finance. These fin an cial processes consis t of the folJowing:

Fiumrcinl plnmring. TIUs p rocess p repares the an nuaJ fin an cial an d oper a tio nal bu dgets. It
defines the deeds to be done in the year ahead. It translates those deeds into money-
revenue~ costs, a nd profits. lt determines the fi l'l ill)dal benefits d o ing a H th_ose deed s. Th e
fi nal result establishes the financial go..1ls for the organization and its various divisions
and units.
Finmrcinl c,ontrol. This p rocess consists of evaluating actual finan cial performance,
comparing this with the financial go.1ls and taking action on the difference-the
accountant's "variance." There are n u merous subprocesses fo r fina ncial control: cost
control,. expense control. risk management, inventory conhoJ. and so on.
Finmteinl improtJeme~tf. This process aims to improve financial results. It takes many
f<'rms: cost reduction projects, new facilities, and new-pr<,duct development to increase
s.'\les, mergers, a nd acquisitions, joint ventures, and so on.

These proce.s ses are universal-they p rovid e the basis for finan cial management, no
matter wha t type of organization it is.
The financial analogy can help leaders reaUze that they can manage fo r quaUty by using
the same processes o f plann ing, control, and improvemen t. Since tl"'e con cept of the trilogy
is identical to that used. in managing for fi nan ce, lead ers are n ot req uired to change their
conceptual approach.
Much of their p revious training and experience. in managing for finance is applicable to
O'laJ,aging for quaUty.
lo\'hile the conceptual appi'Oilch does no t cha nge, the procedural steps differ. Figure 3.2
shows tha t each o f these three managerial processes has its own u nique sequence of

Q uu.lily Plnnning Qunlity Control Quulit~· Jmprcn·cmcnt

Esh1bli.sh goals Determine the control subjeers Prove the need with t'
business c~sc
Identify who :trc the customers
~·1 easure ac.tual performance Establish a project
Detenn ine the needs of the infraStJ\ ICtuCC
Ctlstomers
Con, pare. ac-tual performance co Identify the irnpmvenu·nt
Develop features whiC'h respond the targets :1nd goals projec.ts
to customers' needs
Estoblish pr<Jject Leun1s
Develop proccsse~ nble. to Take action on rhe difference
produce the products Provide the teams \vith
rcsourccs. t·miniog. and
Establish process c.omrols m<.llivation 1.0:
tmnsfer the plans to the Continue to •neasu1-e and D iagnose the causes
operating forces maintain pel'formance Stimulate remedies

Establish commls
to hold 1he gains

FrcuAt 3.2 Managing for quahl)'·

 The Universal Methods to Manage for Quality 79

activities. Each of the three processes is also a universal- it fo llows an unvarying seq uence
of s teps. Each sequence is a pplica ble in its respective a rea? no matter what the industry, func-
tion~ cultu re, etc.

Implementing the Juran Trilogy

The Juran Trilogy Diagram

The Huee processes of tl1e Juran "frilogy are interrelated. Figure 3.3 shows this interrelationship.
The Ju ran Trilogy diagram is a graph with time o n the horizontal a xis and cost of poor
q uality o n the vertical axis. The initial activity is q uality planning. The market research h mc-
tion determines who the customers are and what their needs are. The plann ers or product
rea1ization team then develops product' fea tures and process designs to respo nd to those
need s. Finally, the planners turn the plans they created over to o perations: "Rw' the process,
produce the features, deliver the product to meet the customers' needs."

Chronic and Sporadic

As operations proceed, soon it is ev id•nt that the processes that were designed to deliver the
good or service are unable to produce 100 percent quality. Why? B..:ause there are hidden
failures o r periodic fail ures that require rework and red o ing. F igure 3.3 shows a.,cxnmplc
where rnore than 20 percent o f the w o rk processes m ust be red one owing to failures. Th is
waste is con side red chronic-it goes on and o n nntil the organ ization decid es to find its root
causes. \IVhy do we have this ch ronic waste? Because it was planned th at way. The plan ners
could not account for all unforeseen obsta des in the design process.
Under conventional responsibility patterns, the operating fo rces arc unable I<> get rid of
this planned ch ronic w aste. \IYha t they can d o is to carry o ut control- to p.revent things from

Q t•aiAI)' pl;~nnin~

1
Sporadic ,\pike i
40
Original zone of I
~::"!:·~- . .--~
20
New zone of
Chmnic wtJste Quality control
opportunity
(i\11 I
}Or im11r0vement)

Lessons leamed

F1ouRE 3.3 Jurdn Tri lo~.

80 Key Concepts: What Leaders Need to Know about Quality

getting worse, as shown in Figtue 3.3. It shows a sudden sporadic spike that has raised lhe
failure level to more than 40 percent. This spike resulted from some unp tanned event s uch
as a power failure, process b reakdO\'Itn1 or human error. As a part of the contro l p rocess, the
o perating forces conve-rge on the scene and take action to restore the statu~ quo. This is often
called "corrective action.'' "troubleshooting,'' "firc.. fighl'ing," :u1d so on. The end result is to
restore the errol' level back to the planned chronic level o f about20 percen t.
TI1e d1art also shows that in due course the chronic waste was d r iven -down to a level far
below the original level. This gain came from the third p rocess in the trilogy-improvement.
ln effect, it was seen that the chronic waste was an opportuni ty for improvement, and steps
\\~ere takeo to make that improvement.

The Trilogy Diagram and Failures

The trilogy ding•·am (Figure 3.3) relates to prod uct and process failures. The vertical scale
therefore exhibits nnits o f measure such as cost of poor q uality, error rate.. percent d efective,
service call rate, waste, and so o n. On this same sa~le# perfection is at zero.. and what goes up
is b.1d. The results of reducing failures are red uction in the cost of poor q uality, meeting more
delivery promises, reduction of the waste, decrea..~ in customer dissa.tjsfaction, and so on.

Allocation of Time within the Trilogy

An intcrcstin,g question for ma,,agcrs is, How d o we desig '' our f ur' ctions and aJiocatc their
time relative to the processes of the trilogy?" Figure 3.4 is a model designed to show th is
interrelationship in a japanese company (ltoh 1978).
In Figure 3.4 the horizontal scale represents the percentage allocation of any person's
time and runs from 0 to 100 percent. The vertical scale represents levels in the organizational
hierarchy. The diagram shows that the upper managers spend the great majority of their
time on p lanning and improvement. They spend a s ubstantiaJ amoun t of time o n s trategic
planning. The time they spend o n control is s mall and is focused on major control s ubjects.
At progressively lower levels of the hierarch y, the time spent on s trategic planning
d eclines, whereas the time spen t on control and maintenance grows rapidly. At the lowest
levels, the time is dominated by control and maintenance, but some time is s till spent o n
planning and improvement.

Upper
managers

Managers

Wo1·Horce

FtcuoE 3.4 lloh model. (Adapted from Managernem for QualiO•, 4th ed., Juran Institute, Inc., HJ87,
p. 18.)
 The Universal Methods to Manage for Quality 81

Figure 3.2 shm".rs these unvarying sequences in abbreviated form. Exte nsive detail is pro-
vided in other chapters of this handbook: Chapter 4, Quality Planning: Designing Innovative
Prod ucts and Services; Chapter 5, Quality Improvement Creating Breakthroughs in Perfor-
mance; and Chapter 6, Quality Control: Assuring Repeatable and Compliant Processes.

References
ltoh, Y. (1978). "Upbringing of Component Suppliers Sur ro unding Toyota_" International
Confere nce on Q uality Contro l, Tokyo.
Juran,] . M. (2004). "Architect of Quality," McGraw-Hill, New York, NY.
Midwest Business G roup on Health, Juran Institute, Inc., and The Severyn G ro up, Inc. (2003).
"Reducing the Costs of Poor-Quality Health Care through Responsible Purchasi ng
Leadership."
This page intentionally /eji blank
 CHAPTER 4
Quality Planning: Designing
Innovative Products
and Services
Joseph A. De Feo

Abu t Uis Chapter 83 Jm n Quaity by Desip Model 88

Higll Po4ots of This Chapter 84 lm n Quaily by Desip Model Subsleps 91
Tacklin£ the first Process of the Trilou: Desiping frequenHy Used Desig)l Tools 133
l11ovalive Products 84 Design fur Six Siglna 134
The Jura• Quality by Desip Model 35 References 136
The Qu lity by Design Problem 87

About This Chapter

New product development processes are o ne of the most impo rtan t b us iness processes
in an o rganization. It is the life blood o f fu ture sales1 perfo rmance, and competitive-
ness. Traditional meth o ds to develop new products in man ufacturing usua lly arise
with it' the ptod uct d evelop men t fu.o ctiot'IS. l r'l service o rganizations n.cw service d cvcl..
op men t is d o ne ad hoc wi th multiple fu nctions contJ·ibuting to the new service desig ns.
"Quali ty Planning," as the term is us~d here, is a systen1atk process for developing
new products (both goods and services) a nd processes that ens ure customer needs are
rnet. There are ma.ny methods to desjgn innovative products. Design for Six Sjgma,
Design fo r Lean, Design for World ·Ciass Q uality, and Concurrent Engineering , Agile
Design fol' Software ate common. This chap te r will focus on t he me tho d s and tools tha t
are common to each and sometimes excluded from development functions. Quality by
design methods and tool$ wi ll enable an organiza tion to develop breakthrough products
and services tha t drive revenue.

83
84 Key Concepts: What Leaders Need to Know about Quality

High Points of This Chapter

1. Oe.or;igning for quality and innovatiol'l is one of lhe tht'CC: universal pi'QCesscs of theJuran
Trilogy. ft is required toad1ieve breakthroug hs new prod ucts, services, and processes.
2. An effe<:tive design process requires a robust method and structure to create new
products (goods, services, information) and ensure that these together \'lith key
operational processes-including process contro ls-are developed prior to the
introduction of the prod ucts to the marketplace.
3. The Juran Quality by Design Model consists of following simple steps, primarily
leading to a much better understanding of the ct'"tomers that will benefit fro m the
new product. It is nota statistical design method as Design for Six S;gma is considered.
lt is often used to design new services and processes. The steps are as follows:
• Establish the design targets and goals.
• Define the market and customers that \viii be targeted.
• Discover the market, cus tomers, and societal needs.
• Develop the features of the new design that will meet the needs.
• Develop or redevelop the processes to produce the features.
• Develop process controls to be able to transfer the new designs to o perations.
4. The Design for Six Sigma model, often ca lled DMADV, cons is ts of a s tatis tica l
approach to design applicable to manufactured goods. It follows similar s teps and
incorporates some of the tools in Juran's model:
• Define the project and the targets.
• Measure what is critical to customers and quality (CTQs) to est.ablis h the required
fea.tures.
• Analyze the information and create a hig h-level design incorporating the CTQs.
• Des.ign by creating detailed designs, evaluate them, and optimize them before
transferring them to o perations.
• Verify the design requirements and execute the final product.

Tackling the First Process of the Trilogy: Designing lnnovattve Products

An organiz.-ttion's ability to sa tisfy its customers depends on the 1'obustnes...o:; of the design
processes because the goods you sell and the services you offer originate there.
The design process is the first of the three elements of the Juran Trilog)' It is one of the
three basic functjons by wiUch management ensures the survival of the organ.izatjon. The
design process enables innovation to happen by dcsigni.o'g products (goods, services, or
il'forrnation) together with th_c processes-including controls- to produce the final outputs.
'v\'hen design is complete, the other two e lements--<ontro l and improvement-kick in to
continuously improve upon the design as customer needs and technology change.
This handbook addresses two ' 'ersions of the design process. In this chapter we will dis-
cuss the first vecsion, Juran's urtiversal quality by design model. It has been. in place since 1986
and provides a structure that can be incorporated into an organization's new product develop-
ment f<mction, or it can be used independently to be carried out project by project as needed .
The second version, Design for Six Sigma (DFSS), which is referred to by the s teps in the
process DMADV (define, measure, analyze, desi-gn, and verify), is the most rece,,t adaption
 Qua lit y Plann ing: Des igning Innova tive Products and Se rvices 85

to Juran's model. It builds upon the Six Sigma Improvement or DMAIC (d efin e, measu re,
analyze, improve, and con trol) methodology to improve performance. DMADV was firs t
introduced by GE. It uses elemen ts of the Juran modeland incorporates many of th e statisti-
cal tools common to imp rovemen t. DFSS w ill be covered in detail in Chapter 14, Continuous
ln novati.on Using Design for Six Sigma.
TI1e Juran model is especially usefu l for designing products a nd redesign ing processes
simply and economically. The authors have w itnessed the d esign of superb products, pro-
cesses, and services using this model.
Examples include a prize-winning safety program for a mul tiple-plan.t manufacturer; an
it'lfotmation system that enables both sa les ar'd manufacturing to track th e p rocc..<tSion of an
order throughout the entire order fulfill ment process so customers can be informed- on a
daily basis-of the exact status of their order; an d a redesign ed accolmt& receivable sy:;tem
much faste r an d more efficient than its p redecessor.
The DFSS model is the classic model enhanced by th e addition of computers and statisti-
cal software packages$ w hich permit the utilization of n u merous design tools no t easily used
w ithout a comp u ter. The Six Sig ma model is s uitable for designing even complex produ cts
and for achieving extraordinary levels of quality. Altho ugh it is time consumin g and expen-
sive in the s hort term, when executed properly, it produces a healthy retu rn o n investment.

The Juran Quality by Design Model

Modern, s tructured q uality design is the methodology used to p lan !both fea tures that
respond to customers' needs and the p rocess to be u.ed to make th ose fea tures. "Quality by
design" refers to the product or service development processes in organ izations. Note the
dual 1·esponsibility of those who plan: to provide the feat ures to meet customer needs and to
p rovide the process to meet operational need s. In times past, the idea that prod uct design
stopped a t und erstanding the feat ures that a prod uct should have was the blissful domain
of marketers, salespeople~ and research and development people. But this new dual respo n-
sibility requi re..~ tha t the excitemen t generated by u ndersta.ndi ng the features a1' d customer
need s be tempered in the fi re of operational understand in g.
ll'at is, can the processes make the required feat ures withou t generating waste? To
answer this q uestion requires understanding both the current processes' capabilities and
c ustomer specifications. If the current processes cannot meet the requirement, modern
design must include finding alternative pt()t.."'CSSCS that arc capable.
The Ju ran Trilogy points out that the word "quality" incorporates M•o meanings: first,
the pr~nce of fea tures creates c ustomer satisfaction; secon d, freedom b ·om fail ures about.
those fea tu res is also needed. Ln short, failures in features create d issatisfactions.

1. Removing failures is the purpose o f quality improvement.

2. Creating features is the purpose o f q uality by design.

Kano, Juran, and o thers have long ago agreed that the absence of failures, that is, no
c ustomer d issatisfaction, may not lead us to the belief that satisfaction is thus in hand. \•Ve
can readily·conclude that d issatisfaction goes down as fail ures a re removed. \·Ve cannot con-
clude that satisfaction is therefore going up, because the removal of irri tants docs not lead to
satisfaction- it lead s to less d issatisfaction.
[tis o nly the presence of features that creates satisfaction. Satisfaction a n d d issatisfaction
are not co-opposite terms. 1t is am:.zlng how many organizations fail to grasp this point.
Let's take, e.g., the typical "bingo card" seen in many hotels. These are replete with "dosed-
ended" quest-ions. For example, they ask, "H ow well d o you like this o n a scale of 1 to 5?"
86 Key Concepts: What Leaders Need to Know about Qua lit y

l11ey do not ask, "How well do you like this?" This is the exact oppos~te of the q uestion
uHO\V well don't you like it?" Therefore, any so-called satisfaction rating tha t d oes not allow
for open-ended questioning such as "What s hould we do tha t we a re not a lready doing?" or
"ls there someone who p rovides a service we do not offer?" w ill always fAll into a one-sided
dimension of quality u ndcrsta.nd ing. Wh a t, the n, d oe$ a composite scol.'e of 3.5 for o ne
branch in a chain o f ho tels really mean compared to another b ranch scoring 4.0? It means
little. Their so-ca Ued satisfaction indices are really dissatisfaction in dices.
So we arrive a t the basic fundament-dl of wh at quality really is. As stated in C hapter I
Attaining Superior Results Through Quality, the authors adopted a defini tion that Juran
had postula ted long before: "quali ty" means fitt,css fo r usc, ar'ld we nO\"' have extended it
to "fitness for purpose." Let's explore this concept.
First, the definition of ' 1fitness for use" takes into account both dimensions of q uality-
the presence of fea tures and the absence of failures. The s ticky points are these: Who gets to
decide what "fitness" means? Who decides what "purpose" means? The user decides what
"use" means, a nd the user decid es what "fitness" means. Any o ther answer is bow'ld to lead
to a rgume nt and m isunderstanding. Providers rarely w in here. Users, especially society a t
large, generally always win. for example, take yourself as a consumer. Did you ever use a
screwdriver <lS a pry bar to open a paint can? O f course you d id. Did you ever use it to punch
ho les into a jar lid so your ch ild could watch b ugs? Of course you did. Did you ever usc it as
a chisel to remove some wood, or metal, that was in the way of a job you were d o ing around
the house? Of cou rse you did. Now wait just a moment. , , a screwdrive:r's intend ed use is
to drive scre\..•s!
So the word " usc" has two components, inlr.uded use and actual use. VVhen the user utj.
li7..cs it in the inte nded way, bot-h the provider and the user are satisfied . Conformance to
specification an d fitness for purpose match. Bu t w hat about w hen the user uses it in the
nonintended way, as in the screwdriver example? What, then, regarding specifications and
fjtness?
To del"e even deeper, how does the user actually use the product? What need is it meet-
ing for the user? Here we find 3J'IOthcr jw'lcturc: the- user can create a.rtfu l n ew uses for a
product. For example:

"2000" Use.sfol' WD·IW. WD-40 was formula ted years ago to meet the needs o f the U.S.
space program. Not man y know the o rig ins o f the bran d name. "\•VD" refers to water
d isplacement, an d 40 is s imp ly the 40th recipe the company came up w ith. But as the
produ_ct moved into the consU.Il'ler ma.rket, aU kinds of new uses '"'ere uncovered by the
users. People claimed it was excellent for removing scuff marks from floori.ng. They
claimed it could easily remove price stickers from lamps, jnspec tion stickers from
windshields, and bubble g um from children's hair. The company delighted in a ll this.
But the company d idn't release a ll those clever new uses for public consumption. People
also claimed that if they sprayed bait or lures with it, they caught mo.re fish. Those with
arthritis swore that a quick spray on a stiff elbow gave them relief. Let's not go too far.
\ \1hat a bout use where the product obviously canno t work? In Latin there is a word for
this: ab-use {abuse), wh ere the prefix "ab" s imply means "not."

Some examples will h elp: back to the screw driver. Yo u could argu e tha t usin g the screw·
driver as a pry bar, chisel, o r punch is abuse of its o rig inal designed purpose, But dearly man y
manufacturers have provided a p roduct that can withstand this a buse, and so use then falls
back in to the "i1'1 tcndl'!d" column (wheth er th is t.-amc as a result o f hnvsu its or from some othe r
source). Furth er, a look at commercial aircraft "black boxes" (whidl are o range, by the way),
show that they dearly s urvive in circumstances where the aircraft do not survive. Understand-
ing of use in all its for ms is w hat modem design seeks to achieve.
 Quality Planning: Des igning Innovative Products and Se rvices 87

Las t, modern design and planning, as we see over and over, seeks to create features in
response to understanding customer needs. 'We are referring to customer-driven features.
The sum of all features is the new product, service, or p rocess.
A different type of product planning in which features meeting no stated need are p ut
out for user'S to explo re is beyond the scope of this chapter. 3M's Post.. it Notes ar'l d the Inter·
net are examples where we co11ective1y did not voice need s, but w hich we cannot imagine
life w ithou t them, once v,,re embraced their feahLres.

The Quality by Design Problem

TI1e quality by design model and its associated methods, tools, and techniques have been
developed because in the history of modern society, organizations rather unive.r sally have
demonstrated a consisten t faiJure to produce the goods and services that unerringly delight
their customers. As a customer, everyone has been dismayed time and again when flights
are delayed, radioactive contamination spreads, med ical treatment is n.ot consistent with
best practices, a child's toy fails to hmction, a new piece of software is not as fas t or user-
frjendly as anticipated, government responds with glacial speed. (if at alJ}, or a home wash-
ing machine with the latest high-tech gadget delivers at higher cost clothes that are no
cleaner than before. These freque nt, large q uali.ty gaps arc really the compound result of a
number of four s maller gaps, illustrated in Figure 4.1.
TI1e first componen t of the quality gap is the underslfmding gap, i.e., lack of understand-
ing of what the customer needs are. S..>metimes this gap is wider because the producer sim-
p!)• fails to consid er who the custome<S are and what they need. More often the gap is there
because the s upplying organ.ization has erroneous confidence i_n its ability to under:sta.n d
exactly what the customer really needs. The fina l perception gap in Figure 4.1 also arises
from a failure to tmderstand custo mer needs. Customer.s do not experience a new suit of
clothes o r the continuity in service from a local utility simply based on the technical merits
of the product. C ustome<S react to how they perceive the good or service provides them with
a bencfiL

Cus1omcr c.xpccta1ions
Undcrstonding ~ap
Underslanding of needs

1
Quality
Design of product
Oesign gHJ>

gap Pro~css !<'P

Captability to deliver design

j Actut\1 delivery
Oper.ttions gap

Perceptjon gap
Customer perception of delivery

F1cURE 4.1 The quality gap. (Inspired by A. Parasuraman, Yalarie A. Zeithami, and Leonard L Berry, ...A
Conceptual Model for Service Quality and Its Implications for Further Research. Journal of Mari<eting,
H

Fa/11985, pp. 41- 50.)

88 Key Concep t s: What Leaders Need to Know about Qua l it y

Quality Planning
I. Establish the project and design goals.
2. Identify the customers .
3. D iscove1· the c.ustomer needs.
4, Develop the product or service fc.;Hurcs.
5. Develop the process features.
6. Oevclop Ibe controls ~ll)d u·fulsfer ro OJ)Cnuious.

FtGuRr 4.2 Quality by design steps. (Copyrig/lt 1994, Quality by Design, Juran Institute. Inc.)

The second constituent of the quality gap is a rksign g"P· Even if there were perfect
knowledge abou t cus tomer need s and perceptions, many o rganizations w ould fail to create
d esigns for their goods and serv ices that are fu lly consistent with that understanding. So me
of this failure arises fro m the fact that the peop le who und e rs tand c ustomers and the
d isciplines they use for understanding cLtStomer needs are often syste matically isolated
from those w ho actually create the designs. [n addition, des igners- whether- they dcsig·.n
sophisticated equipment or delicate human services-of!en Jack the s imple tools that w ould
enable them to combine their technical expertise with an und erstand ing o f the cus to mer
needs to create a truly superior prod uct.
The third gap is the proc,-ss gnl'· Many splendid designs fail bec.11.1Se the process by which
the physical product is created or the service is delivered is not capable of conforming to the
d esign consistently time after time. This Jack of process capability is o ne of the most persis~
tent and bedeviling failure8 in the total quatity gap.
The fourth gap is the operntions gap. The means by which the process is operated and
controlled may create additi<>nal failures in the detivery of the final good or service.
Quality by design provides the process, methods, tools, and teclm iques for closing each
of these compo nent gaps and thereby ensuring that an y final gap is at a minim u m. Figure 4.2
summarizes at a high level the basic steps of quality by design. The remail!lder of this section
will provide the details and exam ples for each of these steps.

Juran Quality by Design Model

V\1e look at each of lhese as we s tep thro ugh the sequence at a hig h level.

Step 1: Establish the Project and Design Goals

All design s hould take place project by project. There is no s uch thing as design in general;
there is only desjg.n in s pedfk. In stra tegic planning, we set out the vision, mission, s t-rate-
gies, o bjectives, and so o n. Each is a specific thing. In product plannin.g, we s tart with a
project, i.e., something to plan. '1iVe might design a new training roo m, a new car, a wed·
d ing, a customer toll~free ho tline, o r a new Internet process fo r bidding on travel booking
(such as P riceline.com, Expedia.com). Note that each is a specific thing, and each can be
clearly differentiated from anything else. A traini(lg J'O()m is not a cafeteria, a new ca.r is not
a H owit7..Ct, a hotli_n c is not long·d istance service, and the t-ravel booking p rocess is not a
books tore online. This is a sig nHicant point. \•Vithout being able to d iffe rentiate what we
are designing from anything else, everything collapses into vagueness. So a p roject is o ur
s tarting poin t.
 Quality Planning: Des igning Innovative Products and Se rvices 89

Step 2 : Identify the Customers

Going back to u,e 1980s Tok1l Quality Management (TQM) days, we learned that those who
receive the product are customers in some way. lf we were designing a b·aining mom, the tra in-
ees would be an important customer segment. So, too, would the custodians, because they
have to clean the room, set it up in different ways, and so o n. Customers of the new car include
th~ purd"'a.sers, the insu.rnJ"'Ce o rganizations, the deaJers, the ca.r ricrs, e tc. Customers of the hot..
line include o ur clients, o ur service agents, etc. We can include as customers for the travel process
the tr~1velers, airlines, and the Web server entity. From all this e merges the basic understanding:
A customer is a cast of ch aracters, and each h~s unique need s that must be met.

Step 3: Discover the Customers' Needs

\11/ants, needs, perceptions, d esires, a nd other e mn tions are a ll involved in o ur discovery of
c ustomer needs. We need to Jearn how to separate things a nd prioritize them. But at this
point, we need to emphasize that m>t all high-priority customers (such as the car buyer) are
the only ones with high-priority needs. We also stress that just because some customer entity
is lower in priority doesn' t mean at all that it automatically has lesser-priority needs. We
need to understand lhc ''voice o f the customer'' and the "voice of the market."
Take, e.g., the automobile carriers; we simply cannot o verlook their n eed s fo r the car to
be only so high and only w wide. If we ignored their needs, they could s top the product
from reaching the cash-paying ultimate customer, our buyer. So, too, rould regulators (the
vnrious sta tes, the National Highway Transportation Safety Board, the Environmental Pro-
tection Agency, etc., impose " needs" tha t if u nmet, could s to p the process fron1 going for-
ward a t all). So from all this, we reach anothe r po int: C ustomers have to be prio ritized in a n
agreed upon way.

Step 4 : Develop the Product or Service Features

The word "feature/' as used in product pla nning, means what the product doesl its charac-
teris tics... or its functional ity. In s tructu red p roduct planning... we ad o pt a different definition:
A feat ure is the thing that the customer employs to get her or his needs met. For example, in
our h·aining room, the trainees need to take notes as they learn. A featu re r.night then be a flip
chart, a w hite board,. or a desk. Our custodians migh t need to move things aroun d quite a
bit, so features might include portability, s ize, weight, and modularity.
As our list of features grows, we S(l(ln realize that we cannot possibly !lave all feat<u-es a t
the same priori!)' level. So we need a way to put things in order, once agai.,, and in an agreed
upon way. ll\lc fi nali7..c by optimizing a11d agrecil''lg on the list of feat ures a nd the goals for
them as well. Note what o p timization means: Not a ll features survive produd pla nn ing.

Step 5: Develop the Process Features

Because we know that the process is the thing that creates the features, w e need to examin e
c urrent and alte rna tive processes to see w hich on es w iH be used to create the features. \!Ve
need to be sure that the product feature goals can be accomplished via the processes we
choose. 111 o ther words:

Process capability must t'econcile with product requiremen ts. TI1at s tatement is very
important. No process knows its product goals; product goals come from hurmans. Ideal prod-
uct goals would naturally reflect the various customers. But the key isslle is this: Variation
comes from processes; goals come from humans.
90 Key Concep t s: What Leaders Need to Know about Qualit y

Ln the example o f the training room, process goals might be to reset the room in
20 minutes, keep a s upply o f flip charts in a closet, certify the trainees to a standard, and
so o n. As before, we need to Jist all the possible routes to making the prod uct, select the
o nes we will use ba8ed on some rationale, establish goals fo r the processes, and reach an
optim um.

Step 6: Develop Process Controls and Transfer to Operations

Develop Process Controls

Control is basic to all human activi ty, from how the body regulates itself as to temperature
and metabolism, to financial controls in how we run o ur organiza.tions o r homes. Control
consists of three fundame ntals:

In product p lanning, we need to ensure that the processes work as designed vvithin their
capabilities. Jn the training roo m, e.g., controls might take the form of a checklist for reset-
ting the room and a m jnimum inventory of flip charts. Control makes use of the concept of
the feedback loop.

Here's an example you might keep in mind:

Did you e ver check the oiJ in your car? TI1e dipstick is a form of con tr ol point. Note that
we begin with a control subject (volume of o il), a unit of measure (quarts or liters), a sensor
(you and the d ips tick), and a go.>! (keep the oil somewhere between "fuU" and "add"-
inside those hash marks). Then we move on to sample the process (clean the dipstick, p ut it
back in, remove it, and o bserve the oil level). Next we adjust when adjustment is called for
{oiL levels below add require us to add oil until we bring the o il up to somewhere between
add and full, the agreed goal). If the oil is already wit!Un the hash marks, the control activity
is to replace the dipstick, shut the hood, and drive on until another checkpoint is reached
(perhaps next month). Note that the control activity m us t reOect the agreed upo n goal fo r
control. In the engine oil example, the control point was ''inside the hash marks," so the
control action is to bring the oil to somewhere ''inside the hash marks.n Many people miss
this poin t; e.g., they add oil until the stick reads "full." 'This is overcontr<>l. Control actions
must refJect control goals.

Transfer to Operations
Transfer to operations winds up the whole d esign p rocess. As used here,"operations" means
those who run the p rocess, not "manufacturing." To continue the exam ples used earlier,
o perations fo r the training room is the activity of the trainers, the custodians, and the pur-
chasing department. For the new car, o perations includes manufacturing, transpo rt, dealer
relations, and the legal department. For the hotHnc, operations means the customer service
agents who answer the phone. In the travel bidding process, operations :include those who
shop the bid or reject it and those who main tain the soff1..¥are that interfaces the prospect
with the carriers. From the Jessons of the era of prod.uctivity, the Industri-al Revolution, and
into the twen tieth century, we have learned that the involvement of the <>perato<S is key to
any wcll ..ruru\ing pr()C."CSS.
Wi th the d evelopment o f the Ford Taurus came solid -u nderstanding o f the va lue of
a "platform" team. Designers, engineers, workers, purchasing agents, salespeople, and
managers all sat under one roof to develop the car. The concept of plat€ODTI teams is VU!U
 Qua lit y Plann ing: Des igning Innova tive Products and Se rvices 91

ingrained in many car organ izations today. The C hrysler Techn ical Center in Auburn Hills,
Michigan, is a later example of sud1 b road colla boration. Thus, successful transfer to opera-
tions must in clude the operators in the desig n process as early as possible.
l11e remainder of this section will p rovide details, practical guidan ce.,. and examples for
each of these steps~

Juran Quality by Design Model Substeps

St ep 1: Establish the Goals and the ProjectTeam
A q uaHty by desig'' project is the organized wnrk needed to prepare a.n organization to
d eliver a new or revised prod uct·, service, or process. T1'1 c followi ng steps o r activities arc
associated with establish ing a qu ality by d esign project

1. Ide ntify which projects are required to fuJfill the organ ization's sales or revenue
gen eration s trategy.
2. Prepare a goal s ta te ment for each projec-t.
3. Establish a team to carry out the pn>ject.

Identification of Projects
Deciding w hich projects to undertake is usually the outgrowth of the strategic and b usin ess
design of an organization. (See Chapter 7, Strategic Planning and Deployment: Moving
from Good to Great, for a djscussion o f how specific projects are d e ployed from an organ i-
zation's v ision, s trategies, and goals.) TypicaJJy, design fo r q uality p rojects c rea te new o r
tlpdated products that a re needed to reach specific s tra tegic goals, to meet new or ch anging
c ustomer needs, to fulfill legal or c ustomer mandates, o r to take advantage of a new o r
emerging techno logy.
Upper management m ust take the leadership in identifyi ng a.nd supporting the c-ritical
quality by design p rojects. Acting as a d esign cotmcil, coun cil, or sim ila r body, management
needs to fulfill the following key roles:

1. Setting df'Sign goals. Marketing, saJes, an d s im ila r management flmctions identify

market opportunities and client needs currently not being met. By setting these
goals, management is beginning the process to create new products, services, o r
processes to meet these un mel need s.
2. Nomiunting atld selecting projects. Th e managemen t orct)uncil selects the appropriate
d esign projects critical to meeting s trategic business and customer goals.
3. Selecli"g lcnms. Once a proje<:t has been identified, a team is appointed to S<!<l the
p roject through the remainin g s teps of the design for quality process. A team may
be defined by a project manager in the product developmen t ilmction.
4. Supporting project team. New techno logies aJ'I d processes a_rc gen erally required to
meet the new design goals. It is up to management to see that each design team is
well prepared, trained, and equipped to carry o ut its goals. The s u p port may in clude
the following:
a. Provide education and training in design tools.
b. Provid e a trained project leader to help the team work effectively and learn the
d esign for quality process.
92 Ke y Con c e pIs: Wh a I Le ad e r s Ne e d I o Ko ow abo u I Qu a Ii I y

c. Regularly review team prog ress.

d. Approve revision of the project goals.
e. Identify or help with any issues that may hinder the team.
f. Provide resource e xpertise in data analysis.
g . Furnish resources for unusually demanding data collection such as market
studies.
h. Communicate project rcsuJ ts.
5. Mo~tilori11g progri!$S. The council is responsible lor keeping the quality by design
p rocess on track, evaluating prog·res~, and making midooui"Se corrections to imp(ove
the effectiveness o f the entire process. Once the council has reviewed the sources for
potential project>l, it will .elect one or more for immediate attention. Next, it must
prep ore a goal s tatement for the project.

Prepare Goal Statement

Once the council has identified the need for a project, it should prepare a goal s ta tement
that incorporates the speciiic goal(s) of the project. The goal statement is the written
c harte r for the team tha t describes the intent and p urpose of the project. The team goal
describes

• The scope of the project, i.e., the product and markets to be addressed
• The goals of the project, i.e., the results to be achieved (sales targets)

\Alriting goal s tatements requires a firm understanding o f the driving force behind the
project. The goal helps to answer the follo wing questions:

• \Nhy does the organization want to do the project?

• What will the project accomplish o nce it is im plemented?

A goal s tatcmc•\1 also fos ters a consensus among those who either will be a ffected by
the project o r w ill contribute the time and resources necessary to pJan and implemen t
the project goal.
Examples include the following:

• The tt:amgOt·d is to deliver tomarketa new low-energy~ fluorocarbon-free refrjger<ltOr

that. is 25 per<:<lnt less expensive to prod uce thnn similar models.
• The team will create accurate control and minimum cost fo r the inventory of all
stores.

\-\ry,;Je these goal statements describe what will be done, they are s till incomplete. They Jack
the cla ti ty and specifici ty requited of a complete qua lity by design goal s tatement that
incorporates lhe gool(s) o f a project. Well-written and effective goal s tatements define the
scope of the project by including one or more of the following.

Inherent Performance Ho w Lhe final product wiJI perform on o ne or more dimens ions, e.g.,
24-ho ur respo nse time., affects the scope of the project.

Comparative Performance How the liMI p roduct will perform vis-a-vis the competition,
e .g ... the fastest response tirnc in the me tropolitan area, is re levant.
 Quality Planning: Designing Innovative Products and Services 93

Customer Reaction How will c ustomers rate the product compared w ith o thers available?
For example, o ne organization is rated as having a better on-time delivery service than its
closest dval

Voice of Mart<et 'W ho are o r will be the c ustomers or target audience for this product.. and
what share of the market o r market niche will it capture, e.g., to become the "preferred"
SOLtr<:e by all business travelers within the continental United States?

Performance Failures How will the p roduct perform with respect to product failure, e.g.,
failure rate of less than 200 for every 1 million hours of use.

Avoidance of Unnecessary Constraints It is important to avoid overspecifying the product

for the team; e.g., if the product is intended for airline carry-o n, specifyini; the precise
diml!nsions in the goal maybe too restrictive. There may be several ways. to meet the carry-
on market.

Basis for Establishing Quality Goals In addition to the :;cope of the project, a goal statement
must incl ude the goal(s) of the project. An important consideration in establishing qt.tality
goals is the choice of the basis for which the goal(s) are set.

Technology as a Basis !J> many organizations, it has been the tradition I<> establish the
quality goals on a techno logical basis. r..•t ost of the goals are p ublished in specifications
and proced ures that define the quality targets for the s uperv isory and nonsupervisory
levels.

The Market as a Basis Quality goals that affect product sa lability s hould be based
primadly on meeting or exceeding market quality. Beca use the marke t and the compe ti-
tion undoubted ly will be changing while the design for quality pro ject is underway,
goa ls should be set so as to meet or beat the competition estimnted to be prevailing
when the project is completed. Some internal suppliers a re internal monopolies. Com-
mon examples include payroll preparation, facilities maintenance, cafeteria service,
and interna l transportatio n. However, most inte rnal monopoJies have potentia] com-
petitors. There aro o utside s uppliers who offer to sell the same service. Thus the perfor-
mance of the interna l supp lier can be compared with the proposals offered by a n o utside
s upplier.

Bencflmarklng as a Basis "Benchmarking" is a recent label for the concept of setting goals
based on knowing what has been achleved by others. (See Chapter 15, Benchmarking; Defining
Best Practices for Market Leadership.) A common goal is the requirement that the reliability of
a new product be at least equal to that of the product it replaces and at least "''ual to that of the
most reliable competing product Implicit in the use of benchmarking is the concept that the
resulting goals are attainable because they have ah·eady been attained by others.

History as a Basis A fourth and widely used basis for setting quality goals has been his-
torical perfotmance; i.e., goals are based on past performance. Sometimes this is tightened
up to stimulate improvement. For some products nnd processes, the historical basis is an aid
to needed stability. In other cases, notably those involving duonicaUy high costs of poor
quality, the historicaJ basis helps to perpetuate a chronically wasteful performance. During
the goaJ..sctting process, the management team should b~ on the alert fOr ~uch misuse of the
historical basis.
94 Key Concepts: What Leaders Need to Know about Qua l ity

Goals as a Moving Target It is widely recognized that qualily goals mus t keep shifting to
respond to the changes that keep coming over the horizon: new technology, new competi-
tion, threats, and opportunities. While organizations that have adopted quality management
methods practi~ this concept, they may not do as well at providing the means to evaluate
the impact of those changes a1>d revise the goals accordingly.

Project Goals Specific goals of the project, i.e., what the project team is to accomplish, are
part of an effective goal statement. In getting the job done, the team mus t mentally start a t
the finish. The more focused it is on what lhe end result will look Hke~ the easier it will be to
achieve a s uccessful conclusion.

Measurement of the Goal In addition to s tating what will be done and iby when, a project
goal must show how the team will meastu·e whether it has achieved its s tated goa.ls. It is
important to spend some time defining bO\\' success is measured. Listed belo·w are the four
things that c;m be meas\.ll'<..>d:

1. Quality
2. Quantity
3. Cost
4. Ti me, speed, agi.lity

An e ffective quality by design project goal must have five characteristics .for it to be
smart and provide a team with eno ugh information to guide the design prOL~s. The goal
mus t be

1. Specific.
2. Measurable.
3. Agreed to by those affected.
4. Realistic- it can be a stre tch, but it m us t be p lausible.
5. Time-specific-when it will be done.

An example of a poorly written goal that is not smart might look something like this:
"To design a. new life insuran~ plan fo r the poor."
Co ntrast this with the fo llowing example: "To design and deliver a w ho le life p lar'l in less
than 90 days that enables poor families to ensure a level of insurance for under $500 per year
(at time of introduction). The design also should allow the organization to sell the plans with
an average return of between 4 and 6 percent.''
TI1e second example is smart- much more detailed, measurable, and time.-spedfic than
the first The target or e nd result is clearly stated and provides enough direction for the team
to plan the features and processes to achieve the goal.

New Product Policies Organizations need to have very clear policy guidance wilh respect
to quauty and product development. Most of these should relate to all new products, but
specific policies may relate to ind iv"idual products, product lines, or groups. Four of the most
critical policies are as follows.

1. Failures h1 new nmf carnjover designs. Many organizations have establis hed the clear
policy tha t no new product or component of a product will have a higher rate of
failures than the oJd prod uct or componc11t that it is replacing_ l n addition, they
 Quality Planning: Des igning Innovative Products and Se rvices 95

often require that a ny carryover design h ave a certain leve l of performance;

o the rwise, it must be replaced with a more reliable d esign. The minimum carryover
reliability may be S<'t by one or more of the following criteria: (1) competitor or
benchmark reliability, (2) customer requirements, o r (3) a s tretch goal beyond
benchmark or custo mer requitemcnts.
2. lt~temled versus 1miulet1ded use. Should stepladders be designed S<> that the user can
stand o n the top step without damage, even though the step is clearly labeled "Do
Not Step Here?" Sho uld a hospital d esign its emergency room to .handle volumes of
ro utine_, non emergency patients w ho show up a t its doors? These are policy
questions that need to be settled before th e project begins. The an swers can have a
significant impact on tho final product, and the answers need to be d eveloped with
tefcrcncc to the orga1'1iz.ati.on's strategy and the e nvironment w ith.i'' w hjch its
products are used .
3. RequirC'meul of formal qunlily by desig11 process. A structu red, forma l process is
required to ensure that the p roduct plann ers identify their c ustomers and d esig n
p roducts and processes that w ill meet those c ustomer needs with minimum
failures. Structured fo rmality is sometimes eschewed as a barrier to creativity.
Nothing could be more m isguided. formal qua li ty by des.i gn identifies the point$
at w hich creativity is dema nded and then encourages_,s upports , a nd e nab les that
creativity. Formal design also e nsures that the creativity is foc used o n the
c ustomers and that c reative designs ultimately are delivered to the customer free
of the destructive influences of failures.
4 . Custody of desigus mrd dumge coutrol. Specific provis ion m ust be made to ensure that
approved designs are documented and accessible. Any changes to designs must be
validated, receive appropriate approvals, be d ocumented, a.nd be unerring ly
incorporated in to the p roduct o r process. Specific individua ls mtL'it have lhe
assigned authority, resp o nsibility, a nd resources to maintain the finaJ designs and
administer change control.

Establish Team
The cross-functional approach to complete a quality by design project is effective for several
reasons:

• Team involvement promotes sharing of ideas, experiences, aJ'\d a sense of

commitment to being a part of and helping 11 our" organization achieve its goal.
• The diversity o f team members brings a more complete w orking kno\vledgc o f the
p roduct and processes to be planned. Design of a product requires a thorough
u nderstanding of how things get d one in many parts of the organization.
• Rep resentation from vario us departments or functions p romotes the acceptance and
implementation of the new plan througho ut the organiz.1tion. Products or processes
designed '•ith the active participation of the affected areas tend to be technically
s uperior and accepted more readily by those who must implement them.

Guidelines lor Team Selection \\~1en selecting a team, tho council idell tilics those parts of
the organization that have a stake in the outcome. There are several places to look:

• Those who will be most affected by the result o f the project

• Dcpattmcnts or funclions responsible for vario us s teps in the p mcess
96 Key Concepts: What Leaders Need to Know about Qua lit y

• Thos.~ with special knowledge, information, or skill in the desig n of the project
• Are~s that can be helpful in implemer\!ing the plan

Step 2 : Identify the Customers

This step may seem unnecessary; of cours.~, the planners and designers know w ho their
customers are: the driver of the auto mobile, the d epositor in the bank acrow1t, the patient
w ho takes the medication. But these are not the only customers-not e\"en necessarily the
most important cus to mers. C ustomers comprise an entire cast of characters that needs to be
Wlder.tood fully.
Generally, there are two primary groups o f cus to mers: the external custo mers-those
outside the producing organization- and the internal customers- those inside the produc-
ing o rganization.

Types of External Customers

The term "customer" js often used loosely; it can refer to an entire organization, a unit of
a larger o rganiza tion, or a persoo. There are many types o f custome-r s .. some obv-i ous,
others hidden. Below is a listing of the majo r categories to help guid e complete customer
iden tification.

The Purchaser This is someone who buys the product for himself o r herself or fo r someone
els.~, e.g., anyone who purchases food for his or her family. The end us.~rf ultimate custo mer
is someone who finally benefits from the product, e.g., the patient who goes to a health care
facility for diagnostic testing.

Merchants These are people who purchase products for resale, who lesalers .. distrib utors,
travel agents and brokers, and an yone who handles the product, s ud1 as a supermarket
employee who places the product on the shelf.

Processors Processors are o rganizations and people who use the p roduct or ou tp u t as an
input fo r producing their o wn product, e.g., a refinery that receives crude oiJ and processes
i t into d ifferent products fo r a variety of customers.

Suppliers Those w ho provideinp ut to the process are s uppliers, e.g., the manuJacturerof
the .spark plugs for an auto mobile o r the lav•' fil'm that provides advice on the organiza ..
tion's environmenta l law matters. Suppliers are also customers. They have informatio n
needs with respect to product specification, feed back on failures, predic tability of orders,
and soon.

Potential Customers Those no t currently using the product but capable of becoming cus-
tomers are poten tial customers; e.g., a bus iness traveler renting a car may purchase a similar
automobile when the time comes to buy o ne for p-ersonal use.

Hidden Customers Hidden custorncrs comprise an assol'tment of dHferent customers w ho

are easily o verlooked because they may not come to mind readily. They can exert great influ-
ence over the product design: regulators, critics, opinion leaders, testing .ervices, payers, the
medin, the public a t large, th os.~ directly or potentinlly threatened by the p roduct, corporate
policymakcrs, Jabor uojons, a.nd p rofessiona l associations.
 Qua lit y Plann ing: Des igning Inn ov a tive Products and Se rvices 97

Internal Customers
Everyone inside an organiz..'ltion p lays th l'ee roles: supplier, processor, and c us tomer. Each
individual recei ve~ something from someone, does something with it, and passes it to a third
individuaL Effectiveness in meeting the needs of these in ternal customers can have a major
impact o n serving the exte11:aal custom.e rs. Identifying the interna l c ustoJners will ~quj re
some analysis because many of these relationships tend to be informal, resulting in a hazy
perception of who the customers are an d how they w ill be affected. For example, if an orga-
nizatio n decides to introduce just-in-time manufacturing to one of its plants, th is will have
sjgnificant effects on purchasing, shipping, S.''lle.o;, operations, and so on.
Most organizations try to set up a mechanis.:n tha t will allow seemingly competing
functions to negotia te and resolve d ifferences based on the lUg her goal of satisfying c us-
tomer needs. This might include cond ucting weekly meetings of department heads or
publishing procedure manuals. However, these mechanisms often do not work because
the needs ofinte_rna l c ustomers are no t fu lly u nders tood, a nd communic..--ation a mo ng the
functions breaks down. This is w h y a major goal in the d esign for quality process is to
identify who the interna l customers a re, discover their needs, and plan how those needs
w ill be Sc:1.tisHed. This is a lso a nother reason to have a multiflmctional team involved in
the plruming; these are people who rue likely t<> recognize the vested interests of in ternal
customers.

Identifying Customers
In addition to the general guidan ce just laid out, it is most often helpful to draw a relatively
high-leVel flow diagram of the pr()C(!$S<."S related to the product being planned. Careful anal-
ysis of this flow d iag~ram often wil1 prov-id e new insigh t, identifying c ustomers that might
have been missed and refining underst~1nding of how the customers interact with the pro-
cess. Figure 4.3 is an example o f su ch a d iagrant. A review of this diagram reveals tha t the
role of ~~customer" is really two d ifferent roles-placing the order and u sing the product.
These may or may no t be played by the same individ uals, but they are two distinct roles, and
each need s to be und erstood it'l l'c rms of its needs.

Step 3: Discover Customer Needs

The thi rd s te p of q uality by design is to discover the needs of both external custo mers and
internal p rocessors for the p roduct. Some of the key activities required for effective discov-
ery of customer needs in clude the following:
Plan to d iscovcr customers' needs.
CoUect a Hs t of custo me rs' needs in their lan g uage.
An aly ze and priorit ize c ustomers' needs.
Tra nslate their need s into "ou r'' language.
Establish units of measurement and sensors.

Our own expe rie nce teUs us that the needs of human beings are both varied an d com-
plex. This can be particularly challenging to a design team because the actions of customers
are not always consistent with "ha t they say they want. The challenge fo r quality b)' design
is to id entify the most important needs from the full a n ay of those n eed s expressed or
assumed by the customer. O n ly then can the product delight the c us tomers.
Wh en a product is be.ing designed, there a re actually two related but distinct aspects of
w ha t is being d eveloped: the technology elements of w ha t the p rod uct's features w ill
98 Ke y Con c e pIs: Wh a I Le ad e r s Ne e d I o Ko ow abo u I Qu a Ii I y

or~~:~~.~~--------------------------- -r
Customer

l
Receive order; Process the
inspec ~ it complaint

Mai l order
Rewrn order supplier
fo rm to customer

------ T
Sbip goods 10
customer

R..:cci ve goods:
illSJleCt them

Customer
Complain to
supplier

FtouR£ 4.3 Flow diagram and customers . (From J. M. Juran, Quality Control Handbook, 5th cd.,
McGra"cHi/1, New York, 1999, p. 3.12.)

actually d o or how it w i lJ function and the h u man elements o f the benefits custorners will
receive from using the product. The two must be considered together.
Discovering custo mer needs is a complex task. Experie nce sh ows that customers us ually
do .not s tate.. in $jmplc tet"ms.. exactly wha t they want; ofte1\ thQy do not even mention some
of their most basic needs. Accuracy of bank statements, competence o f a physician, reliabiJ ..
ity o f a computer, and grammatical correctness of a p u blication may be assumed and never
stated without p robing.
 Quality Planning: Des igning Innovative Products and Se rvices 99

O ne of the ways customers express their needs is in terms o f problems they experience
and their expectation that a product will solve their problems. For example, a custo mer may
state, "l can not always answer my telephone personally.. but l do not want caUers to be either
inconvenienced or disgusted with nonresponsive answering systems." Or the customer may
s tate, "'My mother's personal dign.ity and love o f people ate very important to me. r want to
find an extended care facili ty that treats her as a person, not a patient." Even when the need
is no t expressed in s uch terms, the art and science of discovering needs are to und erstand
exactly the benefit that the custo me r expects.
Wh en a product's features meet a c us tomer 's need, it g ives the customer a feeling of
satisfaction. If the prod uct fails to dcljvcr the promised feature defcct...frec, the custo mer
feels dissatisfaction. Even if a product func tions the way it has been d esigned, a competing
prod uct, by v irtue of s uperior service or performance, may p ro vide customers wHh greater
satisfaction.

Stated Needs and Real Needs

Customers commonly state their needs as seen from their v iewpoint and in their language.
Customers may state their needs in terms of the goods or services the)' w ish to buy. How·
ever, their rea l needs are the bc:ncfitc; they believe they wi ll receive.
To illustrate:
Customer wishes to buy: Benefit customer needs might include:
Fn.- sh pasta Nourish ment aJ\d taste
Newest personal compu ter Write reports q uickly and easily
Find information o n the Web
Help children team math
Heal th ins urance Security against financial disaster
Access to high -quality health care
Cho ice in health care providers
Airline ticket Transportation, comfort, safety, and
convenience
Failure to grasp the difference behveen stated needs and real needs can Lmdermine the
salability of the product in design. Understanding the real need s d oes no t mean that the
plan ners can dismiss the customers' statemen ts and subs titute their own s uperior technical
understand i1'1 g as being the customers' real need s. Understand i.n g the rcaB need s means ask·
ing and ansv~,rering s uc::h questions as these:
• Why is the cus to mer buying this product?
• What service does s he or he expect from it?
• How wil) the customer benefit from it?
• How does the customer use it?
• What has created customer complaints in the past?
• Why have cus to mers selected competito rs' _prod ucts o ver ours?

Perceived Needs
Customers understan dabl)' s tate their needs based o n their perceptions. These m ay differ
entirely from the s upplier 's perceptions of what co nstitutes product quality. Planners can
mislead themselves by considering w hether the customers' perceptions are wrong or right
100 Key Concepts: What Leaders Need to Know about Quality

ra ther than focusing on how these perceptions inf)uencecustomers' b uying habits. Al though
s ud1 differences between custo mers and s uppliers are potential tro ublemakers, they also can
be an opportunity. Superior understanding of cus to mer perceptions can I~ad to competitive
advantage.

Cultural Needs
TI1e needs of customers, especiaUy internaJ customers, go beyond p roducts and p rocesses.
They indude primary needs for job security, self-respect, respect of others, continuity of
habit patterns, and s till other elements of wha t we bro.~dly call the "cultural values"; tb.ese
are seldom stated openly. A11y proposed change become..:; a threat to these import..1J'I t values
and hence will be resisted until the natu re of the threat is w1derstood.

Needs Traceable to Unintended Use

Many q~tality failures arise because a customer uses the product. in a manner different from
that intended by the s upplier. 'This practice takes '"any forms. Pa tients visit emergency
rooms for nonemergency care. Untra ined workers are assigned to processes requiring trained
workers. Eq ui pment does no t receive s pecified preventive maintenance.
Factors s uch as safety may add to the cost~ yet they may well result in a reduced ovemll
cost by helping to avoid the higher cost arising from misuse or the product. \.vhat is essential
is to learn the following:

• What w ill be the actual use (and mis use)?

• What a.re the associated costs?
• What are the consequences of adhering only to intended use?

Human Safety
Techno logy places dangero us p roducts into the hands of amateurs who do not always
possess the requisite skills to handle them w ithout accidents. It a lso <:rMtes dangerous
by-products that threaten human health, safety, and the environment. The extent of all this
is so great that much o f the effort of p roduct and process design m ust be directed at reducing
these risks to an acceptable level. N umerous laws, criminal and civi l, mandate s uch efforts.

User-Friendly
The a mateu_r s tatus of ma ny users has given rise h) the te rm "uscr·frie nd ly" to describe
the prod uct feat ure that enables a mateurs to make read y use of tech nologiL"<ll prod ucts.
Fo r example, the language of p u blished info rmation s hould be simple, unambiguous, and
readily muferstood. (Noto rious offenders have included legal d ocu ments, owners' o perat-
ing manuals, administrative forms, etc. Widely used forms such as government tax
re turns should be field-tested on a samp le o f the very people who w ill later be faced
with filling out such forms.) The language of p ublished info rmatio n should also be
broadly compatible. (For example, new releases o f softwa re should be "upward-compatible
w ith e«rlier releases.")

Promptness of Service
Services sho uld be p rompt. In our culture, a major element of competitio:n is promptness of
service. Interlocking schedules (as in mail delivery or airli ne travel) are another source of a
growing demand for pro mptness. Still another example is the growing use of just-in-time
manufacturing, which req .. ires dependable deliveries of materials to minimize inventories.
All s uch examples demonstra te the ''eed to include the clement" of p romptness in_d esign to
meet customer needs.
 Quality Planning: Des igning Innovative Products and Se rvices 101

Customer Needs Related to Failures

Ln the even t of product failure, a new set of c us to mer needs emerges--h ow to get service
res tored and how to get compensated for the m;sociated losses and inconvenience. Cl~a rly,
the ideal solution to all this is to pl;m quality so that there will be no failures. At this point,
we '"'ill look at what Cl.lSiomcrs neet.i when fa ilures do occur.

Warranties
The laws governing sales imply that there are certain warranties given by ·the supplier. How·
ever, in our complex societ)'. it has become necessary to provid e specific, written contracts to
define just what is covered by the warranty and fo r how long a time. In add ition, it should
be dear ·w ho has what responsibilities.

Effect of Complaint Handling on Sales

vVhile complaints deal primarily with product dissatisfaction, there is a s ide effect on S.1 l·
a.biHty. Research ln this area has polnted o ut the fo llowing: Of the customers who were dis-
satisfied with products, nearly 70 pcrt."en t did not complain. The proporl'ions of these w ho
did complain varied according to the type o f product involved. The reasons for no t com-
plaining were principally(!) the belief that the effor t to complain was not wo rth it, (2) the
belief that complaining would do no good, :tnd (3) lack of knowledge about how to com-
p lain. More than 40 percent of the complaining c us to mers were unhappy with the respon-
sive action taken by the suppliers. Again, percentages varied according to the type of
product.
Future salability is strongly influenced by the action taken on complaints. This s trong
influence a lso extends to brand loyalty. Even customers of popular b ra:nds of large ..ticket
items, such as durable goods, fi na ncial services, and automobile services , will redu ce their
intent to buy w hen they perceive that their complaints a re not addressed.
This s.1me research concluded that an organized approach to complaint handling pro-
vides a high return on investment. The elements of such ;m organized approach may
il'clude

• A response center s taffed to provid e 24-hour access by co nsumers and/or a toll-free

telephone number
• Special training for the ernployees who a ns wer the telephones
• Active solicitation of complaints to minimize loss of customers in the future

Keeping Customers Informed

Customers are q u ite sensitive to being victimized by secret actions of a su pplier, as the
phrase ''Le t the buyer beware!" implies. When such secrets are l(lter discovered and publi-
cized, the damage to the supplier's quality image can be considerable. In a great many cases,
the products are fit for use despite some nonconformances.ln o iher cases, the matter may be
debatable. In still other caS<.'$, the act of shipment is at least unetltical and at worst illegal.
Customers also have a need to be ke pt info rmed in many cases invo lving product fail-
ures. There are many situatjons in whkh an interruption in service wilJ force c ustomers to
wait for an indefin ite period until service is restored. Obvious examples .are pO\ver outages
;md delays in public transportation. In all such cases, the customers become restive. They are
w1able to solve the problem-they mus t leave that to the supplier. Yet they want to be kept
info rmed as to the n ature of the p roblem and especially as to the likely time of solution.
Iv(any s upplie rs are derelict in keeping c ustomers info rmed and thereby suffer a dedine in
their q uality image. In con trast, some airUncs go to grea t pajns to keep their custome rs
info rmed of the reasons fol' a delay a nd or the progress being made in providing a remedy.
102 Key Concepts: What Leaders Need to Know about Quality

Plan to Collect Customers' Needs

Customer need s keep changing. There is no such thing as a final list of customer need s.
Altho ugh it can be frustrating, design teams must realize that even while they are in the
middle of the design proooss, foroos Sllcl> as technology, competition, social change, and so
o n can cxea tc new customer needs ot may change the priority given to existing needs. It
becomes extremcJy important to check with customc1'S frequently and monitor the market·
p lace. Some of the most common ways to collect cus to mer n eeds in clude

1. Customer s urveys, focus groups, a nd market research programs and s tudies

2. Routine commun ications, s uch as S.:"lles a nd service calls and reports, management
reviews, h ouse pub lications
3. Tracking customer complaints, incident rep orts, letters, and telephone contacts
4. Simulated-use experiments and design processe.< that involve th~ customer

5. Employees with special knowledge of the customer: sales, service, clerical,

secretariat and s~..tpervisory who c<,•.n e into contact with customers
6. C ustomer meetings
7. User conferences for the end user
8. Info rmation O fl competitol's' products
9. Personal visits to c ustom.c r Jocations; observe and discuss
10. Government or independent laboratory data
11. Changes in federat s ta te, and local regulations tha t wW identify c urre nt need or
new opportunity
12. Competitive analysis and field inteUigence comparing products with those of
competi tors
13. Personal experience d ealing v~.rith the cus tome r and the p roduct (However, it is
important to be cautious about giving personal experience too much weigh t
without direct verification by customers. The analysts must remember tha t
looking at customer needs a nd rcqui(cmcr'lts rl:'orn a personal v iewpoint can be
a trap.)

Often customers d o not express their needs in terms of the benefits they wish to receive
from purch asin g and using the product.

Collect List of Customers' Needs in Their Language

For a list of customers' n~ds to have sig.n ifkant meaning in the design of a new product,
they must be stated in terms of benefits soug ht. Another way of saying this is to capture
need s in the custo me r's voice. By focusing on the be nefits sought by the c us to mer rather
than o n the means of delivering the benefit, designers will gain a better understanding of
what the custo mer needs and h ow the customer will be using the prod uct. Sta.ting ''~eds in
terms o r the benefits sought also can reveal o ppo rtutlities for improved quality tha t ofte n
cannot be seen when concentrating on the feat ures alone.

Analyze and Prioritize Customer Needs

1l1e information actually collected fro m c us to mers is often too broad, too vague, and too
voluminous to be used directly in designing a product. Bo th specificity and priority a re
needed to e nsure that the design really meets the needs and that time is spent on designing
 Quality Planning: Des igning Innovative Products and Se rvices 103

for those needs that are truly the most importan t The following activities help provide this
precision and foc us:

• Organizing, consolida ting, and prioritizing the list of need s for both internal and
external customers
• Determining the importance of each need for both inte.rnal and external customers
• Brca ki,,g d own each need into precise terms so tha t a specific design respo nse can
be identified
• Translating these needs into the supplying organization1s lang uage
• Establ.ishis'lg specific measurements and measurement methods For each need

One of the best design tools to analyze and organize customers' needs is the d esign fo r
q uality spreadsheet.

Quality by Design Spreadsheets

Designing new p rod ucts can generate large amoLmts of info rmation that is both useful and
necessary, but witho ut a systematic way to approach the organization and analysis of this
info rmation, the design team may be overwhelmed by the volume and miss the message it
contains.
Allhough planners have developed variou.c; approaches for organizing all this informa~
tion, the most convenient and basic des ign tool is the quality by design spreadsheet. l11e
spreadsheet is a hig hly versatile tool that can be adapted to a number of situations. l11e
quality by design process makes use of several kinds of spreadsheets, such as

• Customer need s spreadsheet

• Needs analysis spread sheet
• Product or service d esign spreadsheet
• Process dcsig1'1 spreadsheet
• Process control spreadsheet

Besides rccord_ing info rmation. . these tools arc particularly useful in a nalyzing relatio n-
ships among the data that have been co11ected and in facilituting the s tepwise conversion of
customer needs into features and then features into process d1aracteristics and p lans. l11is
conversion is illustrated in Figure 4.4. Analysis of customers and their needs provides the
basis for designing the product. The summary of that design feeds the process design, which
feeds the control spreadsheet.
For most design projects, s imple matrix spreadsheets wiU s uffice. .For other projects,
more complex quality fw1ctional deployment spreadsheets are helpful in computing desi!)ll
tradeoffs. All these spreadsheets are designed to allow the team to record and compare the
relationships among many variables at the S.Wie time. We will illustrate some of these
spreadsheets at the appropriate point in the design process. Fig ure 4.5 illustrates the generic
layou t of any one of these spreads heets. In general, the row headings are the "whats" of the
analysis-the customers to be satisfied , the needs to be met, and so o n . The columns a re
the "hows# -the needs that, when met,. will satisfy the customer, the features that wilJ meet
the necds,a1'1d so on. The bottom row o f lhe spreadsheet generally contains specific measur-
able goals for the how at the top. The body of the spreadsheet expresses with symbo ls o r
numerics the impact of the how o n the w hat, e.g., none, moderate, strong, very strong. Other
columns can be added to give specific measures of the importance of the respective rows,
benchmarks, and so o n.
104 Key Concepts: What Le aders Need to Know about Qua l ity

Product Dt~ig n
Coston1e-r _
needs:

..ar: -- . ..
~
Product

d"'
. .
fe;lt\ICC$
f-
Proc~~ D~ign
!
..
~
t ~

¢~"' Process -
~ .

'8
;;; feature s
~
u
"
=
! :
t
P•·oduct
0
~
.,,
~ ---. . Pro<.x~::.:s control
feature goa ls "9
~ ~
=
" . ., !
fcnturcs

t ~

-.-.
"'~
f'roduct p
feature <>oals c: ~

FtGUR! 4.4
..
Sequence of acttvtties. (Juran Jnstttute. Inc. Used by permJsston.)

How

W hat How well

1-

~=
How much f I
F•oultt 4.5 Planning spreadsheet. (Juran Institute, Inc. Copyright 1994.)

Customer Needs Spreadsheet

Figure 4.6 provides a s imple example of a custo mer needs spreadsheet. The left column lists,
ptiority o rder, all the externa l and ir,tcm al c u sto m cJ'S. n , c co lu mn hca.dings arc the vari·
it'l
ous need s that have been discovered. By either checking o r entering a designation fo r impo r-
tance, it is possible to create a simple b ut comp rehensive picture of the in1po rtance of meeting
each need. All product development m us t operate w ithin a b ud get. Prio ritizing the cus to m-
ers and their need s ensures that the bud get is focused on what is most im portant.

Precise Customer Needs

Once the need s that mLtst be met have been p rioritized, they must be d escrilx'<i in s uffi-
cien tly p recise tel'ms to des ign a product based o n them. A customct need s spread sheet
 Quality Planning: Des igning Innovative Products and Se rvices 105

Customer Needs Spreadsheet

C ustomer Needs

Customers .,E"
.<:
""
g
"'
Readers • • •
Advertisers • 0 • • •
Printers • • •
Typesellet·s • • •
Colo•· sepanuors • • •
Newsstand • 0 • 0 •
ILegend o Very strong o Strong I> Week I
FtouRE 4.6 Custo1ner need s spreadsheet. (Juran Institute, Inc. Copyright 1994.)

helps assemble tills analysis. At tills point, customer needs are probably a mixture of rela-
tively broad expectations s uch as "ease of use" and more specific requests s uch as 1'access o n
Saturday." Figure 4.7 iiJustrates how b road needs (called prim11ry) are b ro ken in to succeeding
levels o f specificity (secondary, tertiary, etc.). Note that primary and secon dary d o no t mean
more and less important; they mean, respectively, less s pecific nnd more specific. Each need

Primary Need Secondary Need Tertiary Net--d

Convenience O pen between 5:00 (ond 9:00p.m .

Hours o f operation
Suturdny hours

Within three blocks of bus stop

Transportation acces;.s
Ample parlcing
Ur·gelll appoi ntment within 24 hours
S hon wait times Routine appoinnnent within 14 days
Wfliting lime at appoinunent less lh~\n 15 minu1es

Complementary Pharmacy on s ite

services available Lab on sih.:

FrcuAt 4.7 Needs analysis spreadsheet for medical office. (Jcmm lnstiW(e, Inc.)
106 Key Concepts : What Leaders Need to Know about Qua l ity

mus t be broke n down to the level at which it can (1) be measured and (2) serve as an u nam-
biguous guide for product design. ln some cases t\¥o levels of d etail may suffice; in others
four o r five may be required. Figure 4.7 illustrates how this might be done for the primary
need "convenience" asso-ciated with a group medical practice.

Translate Their Needs into "Our• Language

111e precise custo mer n eeds that ha ve been identified may be s ta ted in a n y of several lan-
guages, including

• The <:: ustomer's language

• The s upplier's ("our") language
• A common language

An o ld aphorism claims tha t the British and American s a re separated by a common la n-

guage. The appearance of a common language or dialect can be an invitation to troub le
beca use both parties bcljcve that they u r\derst:ll)d ea.ch o ther and expect to be understood.
Failure to commu nica te because o f the u nrecognized differences can build additional m isun·
derstanding that only compounds the difficulty. It is imperative, therefore, for planners to
ta ke extraordinary steps to ensure that they properly understan d c ustomer needs by system-
atically translating them. The n eed to transla te applies to both internal and external c ustom-
ers. Vario us organ.i7~1tion func tions employ local dialects that are often J!\Ot understood by
othe r func tions.
Vague te rmin o logy constitutes o ne special case fo r trans)ation that can arise even (and
often especially) between customers an d suppliers who believe they are s peaking the same
dialect Id e ntical words have multiple meanings. Descriptive words do not describe with
tedmological p redsion.

Aids to Translation
Numerous aids are available to d ear up vague ness and create a b ridge across lan guages and
d ialects. The most usual listed are the following: A glossary is a list of terms rund their definitions.
lt is a pub lished agreement on th.e pr'Ccisc mea n ings o f key terms. The publication may be
embelLished by o ther fo rrns o f communication, s uch as s ketches, p hotog·raphs, and videotapes.
Samples can take many forms, s uch as physica l goods {e.g., textile sw atches, colo r
chips, audio cassettes) or service..-=> (e.g., video record ings to demonstrate "sampJes" of
good service-cou rtesy, thoughtfulness, e tc.). They serve as specifica tions for features.
They make usc of hu nlar'l senses beyond those associa ted wi th word images.
A spedal organi1...1tion to translate communications with externa l customers may be
required because of the high volume of t ran sla tion. A common example is the o rder-editing
department, which reoeives orders from clients. Some elements of these orders are in client
language. Order editing translates these elements In to supplier language, e.g., product code
nu mbers, s upplie r acronyms, and so o n.
Stand ardization is used by many mature industries for the mut ua l be ne fit of customers
and sup pliers. This stan dardization exte nds to Ja.nguage, products, processes, an d so o n. All
organiz.c:1.tions make use of sh ort design actions for their p roducts, s uch as code numbers,
acrony ms, words, phrases, and so o n. Such standardized nomenclature makes it easy to
commlmicate with internal custo mers.
Measurement is the mos t e ffective remedy fo r vaguen ess a nd multiple dia]ects-"Say it
in numbers." This is the first, b ut not the last1 point in the d esign process where measu re·
m er'lt is c ri tical. Design fo r qualjty a_lso r£'qu.ircs measurement of features, p r()reSS featt,Jres,
process capability, control s ubjects, and so OI'L
 Quality Planning: Designing Innovative Products and Services 107

Establish Units of Measurement and Sensors

Sound q uality by design requires precise cornmtmication between customers and s upp li-
ers. Some of the essential information can be conveyed adequately by words. How·ever, an
increasingly complex and specialized society demands higher precision for communicat·
in.g q uaUty..rel.ated j_nfonna t.ioo. The higher prucisi.o n .is best atta ined tvhe_n we say it in
11t1 mbers.

Quantification Requires a System of Measurement Such a system consisliS of a unit of mea-

surement, \vhich is a defined amount of some quality feature and permits evaluation of tha t
feature in numbers, e.g., hours of time to provide service, kilowatts of electric power, or
concentration of a medication.
A sensor, \\rhich is a method or instrument of measurement, carries o ut the evaluation
and states the findings in numbers in terms of the unit of measu re, e.g., a dock for telling
time, a thermometer for measu ring tempernh.u·e, or an X-ray to measure bone density.
By measuring customer needs, o ne has established an o bjective criterion for whether
the needs are met. In addition, o nly w ith measurement can one answer questions s uch as
these: Is our quality getting be tter or worse? Are we competitive with others? \o\'hich o ne
of our operations provides the best quality? How can we bring all operations up to the
level of the bt>st?

Units of Measure for Features

The first task in measurement is to identify the appropriate uni t of measurement fo r ead1
customer need. For features, we know of no simple, convenient, generic :formula that is the
source of many un.itsof measure. The number and varjety of fea tures are simpJy enormous.
[n practice, each product feature requires i ts own unique unit of measure. A good starting
point is to ask the c-ustomers what their u ni ts of measure are for eva luating product <.}Uality.
U the supplier's units of measure are different, the s tage is set fo r customer dissatisfactio n,
and the team wi11 need to come up with a unit of measure acceptable to both parties. Even
if the customers have r\ot developed an explicit unit of measure, ask them how they would
know whether their need s were met. Their response may carry with it an implicit u nit of
measure.

Application to Goods
Units of meas ure fo r quaJity features of goods make extensive use of "hard" technological
units. Some of these are well known to the publ ic: time in minutes, te.mperatureln degrees,
or electric current in amperes. Many others are known only to the specialists. There ar• also
"soft" areas o f q uality for good s. Pood technologists need units o f measure fo r flavor, tender-
ness, and stili other properties of food. Household appliances must be "handsome" in
appearance. Packaging m ust be "attractive." To develop units of measure for s uch features
involv•s much effort and ingenuity.

Application to Services
Evalua tion of service quality includes some technologica l units of meas<ure. A widespread
cxampJc is promptness.. w hk h is measured in d ays, ho urs, and soon. Environmental poll ut·
ants (e.g ... noise, radiation, etc.) generated by service o rganizations a re likewise measured
using tech nological units of measure.
Service q uaHty a lso involves features such as courtesy of service p·ers.onneJ, decor of
s urroundings, and readability of reports. Since these features are judged by human beings,
the units o f measure (and the associated sensors) must be shown to correlate with a jury of
customer opinion.
108 Key Concepts: What Leaders Need to Know about Quality

The Ideal Unit of Measure

TI1e criteria fo r an id eal unit of measure are summarized below. An ideal unit of measure

• Is understandable
• Provides an agreed upon basis for decision-makin g
• Is conducive to uniform interpretation
• Is econom.ical to apply
• Is compatible w ith existing designs of sensors, if other criteria also can be met

Measuring Abstractions
Some quatity features seem to stand apart from the world of physical things. Quality of ser-
vice o ften includes courtesy as a significan t q uality fea ture. Even in tt\e case o f physical
goods, we have quality features, s uch as beauty, taste, aroma, feel, or soun d. The challen ge
is to establish units of measure for such abstractions.
The approach to dealing with abstractions is to break them up into identifiable pieces.
On e~ again, the c ustomer n"'-'Y be the best source to start ident-ifying these components. For
example, ho tel room appeara nce is certainly a q uality feature, but i t <'l lso seems Jike a n
abstraction. However, we can divide the feature into o bservable parts and identify those
specifics that collectively constitute "appearance/, e.g., the absence of spots o r bare patches
o n the carpet, dean l~vatory, linens free frorn discoloration and folded to specified sizes,
windows free of streaks, bedspreads free of wrinkles and hanging to w ithin specific dis-
tances fro m the floo r, and so on. Once u nits of measure h ave been establis hed fo r each piece
or compon ent, they sh o uld be swnmarized into an index, e.g., number of soiled or damaged
carpets to total number of hotel rooms, number of rooms with missing tinens to total num ber
of rooms, or num ber of c ustomer complaints.

Establish the Sensor

To say it in numbers, not only do we need a unit of measure, but <tlso we need to evaluate quality
il' terms of that Ul) i t of mcasu.rc. A key clement in makiJ' S the cva luatio'' is: the sensor.
A sensor is a specialized detectin g d evice o r measurement tool. J t is designed to recog-
nize the p resence and inte nsity of certain p he nomen a an d to convert this .sense knowledge
into inJormation. ln turn, the resulting information becomes an input to decision-making
beca use it enables us to evaluate actual performance.
Technological instrum ents are o bviously sensors. So are the senses of human beings.
Trends in some d ata series are used as sensors. Shewhart contro l charts are sensors,

Precision and Accuracy of Sensors

The Jm~cisitm of a sensor is a measure of the ability o f the sensor to reprod-uce its results over
and over on repeaied tests. For most iechnological sensors, this reproducibility is high and
is also easy to q ua ntify:
At the oth er e nd of the spectrum are t he cases in w hich we use huma n beings as
sensors; inspectors~ a ud itors, supervisors, and appraisers. Human sensors are notoriously
less precise than technological sensors. Such being the case, planners a re well advised to
ltnderstand the limi t<> tio ns inherent in human sensing before making d ecisions based on
the resulting da ta.
The accuracy of a sensor is the degree to which the sensor teUs the truth-the exten t to
which its evaluation of some phenomenon agrees with the "true" value as judged by an
established standard. The d ifference between the observed evaluation and the true W1l ue is
the error, w hich can be positive or nega tive.
 Quality Planning: Designing Innovative Products and Services 109

For techno logical sensors, it is usually easy to adjust (or accuracy by recalibrating. A
s imple example is a clock or watch. The owner can listen to the ti me s ignals provided over
the radio. In contrast, the precision of a sensor is no t easy to adjust. li11e upper Limit of
precision is usually inherent in the basic d esign of the sensor. To improve p redsion beyond
its upper lim it requires a tedcsig~n. The sensor rnay be opcratir-.g at a level of precision
be low tha t of its capability owing l'o misuse, inadequate maintenance, a nd so on. Fo r this
reason, w hen choosing the appropriate sensor for each need, planners will want to con-
s ider building in appropria te maintenance schedules a long with checklists of actions to be
taken d uring the check.

Translating and Measuring Customer Needs

The customer need for p11rforrn.a.ncc Wustrates how h igh·leveJ needs break down into rnyr·
iad detailed need s. Perfo rmance included all the fo llowing d etailed, p recise needs:

Product Design Spreadsheet All the information on the translation and measurement of a
customer need m ust be record ed and organized. Experience recommend s placing these d ata
so that they will be close at hand d uring prod uct design. The example in Figure 4.8 shows a
few need s all prepared for use in product d esign. The needs, their trarnsla tion$ and their
measurement are all placed to the left of the spread sheet. l11e remaind er of the spreadsheet
will be discussed in the next section.

Step 4: Develop the Product or Service Features

Once the cus tomers and their needs a re fully unders tood, we are re~ dy to design the
organiza tion. Most o rganizations have some p rocess for desig ning and bringing new
prod ucts to market. ln this step of the q ua li ty b y d esign process, \'l.'e will focus o n the
role of q uality in p rod uct development and how tha t role combines with the technical
aspects of development and design appropriate for a particular industry. Within prod uct
developmon.t, product d esign is a ccea tivc p rocess based largely on toch.nologica l or
functional expertise.
The designers of products traditionally have been engineers, systems analysts, operating
managers, and many other professionals. In the q uality arena, d esigners can include any
whose experience, position, and expertise can contribute to the design process. The outputs of
product design are detailed designs, drawings, models, procedures, specifications, and so on.
The ovcra.ll q uality objectives fo r this step a rc two:

1. Determine w hich feat ures and goals will p rovide the o ptima l benefit fo r the
custo mer.
2. Identify what is need ed so that the designs can be d elivered w ithout fail ures.

In the case of d esigning services, the scope of this activity is someti mes puzzling. For
example, jn delivering health care, w here d oes the product of d iagnosing and treating end
and the processes of laboratory testing, chart reviews, and so o n begin? One useful way to
think about the disti.t~etion is that the product is the "face to the customer." It is what the
customer sees and experiences. The p atic11t sees and cxpcric •1ccs the physicia.•' i11tcraction,
waiting lime, clarity o f infotmation, and so on. The effectiveness and efficiency of moving
blood samples to and a round the laboratory have an effect on these feahtres bu t are really
features of the process that delivers the ultimate product to the customer.
Those who are designing physical products also can benefit from thinking about the
scope o f prod uct design. Given that the custo1ner's .needs arc the benefits that the custo mer
wants from the prod1.1ct, the d esign o f a piece of consu mer e lectronics includ es not o nly the
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 Quality Planning: Des igning Innovative Products and Se rvices 111

con tents of the box itself b ut also the instructions for installation an d use and the help line
for assistance. There are s ix major activities in this step:

1. G ro up togethe r related c ustomer needs.

2. Determine methods for identifyil'\g fea tures.
3. Select high-level feature.< a.nd goals.
4. Develop detailed features and goals.
5. Optimize fea tures and goals.
6. Set and publis h final product design.

Group Together Related Customer Needs

Most q uality by de,;ign projects will be confronted with a large number of cm;tomer needs.
Based o n the data d eveloped in the preceding steps, the team can p rioritize a nd group
together those needs tha t relate to similar functiona li ty. lllis activity d oes not req u ire m uch
time, but it can save a lot o f time later. Prioritization ensu res that the scarce resources of
product d evelopment are spent most effectively o n those items that are most impo rtant to
the customer. Grouping related needs together aUows the design tea.m to "divide and con-
quer," with s ubtcam.s working on different parts o f the design. Such subsystem or compo..
nent approaches to design, of course, have been common for years. \\'h a t may be differe nt
he re is that the initial focus is o n the t..-omponents of the customers' needs, n ot the compo-
nents of the product. The component design for the product '"ill come during the later activ-
ities in this s tep.

Determine Methods for Identifying Features

Tlloto are m•fl)' complementary approache.< lor identifying the best product design lor meet-
ing custo me rs' need s. Most d esign p rojects do n ot usc all of them. Before starting to design,
h owever, a team sho uld develop a systematic plan for the methods it V\•iU use in its own
design. Here a.re some of the options.
Benchmarking This approach identifies the best in das.~ and the methods behind it tha t
make it best. See Chapter IS, Benchmarking: Defining Best Practices for Market Leadership,
for details.
Basic Research O ne aspect of research might be a ne\v inn ovation fo r the p roduct that d oes
no t currentl y exist in the market o r w ith competitors. Another aspect of b.asic research looks
at explo ring the feasibility of the product and features. While both these aspects are impor-
tant, be carehtl that fascination with Lh e tedmo logical abilities of the prod uct does no t over·
whelm the primary concern of its benefits to the custo mer.

Market Experiments Introd ucing and testing ideas fo r fea tures in th e market allows one to
ana lyze and eva lu ate concepts. The focus g ro up is o ne tech n ique that can be used to mea~
s ure c ustomer reactions and determine w hether the features actuaJJy w ilJ meet custo mer
needs. Some organizations also h'}' o u t thei.r ideas, on an informal basis, with customers a t
trade shows and association meetings. Still others conduct limited test marketing with a
proto type product.

Creativity Developing features allows o ne to dream about a whole range of possibilities

without being hampered by any restric tions o r p reconceived notions. Design for q ua Uty is a
proven, structured, data-based approach to meeting customers' needs. But this d oes n o t
mean it is rigid and uncreative. At this point in the process, the participants in design must
112 Key Concepts: What Leaders Need to Know about Quality

be encouraged and given the tools they need to be creative so as to d evelop alternatives fo r
design. After they have selected a num ber of promising alternati ves, they '"ill
use hard anal-
ysis and data to design the final p roduct.
Design teams can take advantage of how individuals view the wor)d; from their own
pci'Spectivc. Every employee potentially sees other ways of doing things. The team can
encourage people to suggest new id eas and take risks. Team members should avoid getting
ustuck" or taking too m uch time to debate o ne particular idea or issue. They can put it aside
and come back to it later with a fresh viewpoin t. They uw <1pply new m(!thods of thinking
about customers' needs o r problems, such as the following:

• Clwuge in key words or f>l~rnS<'$ . For example, c.1U a "need" or "problem" a.o
"opportu.nity.'' rnstcad o f saying, "Deliver on time," say, "DcUvcr exactly when
needed."
• Random nssocinUOJr. For example, take a common wotd such as •rapple" or "circus"
and describe your business, p rod uct, or problem as the word. Fo r example, "Our
product is like a circus because . . . "
• Centrnl idea. Shift your thinking away from o ne central idea to a different one. For
example, shift the focus from the product to the customer by saying, "V\fhat harm
might a ch ild suffer, and how can we avoid it? 11 rather than "How am we make the
toy safer?"
• Putting yourself i11lhe other persou's shoes. Examine the question ft-om the viewpoint
o( the other person, your competitor, your custo mer- and build their case before
you b uild your own.
• Dremniug. Imagine that you had a magic wand that you could ,.,ave lo remove all
obstacles to achievin g your objectives. What would it look like? Wh at would you do
first? How would it change your approach?
• Tire spnghetli principle. \!Vhen you have difficulty considering a new concept or how
to respond to a particular need , aJJow your team to be comfortabEe eno ugh to throw
out a new idea, as if you were throwing spaghetti against the \•vall, and see what
sticks. Often even "wild" ideas can lead to workable solutio ns.

The initial design decisions are kept as s imple as possible a t this point. For example, the
idea of placing the control panel for the radio o n the s teering wheel would be cons idered a
high-level product feature. Its exact location, cho ice of controls, and how they functio n can
be analyzed later in greater detail. It may become the subject of more deta:iled features as the
design project progresses.

StandardS, Regulations, and Policies This is al>o the time to be certain that all relevant stan-
dards, regulations, and policies have been idenii6ed a.n d addressed. While some of these
requ.ir'Cments arc gLtidelincs fo r how a pa rticular pwduct or p roduct feat ure can pcrfotm,
o thers mandate how they must perform. These may come from inside the organizatio n, and
others may come from specific federal, state, or local governmen ts; reguJatory agencies; or
industry associations. All features and p roduct feature goals must be anal yzed against these
requirements prior to the final selection o f features to be included in the d esign.
It is important to note that if there is a conflict when evaluating features against any
standards, policies, or regulations, it is no t always a reason to give up. Sometimes one can
work to gain acceptance fo r a change when it w ill do a better jo b of meeting customer needs.
This is especially h'uc when it comes to in ternal poUcics. However, an advocate for change
m usl be prepared to back up the arguments with appropriale data.
 Quality Planning: Designing Innovative Products and Services 1l3

Crit eria for Design As part of the preparation fo r high-level design, u,e design team must
agree on the explicit criteria to be used in evaluating alternative designs and design features.
All designs must fulfill the following general criteria:

• Meet the customers' ne-eds

• Meet the suppliers' and producers' needs
• Meet (or beat) the competition
• Optimize the combined costs of the customers and suppliers

ln add ition to the preceding four ge,n eral criteria, the team members should agree explic·
itly on the cri teria that they will use to make a selection. (lf the choices are rela tively com ..
plex. the team sho uld consider using the formal discipline of a selection matrix.) O ne source
for these criteria will be the team's goal s ta tement and goals, Some other types of criteria that
the team may develop could include

• The impact of the feature on the needs

• The relative importance of the needs being served
• The relative importance of the customers whose need s are affected
• The feasibility and risks of the proposed fea tlU'e
• The impact on product cost
• The relatjonsh.ip to competitive features t.tncovered in benchmarking
• The requirements of standards, policies, regulations, mandates, and so on

As part of the decision o n how to prooeed with design, teams also mttst consider anum·
ber of o ther important issues regarding what type of prod uct feature will be the best n.>sponse
to customers' needs. When selecting features, they need to consider whether to

• Develop a n e ntirely new hmctionality

• Replace selected old features with ne•o ones
• Improve or modify existing features
• Eliminate the unnecessary

Select High-Level Features and Goals

Ths phase of quality by design will stimulate the team to consider a whole array of potential
fuatures and how each wottld respond to the needs of the customer. This activity sho<dd be per·
formed without bcing constVJined by prior a...'1Sumptio_ns or notions as to wha·t worked or dld not
work in the past, Aresponse that previously failed to address a customer need or solve a customer
problem might be ready to be e<>nsidered again because of changes in technology o r the market
The team begins by executing its plan for identifying the possible features, It should
then apply its explicit selection criteria to identify the most promising features.
TI'e product desig n spreadsheet in Figure 4.8 is a good g uide for this effort. Use the right
side of the spreadsheet to d etermine and d ocument the following:

• Whjch features contribu te to meeting which customer needs

• That each priority c usto mer need is add_rcsscd by at least o ne product feature
• That the total impact of th.e feat ures associated with a customer need i.s tikely to be
sufficient' fo r meetit'lg that need
114 Key Concepts: What Leaders Need to Know about Quality

• That every product feature contributes to meeting at least one significant customer
need
• That every product fca.ture js necessary for m~ti.ng at least oneslgniiica.nt customer
need (i.e., _removing that fea ture would leave a significant tleed UJlmct)

Team Sets Goals for Each Feature In quality terms, a goa l is an aimed-at quality target (such
as aimed-at values and specification li mits). As discussed earlier, this d"iffers from quality
standards in that the standard is a mandated model to be followed that typically comes from
an external source. \Nhile these s tanda.rds se_
rve as "requirements" that u.suaUy dictate uni-
formity or how the product is to function, product feature goals are often voluntaxy or nego·
tiated. Therefore, the quality by design process must provide the means for meeting both
quality standards and quality goals.

Criteria for Setting Product Feature Goals As with all goals, product feature goals must
meet cer tain criteria. While the criteria for establishing product feature goals differ slightly
£rom the criteria for project goals verified in step 1. there are many similarities. Product lea·
turc goals s hould encompass all the important cases and be

• Measurable
• Optimal
• Legitimate
• Understandable
• Applicable
• Attainable

Measuring Features Goals Establishing the measurement fora product feature goal requires
the following tas ks:

• OeternUne the unit o f measure: meters, seconds, days, percentages, and so on.
• Determine how to measure the goal (i.e., de termine what the sensor is).
• Set the value for the goaL

11\e work done in measuring customer needs should be applied now. The two sets of
m eas1-n-cments may be related it'l one of the following ways:

• Mcasu_r cment for the need and for the product feature goo I may usc the same units
and sensors. For example, if the customer need relates to timeliness measured in
hours, one or more features normally also will be measured in hours, with their
combined effects meeting the customer need.
• Measurement for the product feature may be derived in a technical manner from the
need measurement. For example, a customer need for transporting specified sizes
<lJ'd weights of loads rnay be translated i_nJo spcci.fi.c:: eJ'Igi.neering measurcrneots of
the transport system.
• M~asuremc nt for the product feature may be derived from a customer behavioral
relationship \\lith the product feature measure. ForexampJe,automobile manufacturers
have developed the specific parameters for the dimensions and structure of an
automobile seat that transl(lte into the customer rnting it <~comfortable."
 Quality Planning: Des igning Innovative Products and Se rvices 115

Since we can now measure both the custo mer need and the related prod uct feature goals,
it is possible for the quality by desig n team to ensure that the product d esign will go a long
way toward meeting the cus to mers' needs, even before building any prototypes or conduct-
ing any test marketing.
F'o r la rge or complex p rojects, the work o f d cvc1oping features is o ftcrn div ided a mong a
number o f different ind ividuals and work groups. After all these groups have completed
their work, the o verall quality by design team wiU need to integrate the results. Integration
includes

• Combining features w hen the same features have been identified fo r more than o ne
cluster
• Identifying and resolving conflicting or competing fea tures and goals fo r d iffere nt
clusters
• Validating that the combined design meets the criteria established by the team

Develop Detailed Features and Goals

f'or large and highly complex products, it will usuaUy be necessary to divide the product
into a number of components and even subcomponents for detailed design. Each compo-
nent will typically have its own d esign team that will complete the detailet.i design described
below. To ensure that the overall d esign remains in tegrated, cons isten t, and effective in
meeting custo mer need s, these large, de«ntraJized p rojects require

• A steering o r core team that p rovides overalJ dire<tion and integr ation
• Explicit charters w ith q uantified goals for each component
• Regular integrated design reviews for all components
• Expli.cit i1'1 tcgra tion of d esigns before completion of the p roduct dcsig '' p hase

O nce the initial detailed features and goals have been d eveloped .. then the tech nical
d esigners \viii p l'epare a p reliminary d esign, w ith detailed speci fications . This is a necessary
s tep before a team can o ptimize models of features using a number of q uality by de.sign tools
and ultimately set and publish the final features and goals.
lt is .not o.u1com.m.o n for quality by design teams to select featu.J:es at so high a level tha t
the fea tures are no t speci fic enough to respond to p('CciS.C customer need s. Just as in the iden·
tification o f custo mers' primary need s, high·level features need to be broken down further
into terms that are clt>arly defjned and can be measured.

Optimize Features and Goals

O nce the preliminary design is complete, it m ust be optimized. That is, the d.,;ign must be
adj>.~sted so that it meets the needs ~>I both ~>.~stomer ana S\lpplier while minimizing their
combined costs a.nd meeting or beating the competition.
Finding the o ptimu m ca'' be a complicated matte( unless it is approached in an orga ..
nized fashion and follows quality disciplin es. For example, there are many d esigns in w hich
numeroll!) variables converge to p roduce a final result. Some of these d~ igns are of a busi-
ness nature, such as d.,;ign of on information system involving optim;;,J use of facilities,
pe<Son.nel, energy, capital, and so on. Other s uch des.i gns are technological, involving opti-
mization of the performance of hardware. Either way, finding the optimum is made easier
thro ugh the use of certain q uality disciplines.
Finding the optimum involves balancing the needs, whether they are multio rganiza-
tiona l needs or ,,rithin -organi?.ation need s. [dcally, the sea rch for the optimum should be
116 Key Concepts: What Leaders Need to Know about Qua li ty

d o ne through the participation of suppliers and cus tomers alike. TI1ere are several tech-
niques that help achieve this optimu m.

Design Review Under this w ncept, those who will be affected by the product are given the
opportunity to review the design during various formative s tages. This allows them to use
their ex-perien_cc and expertise to make s uch COI\trib utions as

• E.1tly warning o f upcom ing problems

• Data to aid in finding the optirnurn
• Challenge to theories and assLLmptio ns

Design reviews can take place at different stages of development of the :new p roduct. They
can be used to review conclusions about customer n eeds and hence the product specifications
(charactel'istics of product output). Design reviews also t:•an take ph'lce at the time of selecting
the optimal p roduct design. Typical characteristics o f design reviews include the follow ing:

• Participation is mandator)~
• Reviews are cond ucted by specialists, external to the design team.
• Ultimate decisions for chan ges remain with the design tearn.
• Reviews are formal, scheduled, and prepared for w ith agendas.
• Reviews will be based o n clear criteria and predetermined param eters.
• Reviews can be held at various stages of the project

GroLmd rules for good d esign reviews include

• Adequate advance design review of agenda ill'ld documents

• C learly dcfi.ocd meeting structUJ"C ilJ'd roles
• Recognition of interdepartmental conflicts in advance
• Emphasis on constructive-not critical-in puts
• Avoidance of competitive design d uring review
• Realistic timing and schedules for the reviews
• Suffidcnt ski I}!; <11'd l'CS()urccs provided for the revic'''
• Discussjon focus on untried/unproved design _ideas
• Participation direc ted by management

Multifunctional Design Teams Design teams should includ e all those who have a vested
interest in the o utcome of the d esign of the product along with individuals skilled in product
design. Under this con cept, the team, rathe r than just the product designers, beMs responsi-
bility for the final design.

Structured Negotiation Customers and s uppliers are tugged by powerful local fo l'res to an
extent that can easily lead to a result other than the optimum. To ensure that these nego tiat-
ing sessions proceed in as productive a fas hion as possible, it is recommend ed that ground
rules be established before the meetings. Here are some examples:

• The team s hould be g ttided by a spirit of cooperation, no t competition, toward the

achievement of a commo n goal.
 Quality Planning: Des igning Innovative Products and Se rvices ll7

• Diffe ren~s of opinion can oo healthy and can lead to a more efficient and effective
solution.
• Everyo ne should have a chan~ to contribute, and ever)' idea should be
considered.
• Everyoncls opjnions should be hea.rd and rcspccl'ct.i without inte-rruptions.
• Avoid getting personal; weigh the pros and cons of each idea, looking at its
advantages before its disadvant:..1gcs.
• Challenge conjcc tur~; look at the facts.
• Whenever the discussion bogs down1 go back and define areas of agreement before
discussjng areas of disagreement.
• If no consensus can be reached on a particular issue, it should be tabled and returned
to later on in the discussion.

Create New Options Often teams appro.,ch a product design with a histo ry of how things
were done in the past. Optimization allows a team to take a fresh look at the product and
create new options. Some of the rnost common and useful quality tools for o ptimizing the
design include the following:
Competitive analysis provides feature-by-feature comparison with competitors'
products. (See below for an example.)
Salability analysis evaluates which features stimulate customers to be willing to buy the
product and the p rice they arc will ing to pay. (See below for an example.)
Value analysis calculates not o nly the incremen taJ cost of specific features of the product
but also the cost of meeting specific customer needs and compares the ·COSts oi alternative
designs. (Set> below for an example.)
Criticality analysis identifies the "vital few" features that are vulnerable in the d esign so
that they can receive prio rity for attention and resources.
Failure mode and effect analysis (FMEA) calculates the combined impact of the
probability of a particular failure, the effects of that failure, and the probability that the
fail ure can be detected and corrected, thereby establishing a priority ranking fo r
designing in failure prevention countermeasures.
Fault-tree anal ysis aids in the design of preventive countermeasures by tracing all
pos.~iblc combinatiot'IS of c..-. uses that could lead to a particular faiJurc.
Design for manufacture and assembly evaluates the complexity and potential for
problems during manufacture to make assembly as simple and error-free as possible.
Design for maintai~'ab iUty evaluates particuJar desjgns for tJ,e ease and cost of
maintaining them during their useful life.

Competitive Analysis Figure 4.9 is an example of how a competitive analysis might be displayed.
The data for a competitive analysis may require a combination o f different a pproadu>s such as
laboratory analysis of the competitors' products, field testing t>f those products, or in-depth inter-
views and on-<lite inspections where willing customers are using a competitor's p~t-.d.uct.
Note that by reviewing this analysis, the design team can identify those areas in w hk h
the design is vulnerable to the competition as well as those in w hich the team has deve loped
an advantage. Based on this analysis, the team wiiJ then need to make optim ization choices
about w hether to upgrade the p roduct. The team may need to apply a vaJuc a.n.alysjs to
make some of these choices.
118 Key Concepts: What Le aders Need to Know about Quality

Check 1r Produd Feature Is l'rt\(ent FeatUI"(' l,t:rformance \ 'S'. Go::~ I (•• ldt'nlify if
S igniOetml
Product FeaiU1'C. & Coal Risk or
Produl't A Product R Ours PI"{Jd Uct A Product 6 Qurs
O p-p 9 rtun1 1~·

ReU'ieve messges from all

touch L<.me phones cnsily
Ye.s Ye~;,; Yes 4 5 4 -
Change mc:;.s.Jtgc Cr<m.1 any
Yes No Yes 3 N/A 5 0
remOfe.loc.ation

21ir)CS buill in No No Yes N/A N/A 4 0

Identify if
Rcl.ow Add Featuf"e!> in C heck ir Produc.t Feature h l"resent Featun: Pc rf<•rrn:mce ' 'S'. G(l:ll (•)
S'i)!nili;~mt
Compt.-titorS• Pmdud Nol
Rhk or
lndudnl Jn OurS Product A Product B Ou"' Prod uct A Product ts: Oun; Opportunity
No <:assene used to l't'(.Xml
Yes Yes 4 N/A 1\
messag.e
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Yes Yes 3 4 R
machine h~ one t ill it

L tgend (• ,
I = Poor
2 =fair
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4 = GuocJ
5 =E.:\ctlknt

''
FtCIJRE 4.9 Competlltve analysts, (Jura n lnsUtu te. Inc. Copyngt1t 1994.)

Salability Analysis An e xample o f sa la bility a nalysis is shown in Figure 4. 10. n,is a nalysis is
similar to a competitive analysis, except that the reference po in t is the respo nse of customers
to the proposed design rather than a comparison w ith the features of the competitors'
designs. Note, however, that elements of competitive and salability ana lyses <:an be com-
b.iJ'I cd, with l'he sala.bility aJ'talysjs ln.cor.pora l'iog customer evalu.a l'iOI''I of hotJ, the proposed
new d esign and existing competitive d esigns.
Complex p roducts, such as auto mobiles, with multiple optional featu res and o ptional
config urations offer a uniq ue oppo rtunity to evaluate salability. Observed installation rates
of options on both the existing c-or line and competitors' cars provide intelligen ce o n both the
level of market demand for the fea ture an d the additional pric:e that some segments o f the
ma rket w iU pay for the feature, altho ugh the o the r segments of the market may place lit tle
or no value o n it.

Value Analysis Value analysis has been quite common in a.rcl'litectural design an d the devel-
opment of c ustom-en gineered products, but it also cn.n be applied s uccessfully to o ther c•w i-
m nments as well, as illustrated in Figure 4.11. By comparing the costs for meeti ng different
customer needs, the d~ign team can make a n umber of s ignificant optimization d ecisions.
If the cost for meetin g low-p riority needs is high, the team m ust exp lore alterna tive ways to
meet those needs and even consider not addressing them at all if the p roduct is highly p ric:e-
sensHive. If very importa.nt needs have not consumed much of the expense, the team wiJI
want to ma ke certain that it has met those need s fully and comp letely. Whjle IO\v expense fo r
 l!• .nr.. .-R"'"'I! II A,.UU(;II<I-r•~ ~, ..,.,.. c.,.,,...,.,. \l ,.ul..t Cu•t<~il•cr (""" ..............
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120 Key Concepts: What Leaders Need to Know about Qua l ity

Product Fe.11tu.re <l.hd GollJs

Custc,mcr
Walk in B o:~rd Social Nu1ri1ional On·Sile t:>illin,g 0fi•Si1e
Nt.'ed \ll()rkcr, 5 Cost of
appointment$ Ct'rtified counselor, clerk takes l ::~bor:atory-
(lisled in MeeUnl
handled by obstclridan. days a 5 days o mcxlicaid must
priorUy nurse. 5 Nr<-d
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ordor)
days a week week aU eligible U11der I
J:>.'llients h01.1r

Convcni ~n l
60.000 3(),000 10.000 10.000 20.000 40.000 170.000
10 U:$oe

Confiden<..'C 10,000 15,000

70.000 95.000
in swff

R~SOIHlb l e
2$,fl()0 25,000
COSI

Scnsi1ivi1y 15.000 5.000 20,000

Informed
5.000 15.000 20.000
<:ho kc.~s

Cost for
60.000 100.000 40.000 45,000 20.000 6 5.000 330.000
re.awre

FtGUR£ 4.1.1 Value anatysis spreadsheet. (Juran Institute, Inc. Copyright 1994. Used by permission.)

meeting a high-prio rity need is not necessarily inappropriate, jt d oes present the d es jgners
with the challenge of making C\lrtain that lower-priority needs are not b<!ing met by using
resour= that could be better directed toward the higher-priority necds. l t is not uncommon
for products to be ovetloadcd with " bells and w histles'' at the expense o f the fundamental
fu nctionality and performance.

Set and Publish Final Product Design

After the design has been optimized and tested, it is time to select the features and goals
to be included in the fi nal d esign. This is also the s tage w here the results o f product devcJ..
op ment a re officially transmi tted to o ther fu nctio ns throug h various fo rms of d ocumen ta-
tion. TI1ese include the specifications for the features and p rod uct feat u re goa ls as weiJ as
the spreadsheets and other supporting documents. All this is supplemen ted by instruc-
ti,,ns, both oral and written. To complcle lhis aclivity, the team must first determine I he
process fo.t authorizing a nd p ublishing features and product feat u re goals. A long \v-ith the
fea t ures and goals, the team should include any prot.~d ures, speci fica.tions, flow d iagrams,
and other spreadsheets that relate to the fina l prod uct design. The team should pass a long
results of experiments, field testing, prototypes, and so on that are appropriate. If an orga-
nization has an existing process for authorizing product goals, it s hould be reexamined in
ligh t of recent cxpcric rl cc. Ask these questions: Does the authoriza tion process guarantee
inp ut fro m key custo mers-both internal and external? Does it p rovide for optimi zation of
the design? If an organiza tio n has no existing goal authorizatio n process, now is a good
time to initiate one.
 Quality Planning: Des igning Innovative Products and Se rvices 121

Step 5: Develop the Process Features

O nce the product is d esigned and deve loped, it is necessary to detennine the means by
which the product will be created a nd delivered o n a continuing bas is. Th ese means are, col-
lectively, the proct"SS. Process developmeul is the set of activities for d efining the specific means
to be ttsed by operating personnel for meeting product quality goals. Some related concepts
i1'dude

• Subprocesses: large processes may be decomposed into these smaller units for both
the developmen l and operation of the process.
• Activities: These are s teps in a process o r s ubprocess.
• Tasks: These comprise detailed step-by-step description for execution of an activity.

For a process to be effective, it must be goal-oriented, with specific measUiable out-

comes; systematic, w ith the sequence of acti\,ities and tasks fully and clearly defined and
all inputs and outputs fully specified; and capable, i.e., able to meet prcxluct quality goals
under opera ting conditions; and legitimate, with clear authority a nd accountability fol' its
o peration.
The 11 major activities involved jn developing a process are as follows:

• Review product goals.

• Identify operating conditions.
• CoUect known information o n alternate processes.
• Select general process design.
• Identify process fea tures and goals.
• Identify detailed process features and goals.
• Design for critical factors and hum a n error.
• Optjmize process features and goals.
• Establish process capability.
• Set and p ublish final process features and goals.
• Set and publish final process design.

Review Product Goals

Ideally, this review will be rclati\•ely simple. Product quality goals sholllld have been vali-
dated with the prior participation of Lhose who would be affected. In many organizations,
however, product d esign an d process design often are executed by different team s. There is
no real joint participation on either group's part to contribute to the results that both teams
are expected to produce. This Jack of participa tion usuaJJyreduces the nu.r:nber of alternative
designs that could have been readily adopted in earlie r stages but become more difficult and
more expe nsive to incorporate later. In addition, those who set the product goals have a
vested interest in their own decisions and exhibit cultural resistance to proposals by the
process design team to make changes to the product design. If the product and process
design efforts are being performed by different groups, then review and confirmation of the
prod uct quality goals a re absolutely critical.
Review of product q ualjty goals ensures that they are understood by those most affected
by the process design. The review helps achieve the optimum. Proce.ss designers are able to
present product designers with some realities relative to the costs of meeting the quality
122 Key Concepts: What Leaders Need to Know about Qua l ity

goals. The review process should provide a legitimate, unobstructed path for challenging
costly goals.

Identify Operating Conditions

Seeking to understand operating cond itions requires in vestigation of a n umber of dimensions.

User's Understanding of the Process By " users,'' we mean either those w ho contribu te to
the processes in order to meet p roduct goals o r those \ 'lth o employ the process to meet their
own needs. Users consist, in part, of internal customers (organization units or persons)
t:<lsponsible lor running the processes to meet the quality goals. Operators or other workers
are u%'rs. Process p lan.n.crs need to k now how the..o;c people will understand the work to be
d o ne. The process must be desig11ed e.i ther to accommod ate this level of understanding o r to
imp rove the level of understan ding.

How the Process Will Be Used Desig ners always know the intend ed use of th e process they
develop. However, they may not necessarily know how the process is actually used (and
misused) by the end user. Designers can draw on their own experiences b ut usually must
supplement these with direct observation and inter vie"'S with those affected.

The Environments of Use Plann~rs a rc wcJJ aware that their designs must take account of
environments that can influence process performance. Planners of p hysical p rocesses usu-
ally do take account of such env ironmental factors as temperature, vibration, noise level,
and so on. Planners w ho depend heavily on human responses, particularly those in the ser-
vice areas, should addt:<lss the impact of the environment on human performance in their
process designs. For example, a team designing the process for handling c ustomer inquiries
should consider how environmental s tress can influence the performance of the custo mer
service representatives. TIUs stress can result fro m large numbers of customer complaints,
abusive customctS, lack o f cutrer'l t product informatiOI''I , and so on.

Collect Known Information on Alternative Processes Once the goals and environment ore
clear, the design team needs r<lliable information on alternative processes available lor meet-
ing those goals in the anticipated environ ment.

Process Anatomy At the highest level, there are some basic p rocess anatomies that have
specific characteristics that planners should be aware of. A process mwtomy is a coherent
structure that binds or holds the proce.s together. This s tructure s up ports. the creation of the
goods o r the deliVCI'}' o f the service. The selection of a particular ar,atorny also will have a
profound influence o n how the p roduct is created and the abiHty o f tlhe organi:z.a.tion to
respond to customers' needs. Figure 4.12 illus trates these.

The AssembtyTree The assembly tree is a familiar proccs.c; that _incorporates the outputs o f scv·
eral subprocesse5- Many of these are performed concurrently and are reqttired for final assem-
bly o r to ach ieve an end result a t or near the end of the process. This kind of process anatomy
is widely used by the gre«t mechanical and electronic industries that bttild a utomotive vehi-
cles, household appliances, electronic apparatus, and so on. It is also used to define man)'
processes in a hospitat such as in the case of perfo rming surgery in the o perating room. The
branches or leaves of the tree represe,n t numerous s up pliers o r in-house departments making
parts and components. The elements are assembled by s till other dt>partments.
In the offkc, cc.rtain processes of data coJiedion and summary also exhibit fea ll ltes of
the assembly tree. Preparation of major accoun ting reporls (e.g.$ ba lance sheet, profit state-
ment) requires assembly of man y bits of d a ta into progressively broader summaries that
finally converge into the consolid ated reports. The assembly tree design has been used a t
 Quality Planning: Designing Innovative Products and Services 123

Process Ana tomies

Flow of basic nutlcrials

""\)//
A utonomous
department

I
O utflow of tinjshed and tested J)roduct
Autonomous Dct>::•r1mcot

Vendor departments

In· house departments

~~Q~~
SubRssemblv
dep::.J'tmenls
To test and usage
Assembly Tree D f inal assembly

Vendor depanments To test a nd usage

In-house dep.arunents Proc~ssio n

FIGUR£ 4.12 Process anatomies. (Juran Institute. Inc. Copyright 1 994. Used by permission.)

both the multifunctional and departmental levels. ln large operations, it is virtually mand a-
tory to use staff specialists w ho contribute differe nt outputs at vario us m uJtihmction aJ iev-
els. An example of this is the budget process. While it is not manda tory to use ~taff specialists
for large departmental processes, this is often t.h e case. This can be illustrated by the design
d epartment, w here various design engineers contribu te drawings o f a project that cont ribu te
to the overall design.

Business Process Quality Management to Hold the Gains

Increasingly, many planners are applying a fourth, less traditional fo rn1 of management
kno wn as busiuess process qunUty mnnngemenf to their major p rocesses. T h:is new, a lternative
m a nagemen t form has come about in resp o i'ISC to a n increa sed realization that many o f
today's bus iness goals and objectives a re becoming even more heav ily d e pendent o n large,
complex, cross-fw1ctional business p rocesses. Process t1ua lity management emphasizes that
there are several critical processes that an~ crucial to an organiz..1.tion if it is to maintain and
124 Key Concepts: What Leaders Need to Know about Qua l ity

grow its business. (See Chapter 8~ Business Process Management: Crea ting an Ad aptable
Organiz...1.tion, for a full d iscussion.)

Measuring the Process

ln selecting a specific p rocess design, the team wilJ need to acquire inform ation on the effec-
tiveness and effidency of alternative designs, including

• Deficiency rn tes
• Cycle time
• Unit cost
• O utput rate

To acquire the need ed data, the p lanners m-ust typica lly use a nurnber o f d ifferen t
approad1es, including

• Analyzing the existing process

• Analyzing s imilar or related processes
• Testing alternatjve proce...:oses
• Analyzing new technology
• Acquiring information from c us to me rs
• Simulating and estimating
• Be.n dunarking

Select General Process Design

just as product design began w ith a high-level description expanded to the detail<, process
design should begin by describing the overall process flow with a high- level process flow
d iagram. From this diagrrun it will be possible to identify the s ubprocesses and major activ-
ities that can then be designed at a more detailed level. ln developing the high-level flow as
well as the greater detail later, the team sho uld ensure that it meets the following criteria:

• Deliver the quality goals for the product.

• Incorporate the cow>termeasures for criticality analysis, PMEA, and fault-tree
analysis.
• Meet the project goals.
• Ae<:O<U>t for actual use, not only intended use.
• Be efficient in cons umption of resources.
• Demand no investments that are greater than planned .

While some process designs w ill largely repeat existing designs and other process
designs will represent "green field" or "blank sheet" redesigns, most effective process rede-
signs are a combination of the tried and true existing processes with some tiignificant quan-
tum changes in some parts of the process.
The p receding criteria should be the guidelines for whether a partindar part of the proc...ss
shouJd be inco1porated as it is, improved, or replaced with a fundamentally different approach.
This is the point in process design to think as creatively as possible, using some of the
same techniques d iscussed under product development. Consider the impact of radically
diffeccnt anatomies. \•Vould the custo mer be served better with ded icated, m ultispecialty
 Qua lit y Plann ing: Des igning Innova tive Products and Se rvices 125

units or with highly specialized expert functionality accessed as needed?' \Nhat approach is
mostly likely to reduce failures? How can cycJe time by c ut dramatically? [s there a new
technology that would allow us to do it d ifferently? Can '"''e develop such a technology?
O nce the high-level flow is completed, each activity and decision w jthin the flow dia-
gram needs to be fully documented with a specification o.f the following for each:

• Inputs
• Outputs
• Go.1ls for o utputs
• Cycle time
• Cost
• Genera l description of the conversion of inputs to o utputs

Clear specific.1tion of these factors makes it possible to d ivide up thoz work of detailed
design later and s tilJ be confident that the final design \Vill be consistent a nd coordinated.
O nce the initial ne'"' process flow is completed, it should be reviewed for opportunities
to improve it1 such as these:

• Eliminate sources of error that lead to rework klOps.

• Eliminate or reduce redundant s ubprocesses, activ ities, o r tasks.
• Decrease the: J'lumber of handoffs.
• Reduce cycle time.
• Replace tasks, activities, or processes that have o utputs \'l.tith defects.
• Correct sequencing issues in the process to reduce the amount of activity or rev.•ork.

Testing Selected Processes

One of the key factors for a s uccessful design is the incorporation of the lessons learned from
testing the product, the features, and the overall process and subprocesses to ensure that
they meet q uality goals. Testing sho uld be conducted throughout the entire quality by design
process to aJJow for changes, modifications, and improvements to the plan before it is trans-
ferred to o perations. Testing is performed at various points to anal)rze and evaluate alternate
des igns of the O\'cmU process and s ubprO<.-esses.

Comparisons or Benchmarks
Othe r units inside and o uts ide the organi zation may already be us ing a process similar to the
one designed. The process can b<Z validated by comparing it with existing similar proce.<s..>s.

Test Limitations
All test.< have some limitations. The following are comroon limitations tha.t should b<Z under·
s tood and addCC$$00.

Differences In Operating Conditions Dry runs and modular testing obviously differ from
o perating conditions. Even pilo t tests and b<Znchmarks will d iffer in som e details from the
actual, full implementation. Some common differt'nces between conditions for testing and
conditions for full-scale usc include

• People o perating the process

• Customers of the process
126 Key Con cepts: Wh at Le aders Need to Know about Qua l ity

• Extreme values and unusual conditions

• Intera<t.ions with other proce.sse..; and other partS of the organization

Differences In Size Especially with critical failures, such as breakdown .of equipment, loss
of ke y personnel, or any other pote ntial failure, as in the case of complications in a surgical
procedure, a test might not be large eno ugh to allow these rare failures to occur with any
high degree of certainty.

Other Effects Sometimes d esigning a new process or redesigning an existing process may
create or exacerbate problems in other processes. For example, improved t u rnarow1d time in
approving home loans may create a backlog fo r the closing department. Such in teractions
among processes might not occur in an isolated test.

Identify Process Features and Goals

A process jf!Jiture is any property, attrib ute, and so on that is needed to create the goods or
d eliver the service a nd achieve the product fea ture goals tha t will s..1tisfy a customer need. A
process gonl is the numeric target for one of the features.
Whereas features ans\.ver the question "What characteristics of the product d o we need
to meet c us tomers need s?" process features answer the q uestion "\•Vhat m echanisms do we
need to crea te or deJjver those characteristics (and mee:t- q uaJlty goals) over aJ'ld over without
failures?" Col.lcctivcly, process featu res define a process. n,c llow diagram is the source of
many of, but not all, these features and goals.
As the process design progresses from the macro level down into details, a long list of
specific process features emerges. Each of these is aimed directly at producing one or more
features. For example:

• Creating an invoice .:eq uires a process featu re that can perform arithmetic
calcula tions so that accu rate information can be added.
• Manufactu.d ng a gear wheel requires a process fea ture that ca11 bore prcdsc holes
in to the (."enter of the gear blank.
• Selling a credit card th rough telema rketing requires a process featu re that accurately
collects customer information.

Most process features fall into one of the following categories:

• Proccd ures-a. series of steps followed in a regular, definite orde<

• Methods-an orderly arrangeme11t of a series of tasks, activities, or procedoues
• Equipment and supplies-"physical" devices and other hard goods that will be
neede<l to perform the process
• Materials-tangible elemeMs, data, facts, fig ures, or ii>formation (these, alo11g with
cqu i.pment a nd supplies, also may make up inputs rcqujred as \V"cll as w hat is to be
done to u,em)
• People-numbers of individuals, s ki lls they will require, goals, and tasks they will
perform
• Training-skills and knowledge required to complete the process
• Other res.our<:es-addHional resources that m<>)' be needed
• S upport processes-secretarial support occasiona lly other suppor t, such as
outsources of printing servicesi copying services, temporary help, and Sl) on
 Quality Planning: Des igning Innovative Products and Se rvices 127

Process Feature."'

Spray Crew Certified Sched~• li n g

delivery Size matcria.ls forecast on PC
C~ J)!!Ci ty to determine
t•rodud t'C'alurc to/from and
Produd Fcuturc
Gc1al work needed
Time 10 perform
job
L.es:; than one h o~u·
I00 percent of time 0 • •
G\w.rantccd
appointme nt time.
99 percent of jobs within
15 min. o f appt.>intntcnt •
All m;u el'ials
enviro nmentally s.nfc
AU oawrally occurh•g/no
$)'nth etics •
10 gallons One pc.rso n 100% Forecast time
Ltrgeud e Very strong 0 Strong 6 Weak I per mimne per 10.000 approved by :~ l ways
within
!>q. ft of yd. State Dept. of 10 percent
Ag,ric ~• IU.•re of"'ctunl
Process Fea1ure Goals

FtGUA! 4.13 Process design spreadsheet. (Juran Institute, Inc. Copyright 1994. Used by permission.)

just as in the case of prod uct design, process d esign is easier to manage and optimize if
the process features and goals are organized if'lto a spreadsheet in_djcatirllg how the process
d elivers the features and goals. Figure 4.13 illustrates such a spreadsheet.
'01e spreadsheet serves not o nly as a convenient s ummary of the ke y attributes of the
process, it also facilitates anS\vering two key questions that are necessary fo r effective and
efficienl p rocess design. First, will every prod uct feature nnd goal be attained by the p t<Xess'
Second, is each process feature absolutely necessary fo r at least one prodl!.lct featu re; i.e., are
there any u nnecessaty or red undant process features? Also, verify that o ne o f the o ther pro-
cess features canno t be used to create the sam e effect on the product.
Often high-le vel process designs will ide ntify features and goals that are required from orga-
ni?..ation wide macro processes. Examples might include cycle times from t.l le purchasing pro·
cess, specific data from financial systems, and new sk:iUs training. Because the new process will
depend o n these macro processes for support, now is the time to verify that they are capable of
meeting th e goalS- If they are no t, th e macro p rocesses will need to be improved as part of the
process d esign, or they will need to be replaced with an alternative delivery me !hod.

Identify Detailed Process Features and Goals

In most cases, it will be most c{fjcicnt and effecti ve fo r jndividual subtcarns to carry o ut the
d etailed d esigns of subprocesses and major activ ities. These d etailed designs will have the
process features and goals as their o bjectives and c-riteria. Each subprocess team w ill develop
the design to the level at which st<mdard operating procedures can be developed, software
coded, equipment p roduced or purchased , and materials acquired.

Design for Critical Factors and Human Error

One key dement of pr= s design is d etermining the effect that critical factors wiJJ have o n
the design. "Critical factors" arc those aspects which ptescnt sc.rious danger to human. life,
128 Ke y Con c e pIs: Wh a I Le ad e r s Ne e d I o Ko ow abo u I Qu a Ii I y

health, and the environment or risk the Joss of very large sums of money. Some examples of
sud1 fac tors in volve massive scales of operations: airport traffic control syste ms, h uge con-
struction projects, systems of patie nt care in hospital/ and even the process for managing the
s tock market. Design for such factors should obviously in clude ample margins of safety as
to s tructural i11tegrity, fai l-sa fe pi'Qvisions, l'ed undancy systems, mu lt iple alarms.. and so o n.
Criticality analysis and fail u re-mode and effect analysis (see Chapter 19, Accurate and
Reliable Measurement Systems and Advanced Tools) are helpful tools in iden tifying those
factors which require special a ttention at this point.
Workers vary in their capabilities to perform specific tasks and activities. Some workers
perform well, whereas o thers do not perform nea rly as well. What is consistent about all
workers is that they are a part of the human family. and huma-11 beings are fallible. Collec~
tiveJy, the exte nt of human e rrors is large e no ugh to require that the process dt-sign provides
for means to reduce an d c<mtrol human erro r. Begin by analyzing the data on human errors,
and then apply the Pareto principle. The vital few error types in dividually become candi·
dates for special p rocess design. The human errors that can be addressed by process design
fa lJ into these majo r classes:

• Tech nique errors arising from individuals lacking spe.dflc, need ed skills
• Errors aggravated by lack o f feed back
• Errors atis_
i ng from the fac t that hwnan s can J'IOt re_m ai.n i.ndcfit'titcly in a state of
complete, ready attention

Principles of Mistake Proofing

Research has indicated that th ere are a number of different classifications of error proofing
me thods, and these a re spelled o ut below. Elimhwtiou consists of changing the techn ology to
eliminate operations that are error-prone. For example, in some materials handling opera-
tions, the worker should insert a p rotective pad between lhe lifting wire a nd the ptoduct so
that the wire will no t damage the product. Elimination could consis t o f usin g nylon bands to
d o the lifting.

Optlmlze Process Features and Goals

After the plann e rs have designed for critical factors and made modifications to the plan for
ways of reducing human error, the next (lCtivity is to optimize first the subprocesses and
then IJ'Ic overall pl'OCess design. In step 4, develop product, the concept o f optim.ization was
introduced . TI'Ie sam e activities performed for optimizin g features an d product feature goa ls
also apply to process planning. Optimization applies to both the design of tl1e overall p ro·
cess and the design of in dividual s ubprocesses.

Establish Process Capability

Before a process beg.i ns operation, it must be d emonslraled to be capable of meeling its
quality goals. The concepts a nd methods fo r establish ing process capab ility are discussed
in detail in Chapter 20, Product-Based Organizations: Delivering Quality While Being Lean
and Green, tmder Process Capability. Any design project m ust measure t he capability of its
process with respect to the ke)' q uality goals. Failure to achieve p rocess. capability should
be followed by systematic diagn osis of the root ca use-s of the failure a nd improvement of
the p rocess to e liminate those root causes before the p rocess becomes operatio nal

Reduction In Cycle Time

Process capability relates to the effectiveness of the process in meeting customer need s. One
special class o f needs may relate to subprocess cycle time-the to tal ti.mJZ elapsed from the
 Quality Planning: Designing Innovative Products and Services 129

beginning of a process to the end. Red ucing cycle time has a lmost become an obsession for
many organizations. Pressures from cus tom ers~ increasing costs, and competitive fo rces are
driving o rganizations to discover fas ter '"'ays of performing their p rocesses. Often these
targeted p rocesses indud e launching new products, providing service to customers, recruit-
it'lg new employees, respondir'l g to c ustomer coJnpla inlo;, a nd so ()Jl. For existing proccs.c;cs,
d esigners fo liO\"' the well-known q ua li ty jmprovement process to reduce cycle time. Diagno·
sis identifies causes for excessive ti me consumption. Specific remedies are then developed to
alleviate these causes.

Set and Publish Final Process Features and Goals

After the design team has established the flow o f the process, identified initia l process
features and goa.ls, d esigned for critical proc-esses and human error~ optimized process
features and goals, and established process capabmties, it is ready to de nne a ll the deta iled
process fea tures and goals to be included in the final design. This is also the stage where
the rosults o f p roces.< d evelopment are officially transmitted to oth er fu.nc tions through
various forms of d ocumentation. These include the specifications fo r the features and
produc t feature goals as well as the sp readsheets and o ther s upporting documents. A ll this
is supplemented by instructions, both oraJ and written.
Filling out the process design spreadsheet is an o ngoing process throug hout process
d evelopment. The spreadsheet s ho uld have been continua JJy updated to refJect d esign
revisions from s uch activities as reviewing alternative options, d esigning fo r criticaJ fac-
to rs and luunan error, o p timizing:, testing process capability, and so o n .. After making the
last revisjon to the proce-ss design spread sheet, it should be checked ot'lce more to verify
the following:

• Each product feature has one or more process fea tures w ith s trong or very
stro ng relatio n. This will ensure the effective d elivery of the p rod uct feature
without significant defects. Each product fea ture goal w ill be met if each process
goal is met.
• Each process feature is important to the d elivery of o ne o r more features. Process
feat ures with no strong relationship to o ther features are unnecessary and should be
discarded.

The completed proce.;s design sproodsheet and d e toiled flow diagrams are the common
information needed by manage1·s, supervisors, and workers throughout the process. ln
addition, the d esig n team must ensure that the following are specified for ead1 task within
the p rocess:

• Who is respo.nsibJe for doing it

• How the task is to be co mpe-t ed
• hslnputs
• Its o utputs
• Problems that can arise during operations and how to deal with them
• Specification of equipment and materials to be used
• Informa tion required by the task
• ln.forma tjon generated by the task
• Tralni11g, standard opera ting proced ures, job a.ids tha t aro needed
130 Key Concepts: What Leaders Need to Know about Qua l ity

Step 6: Develop Process Controls and Transfer to Operations

[n this s tep, planners develop controls for the processes.. arrange to transfer the en tire prodp
uct plan to operational forces, and valid ate the implen1entation o f the il.ransfer. There are
seven major activities in this step.

1. Identify controls needed.

2. Design feed back loop.
3. Optimize self-control and sclf-inspecti.o n.
4. Establish audit.
5. Demonstrate process capabili ty and controllability.
6. Plan for transfer to operations.
7. Implement plan and validate transfer.

Once design is complete, these plans are placed in the hands of the operating depart-
ments. It then becomes the responsibility of the o perational personnel to manufacture the
goods or d eliver the service and to ensure that quality goals are met p recisely and accura tely.
They do this through a planned system of q uality control. Control is large ly directed toward
continuo usly meeting goals and preventing adverse changes from affecting the q uali ty of
the product. Another way of saying this is that no matter what takes place duri ng produc-
tion (change or Joss of personnel, C<..]uipment or electrical failure, changes in s uppliers, etc.},
\\.'Orkers will be able to adjust or ad apt the process to these changes or variations to ensure
that quality goals can be achieved.

Identify Controls Needed

Process control consists of three basic activities:

• Evaluate the actual performance of the process.

• Compare actual performance w ith the goals.
• Take acti<>n on the difference.

Detailed discussions of these activ ities in the context of the feed. back loop are ron tajn ed
in Chapter 6, Quality Control: Assuring Repeatable and Complial\t Processes.

Process Features
Much con trol consists of evaluating those process feat ures that most <lirectly affect the
feat ures, e.g ... the s tate o f the ton.er cartrjdgc in th~ printer, th~ tempera ture of the fur-
nace for smelting iron, or the valid ity of the formulas used in the researcher's report.
Some feat u res become cand ida tes for cont rol subjects as a means of a void ing or reduc-
ing failu res. These control subjects typically are chosen from previously identified
critical iactors or from conducting Fl\·IEA, fault-tree analysis (FTA), and critic<> lity
ana lysis. Process controls are associated with the decision: Should the p rocess run O l'
s top?

• Setting the standards for contro l. i.e., the levels at which the p rocess is out of control
and the tools, such as con trol charts, that will be used to make the determination
• Decid ing w ha taclion is needed v~.rhen thosestand a l'd sare not met, e.g., troubleshooting
• Desig na ting who will take those actions
 Quality Planning: Designing Innovative Products and Services 131

Proc~ Controls

Control Sensor Goal Me-asurement S mnp le sizc LTilc:rion Rc-$ponsibility

Product feature
s:ubjC<."' frequency
P1'0cess feature I
Process fcature 2
--
- ~ too-p
W:we. w ider Sol de•· The•·mo- 5f1S<~f' Continuous 11/:l Opc.W.:IIOI'
temper~tUI'e couple dec.-ease he;u
500' P
iucr~sc heat
~5 film in
Conveyor ft./m in 4.5 fl/min 1/hour nh• Opcr~•tor
speed nleu:r reduce speed
S4 fl/mi1l
increase speed

Alloy Lub chcm J.S% max ! /month 15 grmns :2:1 .5%. drain Pmcc-_..s
purity analysis totnl bath. re -place cngint."Cr
oonta.min:•nts solder

FtGUitl! 4.14 Control spreadsheet. {from J. M. Juran, Quahty Control Handbook . 5th ed., McGrow·HII/, New Yoffl,
1999.. p. 3.48.)

A detailed process flow diagranl sho uld be used to identify and docu ment the po ints a t
w hich conh·o ) measurements and actions w ill be taken. Then ead1 control point should be
docUJl\en ted on a control spreadsheet s imilar to Figure 4.14.

Training
Workers should be trained to make the product conformance decisions Md should also be
tested to ensure that they make good dcdsjo t'l s. Specifica tions must be unequivocally clear.
The q uality audit and audit of control systems are treated elsewhere in detaili see, e.g.,
Chapter 20, P roduct-Based Organizations: Cktivering Quality While Being Lean and Green,
under Aud it of Operations Quality. While the audit of a control sys tem .is a function inde-
pendent of the design team, the design team does have the responsibility for ensuring that
adeq uate d ocunle.r.H atio.n js avaHablc to make a.n effcc6vc a udit possible and that there arc
provisions of resources and time for conducting the audit o n an o ngoing basis.

Demonstrate Process Capability and Controllability

While process capability must be addressed during the d esign of the process, it is during
implementation that ini tia l findings of process capabili ty and controllability must be
verified.

Plan for Transfer to Operations

ln many <>rgatuzations, receipt of the process by oper.1 tions is structured aond for m<tlized. An
iJlfo rmatjon package is p repared consisting o.f certain stal''u.i a tdizcd essentials: goals to be
met, facili ties to be used, procedures to be foJJowed, instructions, cautions, and so o n. There
are also supplements unique to the project. Jn addition1 provision is made for briefing and
training the operating fo rces in such areas as maintenance, dealing with crisis, and so o n.
132 Key Concepts: What Leaders Need to Know about Quality

l11e package ls accompanied by a formal d ocument of transfer of respons ibility. In some

organizations, this tra nsfer takes place in a near-t.--eremonia1 atmosph ere.

The Structured Approacl! Has Value It tends to evolve checkl.i.siS and countdowns that help ensure
that the transfer is orderly and compte~. U the oq,>aniz.,tion already has a structure lor transfer,
proj«:t information may ~adapted to conform to estabUshc'<l practke. U the organization has a.
loose s tructure O I' no ne at alL the foUowing matetial will aid in design the transfer of th e project.
Regardless of \"'hether the o rganization has a structure, the team should not let go of the
responsibility of the project until it has been validated that the transfer has taken plaoo and
everyone affected has all the information, processes, and procedures needed to prod uoo the
final product

Transfer of Know-How During process de,;ign, the planners acquire a gr eat deal of know-
how about the process. The operating per,;onnel could benefit from this know-how if it were
transferred. There are various ways of making this transfer, and most effective transfe.s
make use of several complementary channel-; of communication.. including

• Process specificatjons
• Brjefings
• On-the-job trainins
• Formal training courses
• Prior participation

Audit Plan for the Transfer As part of the plan for formal transfer, a separate audit plan
should be d eveloped as a vehicle for validating the trans fer of the plan. This kind of audit is
different from the con trol audits described previously. TI1e p u rpose of this audit is to evalu-
ate how successful the transfer was. For the audit to have real meaning,specifk goals should
~ established during the desisn phase of the transfer. Generally, these goals rela te to the
quality goals established during the development of the product, features, and process fea-
tu.rcs. The team may d ecide to add o ther goals inherent to the transfer o r to modify newly
planned quality goals during the fi1·st series o f operations. Fo r example, during the first trial
rw>S for producing the product, total cycle time may exceed expected goals by 15 percent.
This modification takes into account that workers may need time to adjust to the plan. As
they ~come more skilled, gain experience with the process, and get more comfortable with
their nt!w set o f responsibilities, cycle time will move closer to targeted q uality goals. The
a udit plan for the transfer s hould include the following:

• Goals to rneet
• How meeting the goa ls willl>e measured
• The time phasing for goals, measurement, and ana lysis
• Who will audit
• What reports will be generated
• Who will have responsibility for corrective action for faiJure to meet specific goals

Implement Plan and Validate Transfer

The final activity of the q uality b)' design process is to implement the plan and validate that
the t ransfer has occurred. A great deal of time and effort has gone into cr-eating the product
plan, and validating that it all works is 1veU worth the effort.
 Quality Planning: Designing Innovative Products and Services 133

Frequently Used Design Tools

• Affinity dhrgmms. This diagram d usters together items of similar type, is a prelude
to a cause-effect diagram used in quality improvement, and is used in quality design
to group together s imilar needs o r features.
• Benclrmarkirtg. H ris technique involves openly sharing and investigating the best
practices of organi?.ations, largely for business and internal p rocesses (not for
competitive or proprietary manufacturing). In today's world, this llas improved from
"industrial tourism'' to rescai"Ch, largely through par-ticipation in online d atabases.
• Bmiustormiug. This popular technique obtains group ideas as to cause (for improvement)
or as to features (for planning).
• Carryover nunlyses. Usually a matrix depicts the degree of ca:rryover of design
elements, with particular regard to failure proneness.
• Comptlitiveannlyses. Usually a matrix depicts a feature-by-feature comparison to the
competith:m, 'vith particular regard to "best~in·class" targets.
• Control chart. This is a w idely used depiction of process change over time. The most
popular is the She\~· hart control chart for averages.
• Crilicnlity nnnlyses. Usually a matrix d epicts the degree of f-ailure of a feature or
compooer1 t aga.inst the ranking oJ customer n~eds, along with rcspons_ibilities
detailed for correction.
• Data collection: focus group. This popular technique places customers in a setting led
by a tr.ti.ned facilitator to probe for the understanding of needs.
• Dntn collectio,l: ,·mrket re.searclr. Any of a variety of tech niques aim at answering the
three fu ndamental q uestions: V\'hat is importan t to the users? \•Vhnt is the order of
the items of impo rtance? How well do we d o in meeting them in that order, as
compared to the competition?
• Data colleclion: sw'Veys. This passive tcch.r1iquc cUcito; answer'S to preset questior1s
about satisfaction or needs. Usually it is "dosed-ended," with meager space for
oomments or a_nswers to open~e.nded questions. Pt."t<lr retun\ rates a.re a hallmark of
this technique, along with the suspicion that those with dis.c;atis factions respond at
higher rates.
• Failure rnode mrd effect nunlyses. Otherwise caJJed FMEA, the matrix presents the
probability of failure, s ignificance of the failure, and ease of detection, resul6ng in a
risk priority mtmlKr (RPN}. Higher RPNs are attacked first. This is used in both
improvement and design settings, althoug h the chief use is as a design tool.
• Fault~lret nualyses. A g·raphical presentatjon of the modes of fai lure shows events
that must occur together ("and") or separately ("or") in order to have the failure
occur. UsuaUy this is shown vertically, with the ANDed and "ORed" events
11 11

cascading as branches on a t-ree.

• Flow diagram. This extremely popular depiction of a process uses standa.r d symbols
for activities and flow directions. It originated in software design during the 1950s
and evolved in to the process mapping widely used today.
• Glo!>snry. The glossary is the chief weapon used to remove the ambiguity of words
and terms between customers and providers. This is a working dictionary of in-
context us..1:ge, e.g., the meaning of #comfortabJe" as it applies to an office chair.
134 Key Concepts: What Leaders Need to Know about Qua l ity

• Design nefwQrk. A tree diagram depicts the even ts that occur e:i.ther in paraUel or
sequentially in the design of something. Usually the network is shown with the total
time needed to complete the event, along w ith ear liest start and subsequent s top
dates. 1t is used to manage a particularly complex design effort. Like techniques
in clude the program evaluation and review technique (PERT) an d critical path
method (CPM). Today's spread sheetlike project management software us ually
combines the key fea tures of each.
• Process analysis techt1ique. This process flowchar t tedmiq ue also shows the time
necessary to d o each task, the dependencies the task requires (such as access to the
computer network), and the time "wasted" in beh\reen tasks. Usually it is interview-
driven and requires a skilled p rocess expert.
• Process capability. This term is given to any number of tools~ usually s tatistical, that
thereby reveal the ability of a process to repeat itself and the abili¢y of the process to
meet its requirements.
• Salability a11alyses. TIUs is another matrix tool used to depict the price willing to be
borne, or the cost need ed to deliver, a given feature of a product.
• SCJ>IIer diagram. This is a graphical technique of plotting one variable a.gainst another,
to determine corelationship. lt is a prelude to regression analyS¢5 to determine
predi·c tion equations.
• Sdeclicm mntri.Y. Th.is .matrix tool shows the chokes to be made ral''lked accor.ding to
agreed u po n crih.•ria. It is used in both improvement and d esign settings.
• Customer ne~~ds sprend$heet. This spreadsheet tool depicts the tclationship between
customer communities and the statements of need, Needs s trongly relating to a
w ide customer base s u bsequent)y rise jn priority when features are considered.
Advan C<'d fo rms of this spreadsheet and others appe<>r as the "h ouse of quality," or
q uality fwtction deployment (Ql'D); see the section in this chapter about Design for
Six Sigma.
• Needs annly$iS spreadsl~eet. TIUs spreadsheet tool is used to "decompose" primary
sta tements of need in to other levels. Thus, "economical" fo r a new car purchaser
might break d0\"-'0 further to purchase p rice, operating costs, insurance costs, fuel
economy, and resale value. Decomposing needs h as the principal ben efit of single-
point response and measurement jf taken to the most eleme ntal level.
• Producl design spreadsheet. This is a continuation of the customer needs spreadsheet,
further developing the fea tures and feature goals that map to th e customer needs.
The features with the s trongest relationship to need s are elevated in prio rity when
considering the processes used to make. them.
• Tree diagrnm. Any of a variely of diagrams depict events U1at are completed in parallel
or s im ultaneously as branches of a tree. This technique is less refined than the design
network, b ut useful to understand the activities from a 11big pkt ure" perspective.
• Valuemm/ysis. 'Ibis is a mahix depiction of customer needs and costs required to suppo rt
or deliver a given feature to meet that need. It is a close cousin to salability analysis.

Design for Six Sigma

Product and service design is the creation of a detailed description for a physica.l good or
service, together with the processes to actually prod uce that good or service. 1J1 quality the-
ory terms, prod uct design means establishing qua lity goals a nd p u tting in p lace the means
to reach those goals on a s ustained basis, Jn Six Sigma terms, p roduct design [Design for Six
 Quality Planning: Des igning Innovative Products and Se rvices 135

Sigma (DFSS)J means contemporaneously creating a design for a product and includes lhe
process to produce it in such a \V~lY tha t d efects in the product and the p rocess are no t only
extremely rare1 but also predictable. V\' hat is more, d efects are rare and predictable, even at
the point when full-scale production begins. To ad1ieve this level of excellence an d its atten -
dant low costs a r1d shott cyc1~ tim.c-$i, as wc11 as soaring levels of cus l'Orn.er satisfaction,
requires some e nhancements to traditional design methods. Fo r example, each DFSS design
project starts with a n identHication o f customers and a detailed analysis and un derstanding
of the ir needs. Even " redesign" starts at the beginning because all successful designs a re
based on c ustomer needs,. and in thjs world. of rapid change, c ustomer needs-and even
c ustomers-have a way of rapidly ch anging. Another example is the w-idespread intensjvc
use n f statistic.1 l method s in DFSS. The power ol the information gained fmm statistical
anaJyses provides the means to achieve Six Sigma levels of quality, which are measured in
parts per million. DFSS is carried out in a series of phases known as DMADV.
DMADV stands lor. define, measure, analyze, design, and verify. TI>e discussion tha t follows
d oes not cover aU th e details of procedures an d tools used in DMADV; that would require m.._1ny
h undreds of pages, and they can be fOtmd elsewhere in p ublished form. We will, however, a ttempt
to acquaint the reader with what any manager nt.aeds to know about the purpose, the issues, the
questions, and the sequence of s teps associated '''ith the respective phases of DMADV.
A "new" codification o f the proces...;;: for d eveloping q uality products is known as Design
for Six Sigma. It combines the concept of q ua lity d esign with the popular goal of Six Sigma
qua lity. The DFSS process directs the designers of tl1e product to create their designs so tha t
manufac turing can produce them at Six Sigma quality levels. In the case of services, it means
developing the service process so tha t it ca.n be deUvered at Six Sigma qu'llity levels.
DFSS is targeted at desig n activities that n."Su lt in. a new product, a new dcs.ign of a n
e xistin g product, or the modification of an e xisting design. It consists of five phases in the
following sequence: define, measure, analyze, design, verify. Figure 4.15 expands o n th e
activities of each phase. (See Chapter 14, Continuous Innovation Using Design for Six Sigma,
for more details o.o DFSS.)

Deline Measure Analyze Design Verify

,. lnili:n e the ,. ()jscove•· and • Develop design • OJ>timize • Execute pilot!

project prioritize ahem~Hive detail level ~mal yze results

• Scope the CUSlOnlCr • Develop high· des.ign • lmpJemem

project needs level design parameters production
• Plan and • Develop and ,. E.vahuHe high- • EvaJuate detail process
manage the prioritize CTQs level design level clesis n • Transition lo
projCCI • ~·lc~svrc • PIM QC!Ril owners
baseline design
pcrfom•ancc veri fi tation
tests
• Verify detai I
and design o r
producl
• Oplimize
process
performance

FtouAr 4.15
.. .
Major actiVTtiCS tn OFSS.
136 Key Concepts: What Leaders Need to Know about Qua l ity

References
Dt>sigus for World Clnss Q"nlily. (1995). Jura n Institute, Wilto n, CT.
Juran, ) . M. (1992). Qunlity by Desigu. Free Press, New York.
Parasuraman, A., Zeithami, V. A ., and Berry, L. L. (198S). "A Conceptual Model lor Serv ice
Q uality and Its implications f<>r Fu rthe r Research." /(!limn/ of Mttrketi,g, Fall, pp. 41-50.
Veraldi, L. C. (1985). "TI'e Team Tauru s Story." MJT Con fere nce paper, C hicago, A ug us t. 22.
Cente r fo r Advanced Engin eering Stu dy, MJT, Camb ridge, MA.
 CHAPTER 5
Quality Improvement:
Creating Breakthroughs
in Performance
Joseph M. Juran and Joseph A. DeFeo

About Uis Chapter 137 Mobilizillg for Breaktlroop tn.

Higlt PcMols of This Ch•pter 138 T.. Executive "Quality Couac:i" 112
The Uoivernl SeQUeace lor Broakthrough 139 Breaktkrougll Coals in the Basiness Pbn 174
Broaltthroup Models aod Met~ods 143 Ue Ho11iaation aod Selection Process 116
The Breaklhroop foodmelllals 151 Project c..rters: Problem and Co.J Statemeots
Sea~riog Upper M•nagemtllt Approval and lor Projects 182
Participati<>o 157 Ue Project Team 183
COPQ vers1s Cost Redwctioo 159 Te•m Organizilioa 187
Driving Bolloll·lioe Performance 160 lnstitutiona&ziot Breakthroop 191
Where to fiod Costs of Poor Performance 161 R"'iew Protress 192
lllerpreting the Costs oiPoor Quality 163 Training for Breakthroop 193
The Results 165 Ackoowledptents 193
Calcul•ting h54urces Used 165 Rtlereoces 193

About This Chapter

its rclatior'l to attajr, ..
Th c- purpose of thjs chapter is tocxplait'l the nature of breakthro ugh and
i1'1g superior results. This chapter deals with the univers."ll and fundamental concepts tha t
define the rnethods to create "breakthroughs in current performance." The Six Sigma Model
for Performance Improvement, popularjzed by Motorola and GE, ;s the most w;dely used
meB' od for ntt.'linh'lg breakthrough. Although this is covered jn detail jn Chnpter 12, Six

137
138 Key Concepts: What Leaders Need to Know about Quality

Sigma: Improving Process Effectiveness, we will focus on setting a foundation, presenting

key terms, and making critical distinctions between simiJar, but different, contemporary
methods to improve performance. This chapter \\rill focus on leadership's roJe in creating a
s trategy that e nables the oq,ranization to continue to improve year after year.

High Points of This Chapter

1. A breakthrough in current performance aims to eliminate failures s uch as excessive
n..mber of defects, excessive delays, excessively long time cycles, and the high costs
of poor quality due to poorly performing processes.
2. The Juran Universal Sequence for Breakthrough, identified in the 1950s, CQnsists of
six steps to achieve s uperior results. The s teps arc
a. Nominate and identify problems. (Management docs this.)
b. Establish a project and team. (Management does this.)
c. Diagnose the cause(s). (TI\e project team does this.)
d. Remedy the cause(s). (The project team plus the work group where the cause(sj
originate do this.)
c. Hold the gains. (The project team and affected operating forces do this.)
f. Repticate results and nominate new projects. (Management does this.)
3. All imp rovement happens project by project. To achieve breakthrough requires
leaders to define goals and projects tha t are rcsourced to ensure completio n and
results.
4. lt is upper management's responsibility to mandate breakthrough. SpecificaUy,
upper management m ust
a. Establish muJtifunctionaJ councils o r s teering teams to prioritize projects.
b. Nominate and select breakthrough projects.
c. Create project charters that include problem and goal s tatements.
d. Provide resources, especially peo ple a nd time, to carry out the project.
e. Assign teams, team leaders, facilitators, "Black Belts" to projects.
f. Review progrc..~. remove barrjcrs, and manage cultural rcs.ista.nce.
g . Provide recognitio n and re wards.
5. Project selection requiies expertise and practice on the part of mMagement, so
"doabJc'' projects arc identified so that lhe team clearly u_n derstands both the
p roblem and the goal.
6 . To attain a breakthrough in current performance requires two "journeys ": the
diagnostic journey and the remedial journey. These journeys represent the
application of the fact-based method to solve the performance problems.
7. The diagnostic joumey proceeds as follows:
a. From problem to symptoms of the problem
b. F rom symptoms to theories of causes of the symptoms
c. From theories to testing of the theories
d. From tests to establishing root causc(s) of the symptoms
 Quality Improvement: Creating Breakthroughs in Performance 139

8. The remed iaJ journey proceeds as follows:

a. From root cauS«(s) to d<!Sign of remedies of the cauS«(s)
b. From design of remedies to testing and proving the remedies under operating
conditions
c. From \'\'Orkable remedies to d ealing with p redictable resistance to change
d. From d ealing with resistance to establishing new contro ls on the remedies to
hold the gains
9. Therehave been numerouse(forts tocreatesimp Jer and less intensive imp rovement
methods. Most of them failed to deliver the results. The Six Sigma DMA!C
Jmprovement Model has gcc1ined wide acceptance and is the most w idely used.
This will be covered in more detail in Chapter 12, Six Sigma: Impro ving P rocess
Effectiveness. J t fo llows t hese basic s teps:
a. Select the problem and la unch a project. (Management does this.)
b. Define the problem. (Champions and Management do this.)
c. Measure the magnit ude of the symptoms. (The project team does this.)
d . AnaJyze in formation to discover the root cause(s). (l11e project team does this.)
e . .Improve by providing a remed y lot the causc(s). (Project ieams do this.)
f. Control to hold the gaiM. (Project team and departments do this.)

10. All projects and teams will CJlcountcr obstacles w hen maki11g changes. Objectjo11S
will be rajsed by various sources. There may be delaying tactics or rejection by a
manager, the work force, or the union. We refer to this as resistance to change. AU
managers must undeC'$tand how to c.wercome this resistance.

The Universal Sequence for Breakthrough

Improvement happens every day, in every organizatkm-even among the poor performer$.
That is how businesse..o; survive- in the short term. Improvement is an activity in \·v hich
every organization carries out tasks to make incremental improvemen ts, day after dtt)~
[mprovement is different from breakthrough improvement. Breakthrough requires s pecial
methods and s up port to attain significant changes and results. lt also d iffers from planning
and controL Breakthrough requires taking a "step back" to discover what may be preventing
the current level of performance from meeting the need s of its customers. This chapter
focuses o n a ttaining breaktluough improvemen t and how Jead ers can create a system to
increase the rate of improvement. By attaining just a few (the Pareto principle) vital b reak-
thro ughs year after year, the o rganization can outperlorm its competitors and meet stake-
ho lder ne-eds.
As used heres " bteakthroug h'' means ''the organized creation o f beneficial change and
the attainment o f un precedented levels of performance." Synony ms are "quality improve-
ment" or "Six Sigma improvement." Unprecedented change may reqttire attaining a Six
Sigrna level (3.4 ppm) or 10-fold levels o f imp rovement over current levels of p rocess
performanc<~. Breakthroug h results in significant cost reduction, customer sa ti..<faction
enhancement, and s uperior results that wi ll satisfy s takeho lders.
"The concept of a universal sequence evolved from my experience first in \A'estem Electric
Ort,>anizntion (1924-1941) and later during m)' years as <m ind ependent consultant, starting in
1945. Following a few preliminary published papers, a universal sequence was published in
140 Key Concepts: What Leaders Need to Know about Quality

book fo rm Quran 1964). This sequence then continued to evolve b..1sed on experience gained
from appUcations b)' operating managers.
TI1e crea tion of the Juran Institute in 1979 led to the publication of the videocassette
series Junm on BrenktltrougiJ 0uran 1981). Th is series was widely received a nd was influential
in latmching breakthro ugh initiatives in many organizations. These organizations then
developed internal training programs and spelJed o ut their own versions of a tmiversal
sequence. All of these h ave much in common with the o rig inal sequence published in 1964.
Ln some cases, the organizations have come up with welcome revisions or additiow."
Breakthmugh means change: a dynamic, decisive movement to new, higiher levels o f perfor-
mance. In a tnuy static society, breakthrough is taboo, forbidden. There have been many such
societi.,;, and some have e ndured for oontwies. During those centuries, their membe rs e ither
suffered or enjoyed complete predictability. They knew pn.>ci.sely what their station in tile was-
the same as that lived out by thc:ir forebea.tS--but this p(t..xlictabiJjty was.. i.n due co u~, pa_id. for
by a later genera tion. Th e price pa.id was the extinction of tJ'\e static society through con quest o r
another takeover by some form of society tha t was on th e move. TI1e threa.t of extinction .may
well have bec_n kn.own to Lhe lcad etS of some o f these static societies. Som.c ga.mblet.i that the
th reat would not become a reality until they were gone. [ t \ ..•as well stal-e d in Madame de
Pompadour'"s famous letter to Louis XV of Fran ce: " Afte r us, the de l uge.~~"
History is vital to today's leaders. The threat to the static society s tems. from basic huma n
drives: the drive fo r more of everything-knowledge, goods.. power, and wealth. The resulting
competition is \"-•hat makes breakthrough important (Juran 1964).
There is an unvarying sequence of e vents by which we break o ut of the old levels of per-
formance and into the new. The details of this sequence are important. The startin g point is th e
altitude that a breakthrough is both desirable and feasible. ln human organizations, there is no
change unless there is first an advocate of change. U someone does not want change, there is a
long_ ha.rd road before chnnge is 6n ally achieved. The fi rst step on that road is S<.'meone's belief
that a cha nge-a breakthrough-is d esirable and feasible. TI>at change is desirable is mainly
an act of faith o r betief. Feasibility req uires some d igging. nus leads to the second s tep.
The second s top is to see whether a breakthrough is lil<cly to happe n if we mobilize fo r
it-a feasibility stud y or demonstration project. TI>is study will help sepa rate the problem
into major parts, the vital few from the useful many. I ca ll th is the Pareto analysis. These vital
few problems then become the subject of a drive for new knowled ge. But trhe creatio n of new
knowledge d oes n ot just happe n-we must organi ze for il This leads to tth e next step.
Organizatio n for breakthrough in knowled ge is next. It requires that we appoin t or cre-
ate two systems: o ne that directs or g uides the b reakthrough, an d o ne that d oes the fact-
gathe ring an d analysis. We call them the steering arm and the diagnostic arm, re-spective ly.
For breakthrough in know }edge, both of these arms are necessary. Neither one alone is suf-
ficient. \"/hen both a re in place, diagnosis begins. Facts are coUected an d examined, an d new
knowledge gained. At this stage, a bre.1.k through in knowledge has been achieved.
However, a b reakthroug h in knowledge does not a utomatica lly create a breakthrough in
performance. Experience has shown that the technical ch an ges needed usually aliect the
s tatus, h abits, beliefs, e tc., of the people involved. Anthropologists have given the name
"cultural pattern" to this collection of human beliefs, practices, e tc.
Breakthroughs in the cultura l pattern a(C in this way an added essential step. Before new
levels of perfo rmance ca1'\ be rea d '\ed, we must discover the effect of the- proposed changes
on the cultural pa ttern nnd find ways I<' deal with the resistances generated. This turns o ut
a t times to be a difficult a nd important problem.
Finally, a b reakthrough in performance can be achjeved. TI'\is is the result we ha d set o ut
to attain . To sustain it, we m ust rely o n contro ls to maintain the status q uo until an o ther
breakthrough comes along.
 Quality Improvement: Creating Breakthroughs in Performance 141

Two Kinds of Breakthrough

Breakth rough can be aimed at bo th sides o f q uality.

L Hnving !Jigher-qunlity product nnd sertJicc fcafttr~~s provides customer Sr'"ltisfaction and
revenue for the p roducing o rganization. These p roduct featu res drive revenue.
2. Achieving freedom from fa ilures will reduce customer djssatisfactjon and non value-
add ed waste. To the produd 1lg organization, red ucing the p roduct failures, w hich
reduce costs, is a target fo r breakthrough.

Breakthrough is applicable to any ind ustry, p roblem, or process. To better und erstand
\vh y w many o rgani zations c reate extensive q u ality improvement progr am!i such as Lean
Six Sigma we must contrast planning versus improvement ln the p revious chapter, we dis-
cLtSSed the q uaJjty plruming process to design fea tures.
Breakthrough to reduce excess failures and d cfic.ieJ'I cics m.ay cor'l sist o f s uch actions as

• Increase the yield of p roduction p rocesses

• Red ucc error rates of ad mlnist-r ativc reports
• Red uce field failures
• Red uce clai m denials
• Red uce the tim e it takes to perform critical patient clinical procedures

TI1e result in bo th cases is performance im provement, w hich can lead to performan ce

excellence. However, the rate of imp rovement required to attain mar ket leadership need s to
move at a revolutionary rate, and this o ften elu des most o rganizations. The methods and
tools used to secure s uperior results are fundamentally different from day-to-day i mprove-
ment method s, a nd for sub tle reasons.
Creating b reakthrough to increase revenue starts by setting s trategic gonls, s uch as new
product development goals to provide best-in-class feat ures, or reducing cycle times to beat
the competitio n. Meeting such new goals requ.ires a systematic "quality planning" p rocess
0u.ran 1999). Mult;ple levels of q uality planning are needed. An organization needs to plan
new products or to d esign for quality. Other for ms of q uality planning arc to design fo r
manufacturing, Design for Six Sigma1 and even Design for Green and Lean.
Q uality planning differs fro m most product and ser vice developmene methods in that it
is carried o ut through a universal series o f s teps focusing on understand the "voice of the
cus tomers" (internal and external) and incorporating it into the design of the p roduct. The
best design methods always begin with a n identification of w ho we are designing fo r. ln
othe r w o rds, who are the "customers?" This is o ften follow ed by dete rmining the needs of
those customers, the n developing the product or service features required to meet those
need~. and so on. Collectively, this serie~ of steps is the "qualil.y planning or quality by
d esign road map." C rea ting breakthroughs in d esign is covered in Chapter 4, Quality Pla n~
ning: Designing Inn ovative Products a nd Services.
Many organiz...1.tio ns main tain an o rgan ized app road1 fo r evo lving n ew p roducts a nd
services, year after year. Under this organized approoch

• Product d evelopment projects are a part of the b usiness plan.

• A new product d evelopment function mainta ins business s urveiUa nce ov er these
p roje<:ts.
• Full-time p roduct and p rocess d e velopment departments at'e eq uipped with
personnel_- laboratories, and o the r resou rces to carry out the techn o logical w ork.
142 Key Concep t s: What Leaders Need to Know about Qualit y

• There is clear responsibility fo r carrying out the essential technological work.

• A structured procedure is used to process the new developments through the
functioMl departments.
• The continuing existen~ of this structure favors new product development on a
ycar·to ..year basis.

Tllis special organizatinnal structure, w hile necessary, is no t SllfficiC!nl to e nsure good

results. In some organi7..ations, the cycle time for getting new products to market is lengthy,
the new models compete poorJy in the market, or new chronic wastes are created. Sud1
\Vea.kness.es usuaUy are traceable to weaknesses in the planning pr()OOSS.
In the case of too many nonvalue-added tasks or too high a cost associated with chronic
waste, the p.rod uct or scrvke js a, Iready in prod uction" the goals arc already i 1'1 place. The pro·
cesse.s for meeting those goals and the means to maintain them are being carried out by the
workforce. 1-lo\vever, the resulting products (goods and services) do no t always meet the
goals. Consequently, the approach to reducing these non value-added tasks or chronic waste is
different from the design or planning methods. Instead, to attain breakthroughs in current
leve ls of performance, we must first have management commi t to a program of quality
improvement such as Six Sigma. This program can provide the means to identify the problems
and then discover their causes. llle organi zation must make the time to cany o ut a diagnosis
of the current process. Once the causes are uncovered, remedies can be applied to remove the
causes. It is this approach- to attain breakthroughs--that is the subject o f this chapter.
Continuing to attain breakthrough is needed. to meet the changing needs of c ustomers,
which are a moving target. Competitive prices are also a moving target. However, break-
throughs in improvement usually lag behind breakthroughs in design. They have progressed
at very different rates. The chief reason is tha.t many upper managers give a higher priority
to increasing revenue from other means than on focus ing- rcsom:ccs on attaining break~
throughs by achieving unprecedented levels of performance in this way. This difference in
priority is usually reflected in the respective o rganizational structures, An examp le is seen in
the «pproa.ch to new product development.
Historically, the efforts to meet the competition and improve performance proceeded
a long two lines based on two very different philosophies:

• Political leaders focused on traditional political solutiot1s -import quot'as, t.:1.riffs,

legislation on "fair trade," and so on.
• Business leaders increasingly became convinced that the necessary response to
competition was to become more competitive. 1l1is approach required applying the
lessons learned from the role models across the entire national economy. Such a
massive scaling up has extended well into the twenty-first centLLry.

TI>e experience of receni decades has led to an emerging consensus ihai managing fo r
quality (planning, control, and improvement) is one of the most cost-effective means to deal
w ith the threats and opportunities, and provide a means of actions that need to be taken. As
it rela tes to breakthrough, the high points of this consensus include the following:

• Global compe titio n has intensified and has become a permanent unpleasant fact.
A needed response is to create a high rate of breakthrough, year after year.
• Customers are increasingly demanding improved products from their suppliers.
These demands are then transmitted through the entire supplier chain. The demands
may go beyond product breakthrough and extend to improving the system of
managing for quality.
 Qua li ty Im provement: Creating Breakthroughs in Per formanc e 145

We will discuss Six Sig ma in detail and fill in the blanks on its s teps.: Define, Measu re,
Analyze, lmprove, and Control in C hapter 12, Six Sig ma: Improving Process Effectiveness.

A Breakthrough Improvement Case

TI1e following is the outline of the anatomy of a breakthrough improvement projec t. Because
thjs book is written as a gu.idc, we will Umit o ur dctajled discussions to some of tbc more
important activities that are ca rried o ul by management. Each of the follo wing topics tha t
are outlined contains a large body of technical kno\vledge, tools, and techniques.
Identify a project (Manogement does this):

• Nominate projects.
• Evaluate projects.
• Select a project.
• Determine if this is a d esign project, an improvement p roject, or another type, s uch
as a lean project.

Establish the project (the champions do this):

• Prepa re a problem statement and a goal sta tement.

• Select a mcil ita tor, or in a Six Sig ma Program, a Black Belt o r expert (sec Chapter J 2,
Six Sigma: Improving Process Effectiveness).
• Select ar1d launch a team.

Diag nose the cause (the p roject team a nd Black Belts do th is):

• Analyze sympto ms.

• Confirm and quantify o r modify the goal.
• For mulate theories of causes.
• Test likely theories of causes.
• Identify root cause(s).

Remedy the cause (the project team an d the w orkgroup where the ca"se[s 1originate d o
this, perhaps with assistance from many others who are affected by, o r who contribute to,
the remedy):

• Evaluate alternative remedial changes.

• Design the solutio n... remedy... and changes need ed to eliminate the root causes.
• DesigTl new controls to hold the gains.
• Design for the culture (prevent o r overcome resistance to the re.mcdial changes).
• Prove t~hc effectiveness o f the remedy under o pera ting oond itior'IS.
• Imp lemen t the remedial ch anges.

Hold the gains (the project te am an d the affected operating forces do this):

• Design an d implement effective con trols.

• r..-tistake-proof the process, as necess..'lry.
• Audit the L"''ntro ls.
146 Key Concep t s: What Leaders Need to Know about Qualit y

Replicate results and nominate new- p rojects (Managernent d oes this):

• Replic.1te the resul ts (clone, perhaps with modifications, the remedy).

• Nominate new projects based on lesS<.>ns learned from the last project.
• Organize leaders into "performance excellence" or "quality councils."
• Select problems or new goals that need to be improved, and establish projects for
them.
• Create project charters: problem and goal s tatements.
• Provide resources: training.. staff, exper tise, coaching, and especiaUy time to complete
the improvement.
• Assign teams and p rojects to te.ams to stimulate remedies and controls.
• Review progress and provide recognitio n and rewards.

The Mysterious Damage to Linoleum in Manufactured Housing

Here is a brief case of a s traightforward, rcJativcly simple (yet valuable) project tha t iJius·
trates the breakthrough improvement methodology.
Nearly half of the residential single-family dwelling tmits built in the United States are
manufactured on moving production lines. The modular units are transported to remote
locations, joined. together there, and set upon prepared foundations on the home purchaser's
lo t. It is hard to telJ the difference between an assembled manufactu red ho use and a s tick-
built house o nce they are finished and landscaped.
A large manufacturer of modular hous ing units was d issatisfied with the level of very
expensive tc\'I.' Otk some of iL.;; fac totics in variolls location...t.t arou1\d the co'\.lntry were experi·
encing. C ustomer diss.."ltisfac tion was rising; p rofits were eroding. Quality councils consist-
ing of the gener-al manager and all direct reports were fo rmed at each factory. They received
training in quality improvement, identified the most expensive rework, for med and trained
teams in quality improvement, and set them to reducing the amount of rework This is the
story of one such improvement project. We begin by identifying the problem.

Identify the Problem: One Factory's Quality Council Listed and Prioritized Its
Rework Problems Using the Pareto Analysis
The Pareto distribution (a rranged in descend ing order of cumula tive percent) of their
most costly rework types d uring the past six months looked as follows (lea rn more
about the Pareto analysis in Chapter 18, Core Tools to Design, Control, and Improve
Perfo rmance):

• Replacing damaged linoleum: 51 percent

• Repairing cu t electrical wires in w alls: 15 pel'cent
• Replacing missing fixtures at the site: 14 per'Cent
• Repairing leaks in water pipes: 12 percent
• Repairing cracks in drywall: 8 percent
Based on the Pareto analysis, the quality cotmcil selected public enemy number one:
replacing damaged linolellm. This problem is expensive to repair. Often, walls had to be
removed and new linoleum laid, followed by replacing the wall. The next s tep was to estab·
lish a legitimate project with responsibility to resolve the problem.
 Quality Improvement: Creating Breakthroughs in Performance 147

Establish the Project

• A p roblem statement was fo rmulated : "The excess number of occurrences of replacing
damaged linoleum accounts for 51 percent of all rt'ivork."
• The goa l statement was provided to the team as to the direction they should take:
"Redua tlu! munber of occ-urrences of replacing damaged linoleum.''

Note that both the problem a nd goal are described and the variable and un it of measure
in the problem statement and goal statement are identicaL This is impo rtant because the
problem s tatement tells the team what problem it is trying to solve. The rest of the project
focuse~ on whatever the council selects as the problem; if they do no t match, the team may
carry out the goa I and not solve the problem. The council c hartered a project team corls isting
of representatives o f the workstations where the linoleum was installed and w here the dam·
aged linoleum was observed. The council appointed a worker in o ne of those workstations
to be the project team leader. The project team leader received training not only in q uality
improvement, but also in leading a project team. A trained facilitator coached the team in the
breakthrough improvement ffil"!thodology. The team bcgatl its diagr'l osticjourncy: the jour'ncy
from sympto m to cause.

Diagnose the Cause

Tite team's first task was to analyze the symptoms. (Symptoms are outward evidence of the
problem.) The primary symptom was, of course, the number of occurrences of replacing
d amaged linoleum. Secondary symptoms were the cost of replacement... the various types
of d amage, the location where the damage showed u p, downtime clue to replacement.
overtime to do the replacement, and the like. The symptoms were ana lyzed by defi11i11g
them, quantifying them, and visunliziug them. What follows is an analysis of the primary
S}'mptom.
Various types of damage were identified and d efin ed as gouges, scrapes, cuts, gaps, and
smea rs. A flow diagram was constructed s howing all operations in all workstations that
reJa.ted to liJlolc u m or replacement oJ llnolcu.rn . The flov,r diagram also id entified the work·
stations where damage showed up. Several Pareto analyses were pctfo rmed. The first Pareto
was "by type of damage." It showed

• Gouges (dents): 45 percent

• ScrapliS: 30 per<:ent
• Cuts: 21 percent
• Gaps: 4 percent
• Smears: 2 _percent

Accordin g ly, the team now focused te mporarily on the top priority: gouges.
A second Pare to an alysis of gouges by location in the house was performed . It showed
which areas of the home had the most occurrences of damage:

• Kitchen: 38 percent
• Interior hall: 21 percent
• Bathroom 1: 18 percent
• Bath room 2: 14 percent
• Laund ry: 9 percen t
152 Key Concep t s: What Leaders Need to Know about Qua l it y

Qlll1li1y oonltol (During opcrulions)

f
Spomdic spik• I
40
Original zone of t~~ :
~ !
Quality control .i =:i= e ;
t O e. !
. . . . . . -.. . . . I. . . . . . . . . .-.. '. . . . """1j ·-5
~ ~
!

20
New zone of
Cluvnic WliSie Q uality control
(An opportunity ~
for imprcJVl'lllelll)

Lessons leamed

Focu•• 5.3 The Juran Trilo~. (Juran Institute, Inc., 1986.)

service d evelopment is trying to create something new that meets a new neec.i o f the cus-
to mer. Jt is new, in novative, and requires pro per planning.
All three-design, con trol, and improvemen t-result in better performance, and all use
teams to get there. It is only the s teps that must be carri.e d o ut that arc) different. This is
analogous to a ca.rpcotcr, clectr'ic:ian, and a p lumber. Each trad_espcrso•' works o n building a
home or solving a p roblem (leaky pipes, rotted wood, fai led circuit breaker). They have com-
mon methods and use similar tools, but at differen t times and for different purpose.s.

All Breakthrough Takes Place Project by Project

There is no s uch thing as breakthrough in a general way. All breakthrough takes place
p roject by p roject and in no o ther way.
As used here, " breakthro ugh" means " the solving of a chronic problem by scheduling
(launching a p roject) to find a solution." Since the word breakthrough has multiple mean-
il'•gs, the organization sho uld create a g lossary and educate all employees on what it 1n_eaf1S.
The d efini tion is helped by presenti ng a few examples that were carried o ut s uccessfully in
your organization.

Breakthrough Is Applicable Universally

The h uge numbers of projects carried out during the 1980s and 1990s d emonstrated tha t
breakthrough is ap p licable to all:

• Service industries as weUas manulacturi.ng industries

• Business processes as well as manufacturing processes
• Support activities as well as o perations
• Software- and info rmation-based industries
 Quality Improvement: Creating Breakthroughs in Performance 153

During this period, breakthrough was applied to virtually all industdes, including gov-
ernment, education, and health. In add..ition, breakthrough has been applied s uccessfully to
the e ntire spectrum of o rganization functions: finance, product development, marketing,
legal, and so on.
In one o rga nization, the lega l vice president doubted that breakthrough could be applied
to legal work. Yet within two years, she reduced by more than 50 percent the cycle time of
filing for a patent. (For ela boration and many more case examples, see the Juran Ins titute
e-Lifeline a t w·ww.jurnn.com.)

Breakthrough Expands to Many Parameters

Published reports of breakthroughs show tha t the effects have exh~•'dcd to aU parameters:

• Produdivity. The output per person-hour.

• Cycle time. The time required to carry o ut processes, especially those that involve many
s teps performed sequentially in various departments. Chapter 8, Business Process
Management: Creating an Ad aptable Organizatio n, elabomte-s o n breakthroug h as
applied to such processes.
• Humnn snfety. Many projects improve human safety thro ugh mistake-proofing, fail-
safe d esigns, and so on.
• The enviromP~eut. Similarly, many projects have been directed at protecting the
environme nt by reducing toxic goals an d so on.

Some projects p rovide benefits across multiple parameters. A classic example was the
color television set. The Japanese MatSu$hita Organization had purchased an American
color television fac tory (QLOasar). Matsushita then made various breakthroughs, including
• Product redesign to red uce field failures
• Process r:<.>design to reduce internal defect rates
• )oint action with suppliers to improve purchased components
11\e results of these and other changes are set o ut in the before and after data:

1974 1977
Fall-off rate, I.e., defects (on assembled set) 150 per 100 sets 4 per 100 sets
requiring repair
Number of repair and Inspection personnel 120 15
Failure rate during the warranty period 70% 10%
- - -- - -
Cost of service calls $22 million $4 million

TI1e manufacturer benefited in multiple ways: lower costs, higher productivity, more
relia ble d eliveries, and greater saJabiJjty. The u ltimate users also benefited- the field failure
rate was red uced by more than 80 percent.

The Backlog of Breakthrough Projects Is Never-Ending

The existence of a h uge backlog of problems to solve is evident from the nu mbers o f b rea.k ·
thro ughs actually made by organizations that carried out successful initiatives during the
1980s and 1990s, Some reported making breakthroughs by the thousands, year after year. In
very large organizlllions, the n wnbers are higher still, by orders of magniltude.
154 Key Concep t s: What Leaders Need to Know about Qualit y

The backlog o f breakthro ugh projec-ts exists in part bel.."ause of internal an d external fac~
tors. lntemally, the planning of new products a nd processes has long been d eficient.Jn effect,
the planning process has been a dual hatchery. It hatched out new p lans.lt a lso hatched out
new chronic wastes, and these accum ula ted year after year. Each such chronic waste then
became a potential breakthrough project.
A further reason for a h uge backlog is the nature o f human ingenuity- it seems to have
no limit. Toyota Motor Corporation has reported that its 80,000 employees offered four
rrullion suggestions for breakthrough during a single year-an average of 50 suggestions
per person per year (Sakai 1994).
Externally, the constantly changing needs of customers a.nd our society will always cha I·
le nge the status quo. Targets today are not good enough for to morrow. This creates a never..
ending backlog of projects.

Breakthrough Does Not Come Free

Breakthrough and the resulting reduction of chronic waste d o not come free-they require
an expenditure of effort in several fo rms. It is necess.-try to create an infrastructure to mobi·
lizc the orga_nh:atio.n's resources toward annual breakthrough. Titis involvC$Settjng specifjc
goa ls to be rc.achet.i, choosing projects to be tackled, assigni_n g responsibilities, fo llowing
progress, and so o n.
There is also a need to conduct extensive training in the nature of the breakthrough
improvement methods and tools, how to serve on breakthrough te>~ms, how to use the tools,
and soon.
In addition to all this preparatory effort, each breakthrough improvement project
requires added effort to conduct diagnoses to dhK:over the causes of the ch ronic waste and
provide remecH~ to eliminate the causes. Thjs is the time it takes for all the people involved
in the team to solve the problem.
TI1e precedin g adds up to a sign ificant front-end ou t lay, bu t the resu lts can be stunnin g.
They lmve been s tunning in the s uccessfu l organizations, the role models. Detailed accotmts
of s uch results have been widely published, notably in the proceedings of the annual confer·
ences held by the U.S. National Institute for Standards and Technology (NlSD, which
administers the Malcolm Ba ldrige National Award.

Reduction in Chronic Waste Is Not Capital-Intensive

Reduction in chronk waste seldom req u ires capital expe nditures. Diagnosis to discover the
causes usually COt'\sj sts of the time of the breakthrough project tea.J:ns. Remedi~.; to .remove
the causes usually involve fineahmjng the process. In most cases, a ptoccss that i.s already
producing rnore than 80 peJ'cent good work can be raised to the high 90s without capital
investment. Such avoidance of capital in vestment is a major reason why reduction o f chronic
wast<: has a high return on investment (ROI).
ln contrast, projects to create breakthroughs in product design and development to
iJ'\creasc sales car1 involve costly outlays to discover c ustomer" needs, design products and
processes, build facilities, and so o n. Such o utlays a re largely classified as capital exp endi-
tures and thereby lower the HOl estimates. There is also a time lag between investing in
design and receiving revenue from the sale of the new designs.

The Return on Investment for Breakthrough Improvement Is High

lhis is evide nt from results publidy reported by national award winners. in japan (Deming
Pri<e), the United Stales (Baldrige Award), ELUope, and elsewhere. More i>nd more organiz.a·
tions have been publishing reporlll de..<cribing their breakthroughs, including the gains made.
160 Key Concepts: What Leaders Need to Know about Quality

aJiowances g iven to customers because of late delivery, inaccuracy or errol's in billings, scrap
and rework, and accounts payable mistakes caused by discoun t e rrors and othe r mistakes.
When this company documented its costs of poor q uality, the management team was
astounded by the millions of dollars lost d ue to poor quality of performance within the
o.rgani7.•ation.
This total cost of poor q uality lhe n became the tal'get. The result? Elimination o f waste
and a return to the bottom line from p lan ned cost reductions and more satisfied customers.
Why? Because th.e company eliminated the reasons these costs existed in the first place.
There were pr<.'lteSS and product deficiencies th.at caused customer dissatisfaction. Once
these deficiencies were removed, the quality was higher <11'\d the costs were lower.
\Nhile responding to customer d ema nds for improved quality in everything an organi~
zatio n does is becoming essential, organizations sho uld no t overlook the financial impact of
poor performance. In fact, these costs sh.ould be the driver of th.e project selection process for
Six Sigma.
In o the r words, the cost of poor quality provides proo f o f why ch an ges must be made.
The need to improve an organiz..:'ltion's fmancial condition correla tes directly w ith the pro-
cess of making and measuring q uality improvements. Regardless of the <>bjective you start
with, enh.ancing features as weUas reducing costs of poor quality will affect th.e continuing
fi na ncial succes.~ o f a n operation.
VVh ile the re is a limit to the am ount q uality can be improved when cost effectiveness and
savin gs a re measured against the costs of achieving them, it's not likely this wiU occur until
you approach Five or Six Sigma levels, A busin ess must p ursue the n ext level of q uality
based on wh at is of cdtka_l importance to its c ustomers. If c us tomers demand something,
chances are it rnust be done to keep the b us iness. 1f they d o not, there's time to p la1'1.

Driving Bottom-Line Performance

If you accept the reali ty tha t customers and the marketplace define quality, then your orga·
nization must have the right product or service features a nd lower your d eficien cies to c reate
loyal customers.
With a competitive price and market share strongly supported by fast cyde time, low
warranty costs, and low scrap and rework costs, revenue will be h.igher and total cost lower.
The s ubstantial bor'IUs that falls to the profit column CQmcs, in effect, from a combina tion of
enh.ancing features and reducing the costs of poor quality.
Before getting into specific ways to identify, measure, a nd accolmt for the impact of costs
of poor quality on financial results, look at w hat to do first if you are trying to understand
how the costs of quality can drive a {;n;mcial target.
For example, if your organization sets a cost reductio n target to save $50 million, the re is
a simple methodology to determine how many improvement projects it w iJJ take to reach
that g<k1l. The organization can then manage the improvement initiative more effectively if
il puts some tho ught behind how much activily it can afford. The answer will help deter·
mine how many experts or Black Belts are needed to manage the improvements a nd how
much training w ill be required .
The methodology includes the following s ix s teps:
1. Identify your cost reduction goal of $50 million over the next two years-$25 million
per year.
2. Using an average return of $250_.000 for each improvement, cakula te how many
projects are needed to meet the goaJ for each year. For this example, we would n eed
an incredible 200 projects-100 per year.
 Quality Improvement: Creating Breakthroughs in Performance 161

3. Calculate how many projects per year can be completed and how many experts '\oviU
be required to lead the team. Jf ead1 p roject can be completed in fo ur months, that
means o ne Black Belt o n two p rojects per fo m· mo nths. Hence, o ne Black Belt can
complete s ix p rojects in one year. We will then need about 17 black belts.
4. Estimate how man y employees will be involved on a part-time basis to work wlth
the Black Belts to meet their targets . Assume four per Black Belt per four months.
We would need about 200 employees invo lved at some level e<tch year, possibly as
little as 10 percen t o f their time.
5. Identify the specific costs rel<tted to poor performance, and select projects from this
list that are already causing your organ.ization to incur at least S250,000 per
d eficiency. If you haven't created this Jist, use a small team to identify the costs and
create a Pareto analysis p rior to launching any p rojects.
6. Use this method and debate each varjable among the executive team to ensure the
right amount o f improvement can be s uppo rted. All o rganjzations make impro ve-
me ntl>, but world-class or&"illlizations imp rove at a faster rnte than their competjtion.

Where to Find Costs of Poor Performance

To p ut targets of opportunity into perspective, look at the traditional costs of poor quality
and, even more criticalJy. the hidden costs o f poor q uality, as shown in Figures 5.2 and 5.3.
The hidden costs must be quantified to get a complete picture of losses due to poor perfor-
mance. These costs of poor quality could disappeM entirely if every activity were performed
w ithout deficjency every time.
Tiuee major categories of costs of poor quality exist in organizations. You can focus your
efforts better if you put them into the following three categories:

• Appraisal and inspection costs

• Internal failure costs
• External failure cmas

Appraisal and Inspection Costs

Appraisal and inspectjon costs are costs associated w ith inspection-checki ng or assurin g
that deficiencies are discovered before custo mers a re affected.
Examples include

• Testing: products o r d \ecking docmnents before providing them to customers

• Reviewing d ocuments and correcting errors before ma iling
• Inspecting equipment or supplies
• Proofreading reports or correspondence
• Auditing custo mer bills prior to sending invoices
• RetooJing due to poor design

Discovering d eficiencies at this stage avoids serio us failure costs later and helps develop
more effective and efficient inspection methods. There will always be some costs in thls
category because some level o f auditing will be need ed to cnsu.re consistent performance.
The point is to avoid cxccs.~ivc coslc;.
162 Key Concep t s: What Leaders Need to Know about Qua l it y

Internal Failure Costs

Failure costs w ithin an organization are attrib uted to the repair, replacement, or discarding
of defective work the customer d oes no t see.
Exam ples include

• Repladng 1netal stampings that d o no t meet sp-ecifications during ptOd uction

• Repainting >Kratched surfaces
• Makin g up for w1plann ed computer dov,rntime
• Replacing componen ts damaged w hen being moved from one st<~.ti on to ano ther
• Rcwriti •.'lg parts of a proposa l
• Working overti me to make up for slippage
• Correcting database errors
• Stocking extra parts to replace defective components
• Scrapping products that do not meet specifications
• Spending excess accoun ts··payable time to correct supplier invoice errors
• Eng inccti.ng cha nge no tices to correct errors in specifications o r d,ra\.....-ings

These costs may affect custo mer service indirectly.

External Failure Costs

Ext~rnal failure affects customers diiectly; thes.J usually are the most ~xpensive failures to
correct. External fail ure costs may result from

• Satisfying '"'arran ty d ai ms
• Investigating complaints
• O ffsetling customel' dissa.tisfaction with a 1·ecovery strategy
• Collecting bad debts
• Correcting biWng erro rs
• Processing comp laints
• Exped i ting ]a te shipmen ts by purchasing more expens ive means of
transportation
• Replacing or repairing damaged or lost good s
• Housing s trand ed passengers from cancelled nights
• Paying interest or losing discounts for late payments to vend ors
• Providing on-site assistance to customers w he n field p roblems occur
• Providing credits and a llowan ces to d ients for Jack o f performance or late
deliveries

Efforts to correct external failures usuaUy focus on regainin g customer confidence or lost
sales. Bo th are debatable costs that may or may not be fully calculated.
164 Key Concep t s: What Leaders Need to Know about Qualit y

Decide How to Estimate Costs

Wh en a specific activity related to p oor q ualily is identified, two s trateg·ies help estimate its
costs: total resources and unit costs. These strategies can be used individually or together.
•.1\.n example of the total resource approach is how an operational uni t calcuJnted the
human resource time to p rocess c us to mer complaints and the doJJar vaJue of that time. This
a.pproach require.~ two p ieces of data: to taJ ~source.or; consu med in a category and the per·
cen tage of those resources consumed for activities associated with poor q uality.
An example of the unit cost approach is when a project team calcula!tes the annual cost
of correcting erroneous shipme n ts. To find that cost, the team should estimate the cost of
co rrecting an average errone\)U$ shipment and how many errors occurred in one year.. and
then multiply the average cost by the annual number of errors.
Data forcalculatil''l g the total teSource.o; used in a ca tegory mig ht com·e from a. varie ty o f
sources, such as accolmting , time reporting,. o ther information syste ms, in fo rmed judgment
spedal time reporting, special data collections, an d lmit costs. These sources a re described in
the section "Calculating Resources Used."

Collect Data and Estimate Costs

Procedures for collecting dMa on costs of poor quality are generally the same as those fo r
a ny good data coUedion:

• Formulate questions to be a nswered.

• Know how d ata will be lLSe<l an d an alyzed.
• Determine where data will be coJJected.
• Decid e \•v ho will collect it.
• Und ersta nd d ata collectors' need s.
• Oe:sig n a s imple data collection form.
• Prepare cl(!llr i•"'structio•"'S.
• 1E-st forms an d p rocedures.
• Train data collectors.
• Audit results.

To estimate the costs of poor q uality, it is sometimes necessary to collect pel'sonal opin-
ions a nd judgments about relative magnitudes o f time spent or costs. Even thou gh precise
nume ric data is not requi red fo r such estima tes, it is importan t to plan carefully. The ma nne r
in which o pi.nkms a re solicited affects responses.
Samp ling works w hen the same activ ity is performed often i 1"1 diffe rent parts of an orga·
nization. All field sales offices, fo r example, perfol'm similar fwKtions. 1f a company has 10
field sales offices, estimates fro m o ne or two would provide a reason able value for calculating
overall costs of poor quality.

Analyze ResuHs and Decide on the Next Steps

Collecting data o n costs of poor q uality helps make decisions such as

• Selectin g th e most important q uality imp l'ove ment projects

• Identifying the most costly aspects of a specific problem
• ldentU)'ing spedfic costs to be eliminated
 Quality Improvement: Creating Breakthroughs in Performance 165

The Results
Of note is the fac t tha t evc ..y organizati.on tha t has adopted Six Sigma and in tcgtated the
discipline througho ut its operations has produced impressive savings tha t were reflected o n
the bottom line. More cus tomers were satisfied and became loyal, and re venues, earnings,
and operating margins improved signific.mtly.
E'or example, Ho•\eywell's cost savings have exceeded $2 billion si.oce implementing Six
Sigma in 1994. At General Ellcctric, thc SixS.igma initiative began in 1996 and produced more
than 52 billion in benefits in 1999. Black & Decker's Six Sigma productiv·ity savings rose to
about S75 million in 2000, more than double the prior year's level, bringing the total saved
since 1997 to over 5110 million.
A more revea ling ins ight into the L"'St of poor q uality as a function o f Six Sign'la perfor-
mance levels is the following:

• When +/- 3 Sigma of the process that produces a part is w ithin s pecification.. there
wiU be 66,807 defects per million par ts produced. If each defect cost Sl,OOO to correct,
then the total COPQ would be $66,807,000.
• When an organization improves the process to within +/- 4 Sigma, there wiU be
only 6210 defects per million at a COPQ of $6,210,000.
• At +/- 5 Sigma, the cost of defects declines to $233,000 per milllion, a savings of
$66,574,000 more than the savings at a process capability of +/ - 3 Sigma.
• At the near perfection level of +I- 6 Sigma, defects are almost eliminated at $3400
per million parts produc.id.

After all data are collected Md tabulated, and decisi<>ns are made, no s tudy of the cost
of poor quality shouJd end without a continuing action p lan to eliminate a major portion of
the costs that have been identified. There is no need to usc a complex accounting method fo r
measuring costs because it would be expensive and waste valuable effo1·t. Simple methods
are sufficien t.
T11e most important step in developing useful COPQ data is simply to identify activities
and other factors that affect costs. Any consistent and unbiased method for estimating costs
will yield adeq uate info rmation that w iU identify key targets fo r q uality improvement. More
refined esti mates may be needed for specific projects when diagnosing the cause of a specific
problem or identifying spt-cific savings.

Calculating Resources Used

Data for calculating the total resources used in an expense category come from a variety of
sources, as the following sections explain.

Accounting Categories
Financial and cost accounting systems often contain specific categories th.at can be allocated
partly or totally to cost~ of poor quality. Typical examples includ e scrap accounts, warranty
costs, p rofessional liability, discarded inventory, and total d epartment operating costs.

Time Reporting
Many o rganizations routinely ask employees to report how much time they spend on specific
activities. This makes it possible to assign some or all of the tim e in a category to a s pecific
cost of poor quality.
166 Key Concepts: What Leaders Need to Know about Qua l ity

Other Information Systems

Other information systems include cost accounting, activity·based cost accounting, materi·
als management, s.·tles, o r similar repo rts.
Data for calculating the percen tage of resou rces used for cost of poor q uali ty activities
can be obtain ed thro ugh a varie ty of techniques, including

• Informed judgment. Supervisors and experienced employees can make adeq uate
judgments about w hat p roportion of a department's time is spent on an activit)~
This is especially true if the un it performs very few distinct fu nctions or if the effort
consumes a very large or small portio n o f total tim e.
• Special time reporting. TI1is method has been used to calculate costs for processing
computer complaints. A special s hort-term collection of time d istrib ution data may
be appropriate if a d epartment performs man y differen t functions, activ ity is neither
un usually s mall nor large, or there is uncertainty or significant d isagreement .among
informed ind iv idua ls as to the petcentagc of time o t money aJiocated to a spcdfic
activ ity. A s ign ificant disagreemen t would typica11y be one of mote tha n 10 percent
of the total amount allocated.
• Special data co/leclious. Besides collecting data on how m uch. empBoyee time is spent
on an activity, an organization mig ht also coUect d ata on the amoun t of time a
computer network is inoperative, the voJume of items consumed o r discarded, or
the amount of time special equipment or other resources are not used.

ln all these examples, the general calculation to determine costs of poor quality is:
Cost of poor quality= (cost of total resources in a category) x (percentage of resources
in category used for activities related to poor quality)

Unit Cost
An cxampJc of thisstrntcgy occur'S when a project team calculates the rul n ual cost of correct·
ing erroneous shi pments. To find o ut the cost, the team should estimate the cost of correcting
an average erroneous shipment, estimate how many such errors occurred in one year1 and
then multiply the average cost by the ann ual number of errors.
Focusing on unit cost req uires two piet.."CS of data: the number o f times a particular d efi-
ciency occurs and the average cost fo r correctiJ'I g and recovering from that d eficiency when
it does occur.
~01is average cost, in turn, is compu ted from a list of resources used to make corrections,
o n the a1nou nt used of each resource, and on the cost of each resource u nit.
Unit cost is often the most appropriate s trategy w hen deficiencies occu r rarely and may
be costly, when deficiencies are complex and require the participation of many departments
to correct, or when deficiencies occur frequently and corre<:ting them is so routine that those
involved may not realize their pervasiven\lSS.
Da.ta on freq uency of a deficiency may come from any of the following:

• Q uality assurance
• Warran ty data
• Customer surveys
• Field service reports
• Customer complaints
112 Key Concep t s: What Leaders Need to Know about Qua l it y

Acth·ities by Management Acth'iti'es by Proj ect Teams

Establish infrastruc1mc: <1uality councils Verify problem

Scl(.'<:l. problems: determine g_oHIS and Analyze symptoms
1arge1s Theorize as to csws.es
Create project ch;uters <.md assign teams Test theories
launch teams and review progress Discover causes
Provide recognition and rewards Stimulate remedies and controls

F1ouRt 5.5 Mobilizing for breakthrougll.

The Executive "Quality Council"

The firs t s tep in mobilizing for breakthrough is to establish the o rganization's council (or
similar name). The basic respons ibility of this council is to launch, coordi n a te, and ' 1instiht-
tionalizc" annual breakthroug h. Such councils have been established in manyorgani7.alions.
Their experiences provide useful guidelines.

Membership and Responsibilities

Cou ncil membership is typic-ally drawn from the ran ks of senior managers. Often, the
senio r management committee is also the council. Experience has shown that councils are
most effective w hen upper managers ate persona lly the leaders and members o f the senior
councils.
In large organizations, it is common to estnblish councils a t the divisional level as weU
as at the corporate level. In add ition, some individual facilities may be so large as to warrant
establishing a local council. When multiple oouncils are established, they are usually l.inl<ed
together- members o f high·lcvcl councils serve as chairpersons o f lowcr·lcvcl councils.
Figure 5.6 is an example of such linkage.
Experience has shown that organizing councils solely in the lower levels of management
is ineffec tive. Such o rganization limits breakthrough projects to the " useful many" while
neglecting the "vital few" projects-those that can produce the greatest results. In addition,
councils solely at lower levels send a message to all: "Breakthrough is not high o n upper
management's agenda."
ft is important for each cotmcil to define and publish its responsibili ties so that (l) the
members agree on their goal and (2) the rest of the organization can become informed rela-
tive to upcoming events.
Many «:otmcils have published their statements o f respo nsibility. Major common ele-
ments have included the following:
• For mulate the policies, s uch as foc us on the custo mer has top p riority, breakthrough
m ust go o n year after year, participation should be ttniversaJ, o r the reward system
should reflect perfor mance on breakthrough.
• Estimate the major d imensions,such as the status of the compan y's quality compared
with its competitors, the exhmt of chronic -w aste, the adequacy of major business
processes, or the results achieved by prior breakthroughs.
• Establish processes for selecting projects, such as soliciting and screening nominations,
ch00$ing projects to be tackled, preparing goal s tatements, <>r creating a favorable
climate for breakthro ug h.
 Qua lity Im provement: Creating Breakthroughs in Per formance 173

Executive leadership
council

Business unit or
d ivisioll council

Process owners
(Optional)

Teams

FIGUA£ 5.6 Quality councils are linked together. (Juran Institute, Inc.. 1994.)

• Establish processes for carrying out the p rojects, such as selecting team lead ers and
members or d efin ing the role of project teams.
• Provide s upport for the project teams, s uch as training time for working on projects,
diagnostic support, facili ta tor s upport, or access to facilities for tests and tryouts.
• Establish measures of progress, s uch as effect on c u~tomer Stttisfaction, effe<:t o n
financial performance, or extent of participation by teams.
• Review progress, assist teams in the event of obstacles, and ensUie that remedies
are implemen ted.
• Provide for public recognition of teams.
• Revise the reward system to reflect the changes d emanded by introducing annual
breakthrough.

Cotmcils sho uld anticipate the troublesome questions and , to the ex tent feasi ble, pro-
vide answers a t the time of announcing the intention to go into annual b reakthrough. Some
senior managers have gone to the extent of creating a videotape to enable a w ide a udience
to hear the identic-al message from a source of undoub ted a u thority.

Leaders Must Face Up to the Apprehensions about Elimination of Jobs

E:mployees not only \~·ant d ialogue o n s uch an importan t issue, they also want assurance
relative to their a pprehensions, notably the risk of job Joss due to imp rovem ents. Most u ppe r
174 Ke y Con c e pIs: Wh a I Le ad e r s Ne e d I o Ko ow abo u I Qu a Ii I y

managers have been reluctant to face up to these apprehensions. Such reluctance is under-
standable. Jt is risky to p rovide assurances when the future is uncertain.
Nevertheless, some managers have estimated in some d e pth the two pertinent rates of
change:

• The rate of creation of job openings due to attrition: retirements, offers of early
retirement, resignation, and so on. This rate can be est.imated w ith a fair degree of
accuracy.
• The rate of elimination of jobs due to reductio n oi chronic waste. This estimate is
more speculative- it is difficult to predict how soon the b reakthrough rate will get
up to speed. In practice, organizations have been overly optimistic in their
estimates.

Analysis of these estimates can help managers judge what assurances they can p rovide,
if any. It also can shed tight on the choice of alternatives for action: retrain for jobs that have
o pened up, reas..;;ign to areas that have job openings, offer early retirement, assist in f-inding
jobs in other o rganizations, and/or provide assistance in the event of termination.

Assistance from the Quality and/ or Performance Excellence Functions

Many councils secure the assistance of the performance excellence and quality departments.
These are specialists that are skilled in the methods and tools to attain high q uality. They are
there to

• Provid e inputs needed by Lhe council for plannil''l g to introduce b reakthrough

• Draft proposals and procedures
• Carry o u t essential d etails s uch as screening nominations for p rojects
• Develop training mate-rials
• Develop n ew scorecards
• Prepare reports on progress

It is a lso usual for the q uali ty directors to sen'e as secretaries of the council.

Breakthrough Goals in the Business Plan

Organizations that have become the market leaders-the role models-all adopted the p rac-
tice of enlarging their business plan to include q uality goals. In effect, they translated the
threflts and o p portunities faced by their organizations into goals, such as

• Increase on-time deliveries from 83 to 100 percent over the next two years.
• Red uce the cost of poor q uality by 50 percent over the next five years.

Such goals are dear-each is quantified, and each has a timetable. Convincing upper
managers to establish such goals is a big s tep, but it is o nly the first s tep.

Deployment of Goals
Goals are merely a wish list until !.h ey are deployed-until they are broken do,~n into spe-
cific project..< to be <:arried o ut and assigned to spe<:ific indi,,iduals or teams who are then
provided with the rcsoun:::es need ed to ta ke action. Figure 5.7 s hows Ll'lc anato my o f the
180 Key Concep t s: What Leaders Need to Know about Qualit y

Vital Few and Useful Many

Some organizations completed many p rojects. Then, when questions were raised- "What
have we gotten for all this effort?"- they were dismayed to learn that there \vas no no tice-
able effect on the bottom line. Investigatio n then showed that the reason could be t raced to
the process used for project selection. The projects actually selected had consisted of

• firefighting projects. These are special projects for getting rid of sporadic "spikes."
Such projects did not attack the chronic waste and h ence, could not improve financial
perfonnance. (See Chapter 13, Root Cause Analysis to Maintain Performa nce)
• Useful mnny projects. By definition, these have only a minor effect on financial
performance but have g l'eat effect on h uman relations.
• Projects for lmprot1ing human relntious. These can be quite effective in their field, but
the financial results are usually not measurable.

To a.ch.ievc a sjg.nificant eflect o..n the bottom line requires selecti1'1g the "vitaJ few'' proj·
ects as weiJ as the "useful many.'' h is feasible to work on both, since d ifferent people a rc
assigned to each.
There is a school of thought emerging that contends that the key to market leadership is
"tiny breal<throughs in a thousand places"-in other words, the useful many Another school
urges focus o n the vital few. In my experience, neither o f these schools has the complete
answer. Both are needed-at the right time.
·n1e vital few projects are the maj<.lr contributors to leadership and t o the bottom line.
Tite useful many projects are the major contributor~ to employee partic-ipation and to the
q uality of ""'ork Jife. Eac.h is necessary; neither is s ufficient.
TI1e vital few and useful man)' projects can be carried out simultaneously. Successful
organi z.."ltions have d o ne jus t U1at by recognizing that w hile there are these two types of
projects, they require the time of different categories of orgrutization perS<>nnel.
The interrelation of the..<e two types of projects is shown in Figure 5$. In this figure, the
horizontal scale is t.irne. n'c vertica l scale is chro nic waste. What goes up is bad. The useful

Useful many
~ - - - - --- ···--·-----,, projectsby
•' -· departmental
leams

Vital few
projects by
I

/
/

__ i

muJti-
funcLion~ll
teams '
Time

FIGUR! 5.8 Interrelation of projects. (Juran Institute. Inc.. 1994.)

 Quality Improvement: Creating Breakthroughs in Performance 181

man ybreakthroughscoUectivelycreate agrad uallyslopingline. The vital few breakthro ughs,

tho ugh less frequent, co ntrib ute the bulk of the total breaktluo ugh.

Cost Figures for Projects

To m ee t the preceding c riteria (especially that of retum on investmen t) requires info rmat;o n
on va rious costs:

• The cost o f chronic waste associated w·ith a g iven nomjnation

• The po tential cost reduction if the pwject i~ s uccessful
• The cost of the needed diagnosis an d remedy

Costs versus Percent Deficiencies

[ t is risky to judge priorities based solely o n the percentage of d eficiencies (errors~ defects,
and so on). On the face of it, when this percentage is low, the p riority of the nomination also
should be low. ln some cases this is tr.ue, but in others it can be seriously m isleadjng.

Elephant-Sized and Bite-Sized Projects

There is only one way to ea t an elephant: bite by bite. Some projects are "elephant-si~";
that is, they cover so broad an area of activity that they must be s ubdjvided into muJtiple
"bite-sized " projects. Jn s uch cases.. one project team can be assigned to "cut Llp the ele-
phant." Other teams are then assigned to tackle the resulting bite-sized p rojects. l11is
app roach shortens th e time to comple te the project, sin ce the teams wo•·k concurrently. ln
contrast, use of a single team stretches the time out to several years. Frustration sets in, team
membership d\anges due to attrition, the project drags, an d morale d eclin es.
A most useful too l for cutting up the elephant is the Pareto anaJysis . For an application,
see the paper mill e•ample earlier, under "Use of the Pareto Principle." For elephant-sized
projects, separate goaJ statements arc p repared for the broad coordinating team and for each
team assigned to a bile ~i?..ed proje<t

Replication and Cloning

Some o rganizations consist of multjple autonomous units that exhibit much commonality. A
widespread example is the chains of retail stores, repair shops,hospjtals,and so on. [n such orga-
nizations, a bre.1kthrough project that is carried o ut successfully in one operawg unit logic.1lly
becomes a nominati<'n for application to o ther units. This is called cloning the project.
[tis q uite common for the other units to resist applying the breakthrough to their opera-
tion. Some of this resistance is cult ural in natu re (no t invented here, and so o n). Other resis-
tance may be due to real differences in operating conditions. For exampJe, telephone
exchanges perform similar flmctions for their customers. However, some serve mainly
industrial customers, whereas others serve mainly residential customers.
Upper managers are wary of ordering autonomous units to clone breakthroughs that o rig-
inated elsewhere. Yet d on.ing has advantages. \.\'here feasible, it provides additional break-
throughs without the need to dupUcate the prior work o f diagnosis and design of remedy
What has emerged is a process as foUows:

• Project teams are asked to include il'1 their fi nal repl)rt their s uggestions as to sites
that may be opportu nities for clo ning.
• Copies of such final reports g o to those sites.
• The decision of w he the r to clone is made by the s ites.
182 Key Concep t s: What Leaders Need to Know about Qua l it y

However, the s ites are required to make a response as to their disposition o f the matter.
This response is typically in one of th ree fo rms:

• We have adopted the breakthrough.

• We wjJI adopt the b reakthroug h, but we mu.st fi rst adapt it to our conditions.
• We are not able t<> adopt the breakthrough for the following reasons.

[n effect, thls process requ.ires the unlts to adopt the btoa.k through or give reasons for not
doing so. The u nits canno t just quietly ignore the recommendatio n.
A more sub tle but familiar form of cloning is d o ne through p rojects that have repetitive
application over a w ide variety of subject matter.
A project team develops computer software to find errors in spelling. Another team
evolves an improved proe¢d ure for processing customer orders through the orgaruzation. A
third team works up a procedure for condu cting dcsigr-. .r eviews. VVh a t is common abou t
s uch projects is that the result permits repetitive application of the same- p rocess to a w ide
variety of s ubject matter: many d iffere nt misspelled words, many different customer orders,
and many differen t designs.

Project Charters: Problem and Goal Statements for Projects

Each p roject selected s hould be accompanied by a w ritten p roblem and goal statement that
sets o ut the i.n tended focus and the intend ed result of the project. Upon approval, this state·
ment define-s the actions required o f the team assigned to carry out the pr'ojc-ct.

The Purpose of the Project Charter

The problem and goal statement serves a number of es.-;ential p urposes:

• It defines the prob.lem and the intended result and S<.> helps the team know when i t
has comp le ted the project.
• It establishes clear responsibility-the goal becomes a n addi~ion to each team
member's jo b description.
• It provides legitimacy- the project become-s officia l organi7.a tion b usiness. The team
mernbers are a u thorized to spend the time needed to carry out the goal.
• ll confers righ ts-the team has the right to ho ld meetings, ask people to a ttend and
assist the team, and request data and o ther services germane to the project.

Perfection as a Goal
There is universal agreement that perfection i> the ideal goal--<omp lete freedom from
errors, defec ts, failures, and so on. The reality is that the absence of perfection is due to many
kinds of such deficiencies and tha t each requ ires it.• own breakthrough project. If a orgaruza-
tion tries to eliminate all of them, the Pareto p rincip le a pp lies

• The v ital few kh1ds of d eficiencies cause most of the t ro uble but a lso read ily justify
the resources needed to root them o ut. Hence, they receive high priority during the
screening process an d become p rojects to be tackled.
• The remaining many types of deficiencies ca use only a small ntinority of the trouble.
As o ne comes closer an d closer to perfection, each remaining kind of deficiency
 Quality Improvement: Creating Breakthroughs in Performance 185

Finally comes the selection of individuals. This is negotiated w ith the respective s uper-
visors, g iving due consideration to workloads, competing priorities, and so o n. TI1e focus is
o n the individual's ability to con tribute to the team project. The individuals need

• Time to attend the team meetings and to carry out assignments outside the
meetings--"the homework."
• A k11ow/edge base that enables the individ ual to contribute theories, insights, and
ideas, as weJJ as job information based on h.is or her hands-o n experience.
• Trai11i11g in the breakthrough process and the associated tools. During the firs t projects,
this training can and should be done concurrently with carrying 01.1t the projects.

Mc'St teams consist of s ix to eight members. larger numbers tend to make the team
unwieldy as well as costly. (A convoy travels only as fast as the slowest ship.)
Should team me1l\bcrsa1Jcomc from the same level irl lhc:-.lticrarchy? ~h_ind thjsq-ucstio.n
is the fear that the biases o f high-ranking members will dominate the meetin g. Some of this no
doubt takes place, especially during the first few meetings. However, H d eclines as the group
dynamics take over and as members learn to distinguL<m between theory and fact.
Once the team is selected, the members' names are p ublished, along w ith their project
go.1.J. The act of p ub lication officially assigns responsib ili ty to the individua ls as ''•ell as to
the team. ln effec t, serving o n the project team beco mes a pa rt of the individuals' job descr ip -
tions. This same pub lication also gives the team the legitimacy and rights discussed earlier.

Membership from the Workforce

During the early years of using breakthrough teams, o rganiu1.tions tended to maintain a
s tr.ict sepMatjon of team membership. Teams for mul tifunctional p rojects consisted exclu-
sively of members from the managerial hierarchy plus professional specialists. Teams fo r
local departmental p rojects (such as quality circles and employee invo lvemen t team s) con-
sisted exclusive ly of members from the workforce. Figure 5.9 compares the usual features of
these teams with those of m ultifunc tional teams.
Experience then showed tha t as to the details of oper-ating conditions~ no one is better informed
than the workfon._--e. Through residence in the workplace, worke rs can observe Jocal changes and
recaH the duonology o f e vents. This has Jed to a growing practice of secur ing such information b)'
interviewing the wo rkers. Th e workers become can be "on call" or full-time team mem bers.. in a
hospita.l, a doctor can be consid ered in the same way. Removing a worker tied djre<:t ly to ~\e pro-
duction of a product m ust min im ize their time away fm m their work o r patie-nts.
O ne rt.'Sult of all this experience has been a growing interest in broadening worker pa r-
ticipation generally: This has led to experimenting w ith p roject teams that make no d istinc-
tion as to rank in the hierar.:hy. These teams rna)' become the rule rather than the exception.
(For further discussion on the trends in workforce participation, see Chapter 26, Empower-
ing the \•Vorkforcc to Tac kle the "Useful Many" Processes.

Upper Managers on Teams

Some p rojects, by their very nature, require that the team include members from the ranks of
upper management. Here ai'C some cxmnp1cs of breakthrough projects act ually tackled by
teams that included u pper m a nage1'S:

• Shorten the time to put new prod ucts o n the market.

• Improve the accuracy o f the sales forecast.
• Reduce the carryover of prior failure-prone features in to new product models.
186 Key Concepts: What Leaders Need to Know about Qua lit y

Department Teams or
Feature Breakthrough Teams
Quality Circles
To improve departmemal To improve pert'o~mance by creating
Primar)' purpose processes al)d humau relations breakthroughs ~\CJ"OSS multipJe
departments

To improve <1uality To improve teamwork and

Secondary purpose
participaliO•l

Scope of project W ithin a single departmem Across n1ultiple depa•·lments

Size of project One of tbe useful many One of the viti\I few

Membership From a single depattmem Prom multiple depn•·tme.us

Basis of membership Voluntary or mandatory Mandatory

Hierarchical status of The manager. staff in Management subject matter
members any department experts. and the w·o rkforcc
Team remains intact. project Team is ad hoc. d isbands
Continuity
a fter J>rojcct Dfter projecl is COOlple.ted

F1ouRE 5.9 Contrast departmental teams and quality circles to multifunctional teams. (From Making
Quality Happen, Juran Institute, Inc., 1998.)

• Establish a team,.,•ork relationship with s uppliers.

• Develop the new measures needed for s trategic pla1ming.
• Revise the system of recognition and rewards for brea.k through.

TI1ere are sorn.e persuasive reasons u.rging aU upper managers to personally serve on
some project teams. Personal partidpati01.1 01' project teams is an act o f leadership by cxa_m ..
pie. This is the highest form of leadership. Personal participation on project teams also
e nables upper managers to understand what they a re asking their subordinates to do, what
kind of tmining is needed, how many hours per week are demanded, ho'" many months it
takes to complete the project, and what kinds of resources are need ed. Lack of upper man~
agement understanding o f such reaJjties has contributed to the fa ilure of some well ~
intentio ned efforts to establish annual breakthrough.

Model of the Infrastructure

There are several ways to show in graphic form the infrastructure for breakthrough-the elc·
mcnts of the organization., how they relate to each o ther, and the flow of .events. Figure 5.10
shows the elements of the in frastructure in pyranUd form. The pyramid depicts a hierarchy
consisting of top manage ment, the autonomous operating units, and the major staff functions.
At the top of the pyraJTtid are the corporat<l council and the subsidiary councils, if any. Below
these levels are the m uJtifunctioMI brea.kthrough teams. (There may be a oomrnittee structure
between the councils a nd the teams.)
At the intradepartmental level are teams from the workforce---circles or other forms.
This infrastructure pecnUts employees in all levels of the organization to participate in break~
through projects, the useful many as well as the vital few.
 Quality Improvement: Creating Breakthroughs in Performance 187

FrcuRt 5.1 0 Model of the Infrastructure for breakthrough quality improvement. (Juran lnsti!tJte, Inc.)

Team Organization
Breakthrough teams d o not appear on the organization chart. Eadl "floa ts"-it has no per-
sonal boss. Ins tead, the team is supervised impersoual/y by its goaJ statement and by the
breakth rough road map.
The team does have its own internal organiza tio nal structure. This structu re invari-
ably includes a team lellder (chairperson and so on) and a team secretary. In addi tio n, there
is usually a fncilitnlor.

The Team Leader

The le~der is usually appointed by the sponsor-the <:Ouncil or other s-upervising group.
Alternatively.. the team may be a uthorized to elect its leader.
The leader has several respo nsibilities. As a team member, the leader shnres in the respo n-
sibility for <:Ompleting the team's goal. In addition, the leader has adminis trative duties.
These are rmshared and include

• Ensuring that meetings s tart and finish o n time

• Helping the members attend the team meetings
• Ensuring that the agend as, min utes, reports, and so on are prepared and published
• r\'1aintalnin g contact with the spo nsoring bod y

Fin a llys the leader has the responsibility of oversight. This is met not through the power
of command-the leader is not the boss of the team-it is met through the power of leader-
ship. The respo nsibilities include

• Orchestrating the te.am activities

• Stimulating all members to contrib ute
• Helping to resolve conflicts amo1\g members
• Assigning the homework to be d o nL' between meetings
188 Key Concep t s: What Leaders Need to Know about Qualit y

To meet s uch responsibilities requires multiple skills, w hich include

• A trained capability for leading people

• Familiarity with the s ubject matter of the goal
• A firm grasp of the b reakthrough process a nd the associated tools

The Team Members

"Team members" as used h ere includes the team leader an d secretary. Th" responsibilities of
any team member consist mai.nlyoi the following:

• Arranging to attend the team meetings

• Representing h is or her depa rtment
• Contributing jo b knowledge and expertise
• Proposing theories of causes and ideas for remedies
• Constructively challenging the theoties and ideas of other team m embers
• Voluntecril' g for or accepting assignments fo r homework

Finding the Time to Work on Projects

V\'ork on project teams is time consuming. Assigning someone to a p roject team adds about
10 percent to that person's work!O<,d. This added time is needed to atten d team meetings,
perform the assigned homework, and so on. Fin ding the time to do all this is a problem to be
solved, since this added work is thrust on people who a re already fully ooe:cupied.
No upper manager known to me has been willing to solve the p roblem by hiring new
people to ma ke u p for the time demanded by the breakthrough projects. Instead, it has been
left to each team member to solve the problem in h is or her own way. ln turn, the team mem-
bers have adopted such stmtegies as

• Delegatin g more activities to s ubordinates

• Slowing dov1m the work on IO\'Ier-priority activjtjes
• Improving time management o n th e traditional respons ibilities
• Looking for o ngoing activities tha t can be terminated. (In several organizations,
there has been a specific drive to clear out unneeded work to provide time fo r
breakthrough pr<.>jects.)

As p rojects begin to demonstrate high returns on investment, the climate ch anges. Upper
managers become more l'~ptive to ptOvid.i.ng re.sourcc...o;. ln addition, the successful projects
begin to reduce workloads that previously were inflated by the presence o f ch ronic wastes.

Facilitators and Black Belts

Most organizations make use of internal consultants, usually called "fucilitators" or "Black
Belts," to assist teams. A facilitator tike a Black Belt does no t have to be a member of the
team and may not have any responsibility for carrying o ut the team goaL {The literal mean-
ing of the word facilitate is " to make things easy.") The pri me role o f the facilitator is to help
the team to carry out &ts goal The usual roles o f facilitators consist of a selection from the
following:
 Quality Improvement: Creating Breakthroughs in Performance 189

£rplnin tire orgnnizntiou's intentions. The faciUtator usually has attende·d br iefing sessions
that explain wh.1t the organizatio n is trying to accomp lish. Mud1 of this b riefing is of interest
to the project tea ms.
Assist iu tenm building. ·n, e facilitator helps the team members to learn to contribute to
the team effort: p ropose theories, cha llenS'e the theories o f othei"S, and I o r propose lines of
investigatio n. Where the team concept is new to an o rgani zation, this role .m ay req uire work·
ing d irectly w ith individuals to s timulate those who are unsure about how to contrib ute and
to restrain the overenthusinsti~ ones. The facilitator also may evaluate th·e progress in team
building and p rovide feedback to the team.
Assist in lraim'ug. Most facilitators have und ergone traiJ'I ing in team build ing and if'l the
breakthro ugh p rocess. 1l1ey usually have served as facilitators fo l' o ther teams. Such expeJ'i ..
ences qualify them to help train project teams in several areas: team building, the break-
through roadmap, and/or use of the tools.
Reltrte experiences f r()rn other projects. Facilita tors have muJ tjple sources of s uch
experiences:

• Project tea.rns previously served o n

• -Meeting.s with o ther facilitato rs to share experiences in facilita ting p roject teams
• f inal publis hed reports of project teams
• Projects repo rtet.i in the literature

Assist in n:dirtctlug lire project. The facilitator maintain....; a d etttched view that helps him
o r her sense when the team is getting bogged d own. As the team gets into. the project, it may
find itself getting deeper and deeper into a s wamp. The p roject goal may turn out to be too
broad, vag uely defined, or not d oable. The facilita to r us ualJy can sense such situations ear-
lier tha n the team a_nd can help g·u idc it to a redirection o f the project.
Assisl Uu, team lender. Facilitators provide such assis tance in various \~ays:

• Assist in planning the tea m meetings. This may be d one with the tea m lead er before
each meeting.
• Stimulate attendance. Most nonattendance is d ue to conflicting demands mad e o n a
team member's time. The remedy often must come fro m the mem ber's boss.
• hnprovc h u man relations. Soml! teams include members w ho have not been on
good terms w ith each o ther or who d evelop friction as the project moves along. As
an ''outs ider," the facilitator can help to direct the energie.s of s uch members into
constructive t"hannels. Such action usually takes place outside the team meetings.
(Sometimes the lead er is pa l't o f the p roblem. In such cases, the facilita tor may be in
the best position to help.)
• Assist on matters outside the team1s sphere o f activity. Projects sometimes req uire
decisions or actions from sources that are outside the easy reach of the team .
Facilitato rs m a }r be help hll due to their wid er range o f contacts-.

Support tl1e team members. Such s u pport is p rovid ed in multiple w ays;

• Keep the team focused on the goal by raising q uestions when the focus drifts.
• Chnlle.nge opinionated assertions by questions s uch as, Are there facts to support
that theory?
• Provide feedback to the team based on perceptions from seei.ng the team in
action.
192 Ke y Con c e pIs: Wh a I Le ad e r s Ne e d I o Ko ow abo u I Qu a Ii I y

breakthrough~ and so on. The methods t hey used to achieve such annual brea kthroug h
a re w ell known and can be app lied to brea kthroug h. They are

• Enlarge the annual bus iness pla n to includ e goals fo r breakthro ugh.
• Make breakthrough a part o f everyone's job d escription. In m ost organ izations, the
activ ity of breakthrough has been regarded as in cide ntal to the regular job o f meeting
the goals for cost, d elivery, a nd so o n. The need is to make brea!kthrough a part of
the regular jo b.
• Establish upper ma nagement aud its that include review· of p rogress o n
b reakth rough.
• Revise the merit rating and re~va.rd system to include a n ew parame te r-performance
on breakthro ugh-and give it p roper weight.
• Create weU-p ublkized occasions to provide recognition for performance on
b reaktnrough.

Review Progress
Scheduled, periodic reviews o f p rogress by upper ma.,agcts arc a'' esse•'ltia l part o f main·
taining annual breakthroughs. Activities that do no t receive s uch review cannot compete for
p rio rity w ith activities that do receive s uch revit!W. Subordinates understandably give to p
p rio rity to matters that are reviewed regularly by their superiors.
There is also a need for regular review of the breakthn>ugh process. This is done tl\ro..,gh
a udits that may exten d to all aspects of man agin g fo r q uality. (Refer to C hapter 16, Usin g
lnternationaJ Standa rds to Ensu re Organization Compliance.)
Much of the database fo r p rogress review comes fro m the re p orts issued by the p roj-
ect teams. However, it ta kes added work to ana.lyze these reports and to prepare the
s umma ries need ed by u ppet' managers. Us ually, this added work is d one by the secre~
tary o f the council with the a id o f the facilita tors, the team lead ers, a nd o ther sources
s uch as finance.
As orgaJ\izations gain experience, they desigJ\ standardized reporting f<>rmaL< to make
it easy to s u mma rize reports by groups of projeclc;, by product lines, b)' b usiness unj ts, by
divisions, and fo r the corporatio n. One such fo n nut, used by a large European organization,
d eterm ines for each p rojec t:

• The original estima ted amo unt of ch ronic w aste

• The origin al estimated reduction in cost if the p roject were to be s uccessful
• The act..,aJ cost reduction achieved
• The capital investment
• The net cost reduction
• The summa ries are review ed a t vario us levels. The corpora te summary is review ed
q uarterly at the ch airperson's s taff meeting (personal commw1ication to the
a utho r).

Evaluation of Performance
O ne of the objectives o f p rogress review is evaluation o f pe rforma nce. This evaluation
extends to indjvid uals as well as to p rojects. Eva lua tion of individ ual performa nce o n
 Quality Improvement: Creating Breakthroughs in Performance 193

breakthrough projects runs into the complication that the results are achie ved by teams. The
problem then becomes one of evaluating individual contribution to team efforts. This new
proble m has as yet no scientific solution. Thus, each s upervisor is le ft to ju dge subordjnates'
contributions based o n inputs from a U available sources.
At higher" levels of an organiza tion, the eva_luations exte nd to judg:in,g the pcrforma.nce
of supervisors and managers. Such evaluations necessarily must consid er results ach ieved
o n m ultiple projects. This has led to an evo lution o f measurement (me trics) to e valuate man-
agers' performance on projects collectively. These metrics include

• Numbers of breakthrough projects: initiated, in progress, comple ted, and aborted

• Value o f comple ted p rojects in te rms o f breakthro ugh in product performance,
reduction in costs, and re turn on investment
• Percentage o f subordinates active on project teams
• Supe rio rs then judge their subord inates based on these and o ther inputs.

Training for Breakthrough

Th rougho ut this chapter, there have been numerous observatio ns on the needs for training
e mployees. These needs are extens ive because all e mployees mus t understand the me thods
and tools employed to attain breakthrough. Project-by-project breakthrongh may be new to
the organization, h>rnover may be high, or employees may be assigned new responsibilities.
To cany o ut these new rcspot,s ibjJjties requires extens ive trai,,ing.
So far in this decade, many organi?..a ti ons made significant investments in training their
workforces in the methods and tools to attain performance excellence. According to iSix
Sigma and the American Society for Quality (ASQ), more than 100,000 people were trained
as Black Belts. Another 500,000 may have been trained as Green Belts. A new certification
process has been added at the ASQ and at maoy firms like the Juran lnstutute to ensure that
these exerts arc qualified and competent to drive rcsuJts. A Black Belt training p rogram may
consis t of up to s ix weeks of training plus time to be certified.
This trend has been rever.ed from the 1990s. Training budgets were c ut to red uce costs.
Toda~ training is an in\'e5tment in the futLlfe. This wiU bene fit us as organizations move into
the future.

Acknowledgments
This chapter of the handbook h as drawn extensively from various training materials p ub-
lished by the JLtran Institute, ln<-, and Juran, ). M., ed. (1.955), A History of Managing for
Quality; sponsored by the Juran Foundation, Inc., ASQ Press, Milwaukee. I am also grateful
to the Juran Institute, Inc.

References
Betker, 1-1. A. (1983). "Breakthrough Program: Heducing Solder Defects ·on Printed Circuit
Board Assembly." The Jurnn Report, No. 2, November, pp. 53-58.
Greenridge, R. M. C. (1953). "The Case of Reliability vs. Defective Components et al." Eu•clronic
ApplicntioJts Rclinbility Review, No. 1, p. 12.
Juran, ). M. (1% 4). Mnnngerinl Breakthrough. McGraw-Hm, New York. Revised edition, 1995.
 CHAPTER 6
Quality Control:
Assuring Repeatable and
Compliant Processes
Joseph M. Juran

Abu t Uis Chapter 19S Process Confonnance 213

Higll Po4ots of This Chapter 195 Product COflfonn11ce: Fitness for PWJlose 218
Co11pliance and Control Defiled 196 Ue Role of Statistical Methods ill Cootrol m
The Ele110nts of Ike feedback loop 200 Ue Quaity Cootrol Syslell aod Policy M111al 224
The Pyramid of Co1trol 205 Provision for Audijs 225
Plmiog for Cootrol 201 Tasks for Leaders 225
The Cootrol Spread$heet 209 References 226
Stages of Control 210

About This Chapter

TI1is chapter describes the compliance process or s imply the "control process." ''Control" is
a univctsa] managerial proces.o:; to ensure that all key opera tional p roccs.'ie'S are s table--to
prevent adverse change and to a ensure tha t the planned performance targets are met." Con-
trol includ es product control, service control. process control, and even facilities cont ro L To
maintain stability, the contro l p rocess eva)uates actual performance, compa res actual perfor-
mance to targets, and takes action on an}' differences.

High Points of This Chapter

1. The q uali ty control process is a universal managerial process for conducting
operations so as to provide s tability-to prevent adverse change and to " maintain
the status quo." Q uality control takes place by use of the feed back loop.

195
196 Key Concepts: What Leaders Need to Know about Qua l ity

2. Each feature of the product or process becomes a control s ubject- a center around
which U1e feedback loop is built. As m uch as possible, human control should be
done by the workforce--the office clerical force_. facto ry workers .. salespersons, etc.
3. The flow diagram is w idely used dur ing the p la1ming of qua lity controls. The
weakest link in facilities control has been adherence to schedule.
4. To ensu re strict adherence to schedule requi tes an indepet'ldent a udit.
5. Knowing w hich process vari.able is domi1'1ant helps p lanners during a iJoca tion of
resources and priorities.
6. The design for process contro l should provide the tools needed to help the opel'ating
forces disting uish between real change and false alarms. It is most desirable to
provide umpires w ith tools that can he lp to d is tinguish between special causes and
common cauS<lS. An elegant tool for this purpose is the Shewha•t control chart (or
just control chart). The criteria for self·control are applicable to processes in aU
functions and all levels, from general managct to nonsupcrvisory worker.
7. Respons ibility for results should be keyed to controllability. [dca lly the dcci•ion of
whether the process confo rms to process quality goa ls • hould be made by the
workforce.
8. To make use o f self~inspection requires meeting several essential criteria: Quality is
number o ne; mutual confidence, self-control, training , and certificoe1tion a re the
o the rs. Personnel who are assigned to make product conformance decisions should
be provided w ith clear definitions of responsibility as well as guidelines fordecision-
rna ki ''S·
9. The proper sequence in managing is firs t to establish goals and then to plan how
to meet those goals, indurung the choice of the appropriate tools. The planning
for qua li ty control should prov ide a n informa tion network tha t can serve a ll
decision-makers.

Compliance and Control Defined

Compliance or qua lity control is the third universal p rocess in the Juran Trilogy. The oth-
ers are q uality planning in and quality improvement. which are discussed in Chapters 4
and 5, respectively. The Juran Trilogy d iagram (Figure 6.1) s hows the interrelation of these
processes.
Figure 6.1 is used in several other c hapters in this handbook to describe the relationships
between planning, improvement, and control- the fundam ental managerial processes in
qual ity management. What is important for this chapter is to concentrate on the two "zones
of control."
In Figurc6.1, we can easily sec that although the process is in control in the middle of the
cha rt, we are running the process at an unacceptable level of performance and "waste."
What is necessary here is not more control. but improvement- actions to c hange the level of
performance.
After the improvements have been made, a new level of performance has been achieved.
Now it is important to establish new con trols at this level to prevent the performance level
from detcriotaling to the previous level or even worse. This is indicated by the second zone
of control.
The term "control of quality" emerged ea.rly in the twentieth century (Rad ford 1917, 1922).
The concept was to broaden the approach to achieving quality, from the then-prevailing
 Quality Control: Assuring Repeatab le and Com pl iiant Processes 197

Qlll1li1y oonltol (During opcrulions)

f
Spomdic spik• I
40
Original zone of t~~ :
~ !
Quality control .i =:i= e ;
t Oe. !
. . . . . . -.. . . . I. . . . . . . . ..-.. '. . . . """1j ·-5
~ ~
!

20
New zone of
Cluvnic WliSie Quality control
(An opportunity ~
for imprcJVl'lllelll)

Lessons leamed

f •cuRE 6.1 Jvran Trilogy diagram. (Jvran lnsUruce, Inc., 1986.)

after-the-fact inspection (detection control) to what we now call " prevention (proactive con-
trol)." For a few de<:ades, the word "contro l" had a broad mean.ing, which included the
concept of q uality planning. Then came events that narrowed the mea.n..ing of ''quality con-
trol." The "statisticaJ quali ty control" movement gave the impression tl1at q uality control
consjstcd of using statistica l methods. The ".reliability' ' movemet'l t claimed that q ualjty con..
trol applied o nly to qua lity at the time of test but not d uring service life.
In the United States, U1e term "quality control" now often has the meaning defined pre·
viously. It is a piece of a "performance exc:ellence, operational excellence, business excel·
lence, or total q uality program," which are now used interchangeably to comprise the
all-embracing term to describe the methods, tools, and techniq ues to ma.Ji\age the q uality of
an organization.
ln Japan, the term "quality control'' retains a broad meaning. TI1eir "total q uality con..
trol" is equivalent to our term "b usiness excellence." In 1997, the Unio n of Japanese Scien-
tis ts and Engineers (JUSE) adopted the term Total Quality Management (TQM) to replace
Total Quality Control (TQC) to more closely align themselves with the more common termi-
nology used in the ...St of the \vod d.
Figure 6.2 shows the input-output features of this step.
ln Fig ure 6.2, the input is o perating process feat ures, o r key control characteristics,
developed to produce the product features, o r key product characteristics, required to meet
customer needs. The output consists of a system of product and proce.c;s controls, which can
provide stability to the operating process.
A key product characteristic is a product characteristic for w h..ich reasonably anticipated
variation coultl sigu~fictmtly nffect a product's safety, com.pli;-mce to government regulations,
performance, or fit.
Key product characteristics(KPCs) are outputs from a proce$5 thnl nre measJtrnbleon, within,
or about the product itsell. They are the o utputs perceived by the customer.
204 Key Concep t s: What Leaders Need to Know about Qualit y

Take Action on the Difference

[n any weiiMhmctioning control system we need a means of taking action on any difference
between desired s tandards of perfo rmance and actual performance. For this \•,,re need an
actuator. This device {human or technological or both) is the means fo r stimulating action to
resto re conformance. At the operations o r employee level, it may be a keypad f<.lf giving
o rders to a centralized computer data_b ase, a ch at'lgc in a new p rocedure, a new specification
document, or a ncv,,r setting of a dial to adjust a machin e to the l'ight measure. At th e manage*
ment level, it may be a memorand um to s ubordinates, a new company poJjcy, o r a team to
change a process.

The Key Process

In the preceding discussion we have assumed a process. This may also be human or technologi-
cal or both. It is the means for producing the product and service featur<l$, each o f which requiTe$
contl'<>l subj<.>cts to ensure conforroanc:<~ to specifications. All work is done by a process. A pl'OO!SS
consists of u>puts, labor, technology, proaxlures, e.ncrg)~ materials, and outputs

Taking Corrective Action

There are many ways of taking corrective action to troubleshoot a process ru.>d retu.rn to the
"status quo." A popular example of a root cause and corrective action me thod is the so-
called PDCA or PDSA Cycle (first po pularized by Walter Shewhart and then by Dr. Deming
as the Deming Wheel) asshown in Figure 6.6. Deming (1986) referred to this as theShewhart
cycle, which is the name many still use when describing this version of the feedback loop.
In this example, the feedback loop is divided into four s teps labeled Plan, Do, C heck,
and Act (PDCA) or Plan, Do, Study, Act (PDSA). This model is used by many health care and
service industries. These s teps correspond roughly to the fo Uowin g:

• "Plan" includes c hoosin g control s ubjects an d setting goals.

• "Do" includes running and monitoring the process.
• "Check" or ''S tudy.'~ includes sensjng and umpiring.
• "Act'' includes stim ulnting th~ actuator and taking corrective actjo.n.

PLAN:
ACT: What could be Lhc most important
Study Lhc re.o;uiL<>. accomplishmenLS of Lhil> leam'?
What did we learn·? What changes might be
What can we predict'? desirable"?
4. AC'J' I. PLr\r\

DO:
3. CHECK 2. DO Cnny out the change or test
CHECK:
decided upcm. preferably on
Observe lhe effects
a sm:tll $Calc.
o f the change or test.

FIGUAE 6.6 The PDCA Cycle. (Shewart and Deming, 1986.)

 Quality Control: Assuring Repeatab le and Com pl iiant Processes 205

An early version of the PDCAcycle was included in W. Edward s Deming's first lectures
in japan (Denung 1950). Since then, addi tional \'ersions have been used, like PDSA, PDCA,
RCCA, and so on.
Some of these versions have a ttempted to label the PDCA cycle in ways that make it
serve as a universal series o f s teps for both control and improvement. The authors feel tha t
this confuses matters, since two very different processes a re invo lved. Our experience is
that all organiz..."'ltions sho uld de fine tw o separate methods. One is to take co rrective action
on a "sporadic change" in performance.
RCCA, PDSA, and PDCA differ from improvement methods like Six Sigma in that the
scope of the problem lends itself to a simpler, le.o;.< complex analysis to find the root ca use of
a "sporadic problem." RCCA analytkal and com munication tools contribute to the reduc~
tion of day-to-day problems tha t plague processes. Tools utilized for analysis and d iagnosis
of sporadic spikes typically take the form of graphical tools w ith Jess emphasis on s tatjs tical
applica tions. Often many organizations that have been tr•ined in RCCA and the like do not
have the right tools and me thods to solve chronic problems. It is best to use the Six Sigma
D-M-A-1-C improvement methods. Tlu s is described in Chapter '12, Six Sigma: Improving
P rocess Effectiveness.

The Pyramid of Control

Control s ubjects run to large numbers, but the number of "things" to be controlled is far
larger. TI'Iese things include the p ubJished catalogs and price lists sent out, m ultiplied by the
number of iten"'s in e ach; the sales made, multiplied by the numbe r o f item s in each sale; the
lmits of prod uct produced, multiplied by the associa ted numbers of quali ty features; and so
on for the numbers of items associated with employee relations, supplier rela tions, cost co n~
trol, inventoty control, product and process de,•clopmcnts, etc.
A study in one s mall company employing abo ut 350 people fo und that there were mo re
than a billion U1ings to be controlled Quran '1 964, pp. 18 1- 182).
There is no possibility for upper leaders to control huge numbers of control subjects.
Instead, they d ivide up the work of control using a plan of delegation similar to that shown
in Figure 6.7.

Executive controls:
Ba l r~ nccd scorecards

Mncro·
proce-~o;s

conlrol by managers

Conrtol by the
workforce

Automated controls

FrcuRE 6.7 The pyramid or control. (Making Quality Happen, Juran Institute, Inc.. Senior ExecuUve
Workshop, p. f..5.)
 Quality Control: Assuring Repeatable and Compl iiant Processes 207

At Workforce levels At Managerial levels

Control goals Product a nd process features in Business-<>riented, product

speclfl'catlons and procedures salability, competitiveness
Sensors Technological Data systems
Decisions to be made Conformance or not? Meet customer needs or not?

(MnJ6ng Quality HnPI'•!tt, Junm Institute. Inc., Seuio,.. E~eculh1C Workshop, p. f -4, Scutltbu,.,•!t CT.)

TABLE 6.2 Contrast of Quality Control and Two Levels- Workforce and Upper Management

TI1e distin ctio1'1 between vital few matters and o thers originates with th e control s ubjects.
Tab1e 6.2 shows how con trol subjects at two levels-workforce and upper management-affect
the elements of the feedback loop.

Planning for Control

Planning for cont rol is the activity tha t provid es the system- the COJ'Iccpts, methodology,
and tools-through w h ich company personnel ca.n keep the operating processes s table and
the reby produce the product features required to meet customer needs. The input-output
features of this system (also p lan, p rocess) were depicted in Figure 6.2.

Crit.ical to Quality (CTQs): Customers and Their Needs

The principal customers o f control systems are the company personnel en.g aged in con trol-
those wh o carry o ut the s teps that enable the feed back loop. Such personnel req uire (1) an
understanding of what is critical to quality (CTQ), c us tomers' needs, an d (2) a definition of
their own role .in meeting those needs. However, rn.o st of them Jack direct contact wjth custom ..
ers. Planning for control helps to brid ge that gap by s up p lying a tmnsla~ on of what customers'
needs are, along with defining responsibility for meeting those needs. In th i:s way,. planning for
quality control includes providing operating personnel \•lith info rmation o n customer needs
(whether direct or translated) and d efining the rela ted control responsibilities o f the operating
personnel. PJa.nnhlg forq ua.lity control can ru.n into extensive detail

\1\fho Plans for Control? Plan nin g for control has in the past been assign ed to

• Product development s taff

• Quality e ngineers and speciaJjsts
• Multifunctional design teams
• Departmental leaders cmd supervjS<."lrs
• The workforce

Planning for control of critical processes has traditionally been the responsibility of those
who p la.n the o perating process. For noncritical proceSS<ls, the responsibility was usually
ass.i gncd to quality spccia Usts from the q uality department. Their draft pla ns were then s ub·
mitted to the ope!'a ting head s for approval.
Recent tre nd~ have been to increase the use o f the team concept. The team membership
includes the operating forces and may alS<l include s upplie rs and customers of the operating
process. TI1e recent trend has also been to increase participation by the wor kforce.
208 Key Concepts: What Leaders Need to Know about Quality

Compliance and Control Concepts

The methodologies of compliance and control are built around vario us co.n cepts,such as the
feed back loop, process capability, self-control, etc. Some of these co ncepts are o f ancient
origini o thers have evolved in this and the last centu ries. During the discussion of planning
for control, \ve will elaborate on some of the more w idely use..i concepts.

The Process Map or Flow Diagram

The us ual first s tep in pl<H'I.n ing for cont-rol is to map out lhe flow of the o peca ti ng process, as
discussed in Chapter 4, Quality Planning: Des ig ning [nnovative Prod ucts and Services.
Figure 6.8 is an example of a flow d iagram.

----------r
Begin

Fill 0:.----------- ~::~;----

Cu!>t()mer

Proccs:-o the.
complaint

Mail 01'der
Return order suppl ier
form to c:.ul>f.omer

Ship goods to
cus101ner

Reteivc gl)Ods.:
inspect them

End

FlouR! 6.8 The flow diagram.

 Quality Control: Assuring Repeatab le and Com pl iiant Processes 209

The flow diagram is widely used during the p lanning of q uality controls. [t helps lhe
planning team to

• Und erstand theoveraH operatin g process. Each team member is q uite knowledgeable
about his or he r segment of the proce-ss. b ut less so about other segments and about
the interrelationships.
• Identify the control subjects aro<md w hich the feedback loops are to be built. The
nature of these control subjects was discussed previously in the section "The Control
Subjects."

The Control Spreadsheet

The work of the planners is usually s umm arized on a control spreadsheet. This spreadsheet
is a major planning tool. An example om be seen in Figure 6.9.
In this spreadsheet the horizontal rows are the various control s ubjects. The vertical
colunms cons ist of elements of the feedback loop, plus o tl1er features needed by the operat-
ing forces to exercise control so as to meet the q uality g<><1ls.
Some of the contents of the vertical columns are unique to specific control s u bjects.
However, certain vertit..""a.l columns apply wid ely to many control subjects. These includ e unjt
of measure, type of sensor, quality goal. freq uency o f measurement, sample size, criteria for
d ecisio n-making, and respo nsibiJjty for decision-making.

Who Does What?

The feedback loop involves m ultiple tesks, each of which requires • dear assignment of
respo.n si bility. At anycontrol station there may be multiple people available to perform those
tasks. For example, at the w orkforce level, a control station may include setup specialis ts,
o pera to rs, maintenance personnel, inspectors, etc. In s uch cases it is nec-essary to agree o n
who should make whicl1 decisions and who should take which actions. An aid to reaching
such agreement is a special spreadsheet similar to Figure 6.9.
[n this spread sheet, the essen tial decisions and actions are lis ted in the leftmost column.
The remaining columns are headed u p by the nam es of the job categories associated wHh the

Process Control Features

Criteria for R tsponslbiUty
Control Unit-of TJ'PCof llleucy or Sample
Goal Frc<_
Subjects Measure Sensor Mensurcmenl S ite
Decision· for Oeclslon· ...
Making Making
\V:wc soldct Degree J':' (&J!) 'Thc,•mo- 505' 1' Cooiinlh)US NIA S 10 11 1:: reduce OjlCI'tlh)t ...
oonditi(IIISsoldq ._'OUJ>It hc.·••t soo~r
temper:uure i ncrc:asc hent

Con\'C)'Or spcod Ft:el per rtlmin 4.:; I per hour NIA 5 (t/IJiin rtd1,1<:..: Opc.rmor ...
minoh; ftlmin speed 4 rtJmin
(fllmin) inc~ase ~peed

Alloy purity %Totnl Lab t.S% I per month 15 smms Al 1.5%. dr<Un Process engineer ...
cout:u uin:~tes chemical Ul.,.,, binh, repf;)..-e
analysas $Older

FIGURE 6 .9 The control spread sheet.

 Quality Control: Assuring Repeatab le and Com pliiant Processes 215

Ideally, all s uch nominations s ho uld s ti mulate prompt corrective action to restore lhe
s tatus quo. ln practice many o ut-of-control changes do no t result in corrective action. The
usual reason is that the changes involving special causes are too numerous-the available
personnel can not d eal with a ll of them. Hence, priorities are established ba~ on t>co-
nomic s ignificance or o n o ther cri te ria of importance. Corrective action is taken for the
high-priority cases; the rest must wait their turn. Some changes a l lO\.., levels of priority
may wait a lo ng time for corrective action.
A further reason for f-nilure to take corrective action is a lingering coniusjon behveen
statistica l control limits and q uali ty tolerances. It is easy to be carried aw.a y by the elegance
and sensitivity of the control chart. Tltis happened o n a la rge scale during the 194Jls and
1950s. Here are two examples from my personal experience:

• A large automotive compo nents factory placed a contro l chart at every machine.
• A viscose y arr'l factory c reated a "wa r room" of more tha_,, 400 co:ntro l charts.

ln virtually all s uch cases the char ts were maintained by the quality d epartments b ut
ig nored by the operating personnel. Experience with s uch excesses has led Jead ei"S and p lan·
ners to be wary of employing control charts just because they are sensitive d etectors of
change. Instead, the charts sho uld be jus tified based on value added. Such justifications
include

• Custo mer need s are directly involved.

• There is risk to human safety o r the environment.
• Substantial econo mics are at stake.
• The added precision is needed for control.

Statistical Control Limits and Tolerances

For most of hu man history, targets and goals consisted of product features or process fea·
tures, usually d efined in words. \"lords s uch as "the color is red" and uthe length is long
enough" are targets, bu t are open to too much interpretation. TI1e g row th of techno logy
s tim ulnted the growth of measLLrement, plus " trend to define targets and goals in precise
nt.U)1bers. ln addition, tltere em erged the concept of limits, or "tolerances," around the tar·
gets and goals. For exa mple:

• Ninety-five percent o f the shipments shall meet the scheduled d elivery d>te.
• The leng th o f the bar shall be wi thin 1 mrn o f the specified number.
• l11e length o f time to respond to custo me.r s is 10 minutes, pitts or minus two minu tes.

Such targets hnd of!icinl slntus. They w ere set by product o r process d esigners, and p ub-
lished as o fficial s pecifications. The d esigners were the o fficial quality legislators-they
enacted the Jaws. Operating personnel were responsible for obeying the quality laws-meet·
i11g the specified goa Is and tolerances.
Statistical control lintits in the form of control charts were virtually u nknown w1til the
1940s. At that time, these charts lacked official status. They were prepared and published by
quality specialists from the quality department. To the operating fo rces, control charts were
a mysterious, alien concept. ln addition, the charts thre.1tened to create added work in the
form o f unnecessary corre-ctive action. The operating personn_e l (casoncd as fo llows: Jt has
always been our responsibility to take corrective action whenever the product becomes
216 Key Conc epts : What Le ader s Ne ed to Know abou t Qua l ity

nonconfo rming. These charts are so sensitive that they d etect p rocess changes that d o no t
res ult in nonconforming prod ucts. \>Ve are then asked to take corrective acltion even w hen the
prod ucts meet the quality goals and tolerances.
So there emerged a confusio n o f respo nsibility. ThequaHty specialists werect.)nvinced
that the contro l cha rts p rovided useful catJy.. wa rni ng s ig na ls tl'lat shou,ld no t be igno red.
Yet the q uality d epartmen ts fai led to recognize that the o perating forces w ere now faced
w ith a confusio n of responsibility. The latter felt that so long as the prod ucts met the
qua tit)' goals there was no need for corrective action. The upper lead ers of those days
were of no help-they did not involve themselves in s uch matters. Since the control
char ts Jacked of/jd al s ta tus, the opel'ating foi'<.:C:.~ solved their' pl'oblcm by ig noring the
charts. n ,is contributed to the collapse in the 1950s o f the movement known as "s tatistical
quatity control."
l11e 1980s created a new wave of interest in applying the tools of s tatistics to the contml
of quality. Man)' operating personnel l.lnderwent training in "statistical p•ocess control."
TI1is training helped to reduce the confusion, bu t some confusion remains. To get rid o f the
confusion, lead ers sho uld

• Clarify the respo nsibility fo r corrective action on points ou tsid e the con trol limits. Is
this action mand ated o r is it d iscretionary?
• EstabJish guid elines o n actions to be taken w hen po ints are outside the s tcl tisl'ical
control timits but the product s till meets the q uality tolerances.

TI1e need for guidelines for decision-making is evident from E'igure 6_11. The guidelines
for quadrants A and C a.re obvious. lf b<>th process and p roduct conform to their respective
goals, the process may continue to ri.Ul. If neither proces.< nor prod uct conform to their
respective goa ls, the p roces.o; sho uld be s topped and remedial act:ion should be taken. The
guid elines fo r q uad rants Band Dare o ften vag ue, and this vagueness has been the source. of
a good d eal of confus ion. lf the cho ice o f action is delegated to the workforce, the leaders
should establish clear guidelines.

Product
Does not
Conforms:
conrorm

Does nol B c
conform vague clear
~

1l
u
e
"-
A D
Confo rms
c::lt::nr vt~gue

- -
FlGURf 6.1.1 Areas of declslon-makmg. ( Makrng Qualrty Happen, Juran fnst1tute, fnc. Used by
permission. )
 Quality Control: Assuring Repeatable and Com pl iiant Processes 217

Numerous efforts have been made to design control chart Limits in ways Lhat help operating
personnel detect whether product quatity is threatening to exceed tl1e produ<:t quality limits.

Self-Control and Controllability

Workers are in a swe of self-control when they have been provided with aU the essentials fo r
doil'1g good work. These essentials include

• Means of knowing w hat the goals are.

• ""·feans of knowing \\•hat their actual performance is.
• Means for changing their performance in the event that pt-rformance does no t
confo rm to goals. To meet this criterion requires an operating process that (1) is
inherently capable of meeting the goals and (2) is provided with features that make
it possible for the o perating forces to adjust the process as needed to bring it into
conformance with the goals.

These criteria for se)f-control are applicable to processes in all functions and at all levels,
from generaJ manager to nonsupervlsory worker.
It is all too easy fo r leaders to conclude that the above cri teria have been met. In practice,
however, there are rnany details to be worked out before the criteria can be met The nature
of these details is evident from checklists, which have been prepared for specific processes
in order to ensure that the criteria for self-control are me t. Examples of these checklists
include those designed for product designers, production workers, and administrative and
s upport persoMcl. Examples of such checklists can be found by rcfer•ing to the s ubject
index of th is handbook.
If aU the criteria for self~e<mtrol have been met at the worke r level, any resulting product
nonconformances are said to be worker-controllable. If any of the criterja for self-control have
not been met, then management's planning has been incomplete-the planning has not fully
provided the means for carrying out the activitie-s wi thin the feedback loop. The noncon-
forming products resulting from s uch deficient planning ore then said to be management-
controllable. In s uch cases it is risky for leaders to hold the workers responsible for quaUty.
Responsibility for results should, of course, be keyed to controllability. However, in the
past, many leaders were not aware of the extent of controllability as it prevailed at the worker
level. Stud ies conducted by Juran d uring the 1930s and 1940s showed that at the worker
le ve), the p roportion of management-controllable to worker-controllable nonconformances
was of the order of 80 to 20. These findings were confirmed by other studies during the 1950s
and 1960s. That ratio of 80 to 20 helps to explain the failure of so many efforts to solve the
oro~ni7..a tions 1 qua.lity problems solely by motivating the workforce.

Effect on the Process Conformance Decision

(deaUy, the decision of whether the process conforms to process quality goals should be
made by the workforce. There is no shorter feedback loop. For many processes, this is the
actual arrangement. In other cases, the process conformance decision is assigned to nonop-
erating personnel-independent checkers or inspectors. The .reasons indiUde

• The '''orkcr is not in a state of scJJ-c:ontrol.

• The process is ccitical to human safety or to the environment.
• Quality does not have top priority.
• There is a lack of m utual trust behw!en the leaders and the workforce.
 Quality Control: Assuring Repeatab le and Com pliiant Processes 219

The combination of Ja rge numbers of product features, w hen multiplied by large vol-
umes of product, creates huge numbers of product conformance decisions to be made. Ide-
ally, these d ecisions sho uld be delegated to the lowest levels of organization-to the
automated devices and the o perating workforce. Delegation of this decision to the work-
force creates what is t."'allcd "::;clf.. inspcction."

Self-Inspection
\Ale d efine "self-inspection" as a state in w iUch decisions on the product are delegated to the
workforce. The d elegated d ecisions consist mainly of: Does product quality conform to the
q uality goals? What disposition is to be made of the product?
Note that self-inspection is very different from self·cOI)ttol, w hich involves decisions o n
the prot•ess.
TI1e merits of self-inspection are considerable:
The feedback loop is short; the feedback often goes directly to the actuator-the ener-
gizer for corrective action.
Sclf-i.,spcction ertlargcs the job of the workfo rce-it confers a grea ter sense of job
ownership. Self·inspect-ion removes the police atmosphere crea ted by use o f inspectors,
checkers, etc.
However, to make use of self-inspection requires meeting several essentiaJ criteria:

• Qu11lity is 1111mber 011e. Quality must undoubtedly be the top priority.

• Mutual cotifirlence. The leaders must have eno ugh trust in the workforce to be wilJing
to make the delegation, and the workforce must have enough oonfidence in the
leaders to be willing to accept th.c responsibility.
• Self-coutrol. The oonditions for self-<:ontrol should be in place so ·that the workforce
has aU the means net."CSsa ry to do good work.
• ']j·ainiug. The workers should be trained to make the produc.t conformance
decisions.
• Certificntiou. The recent trend is to include a certification procedure. Workers who
are candidates for self-inspection u ndergo examinations to en sure t-h at tl1ey are
q ualified to make good decisions. The successful candidates are certified and mny
be subject to audit of d ecisions thereafter.

In many organizations, these criteria are not fully met, especially the c riterion of priority.
Li some parameter other than q uality has to p priority, there is a real risk that evaluation of
prod uct conformance will be biased. This problem happens frequently when perwnal per-
formance goals are in conflict with overall qua1ity goa ls. Fo r examp le, a chemical company
found that it was rewarding sales personnel on revenue targets without regard to product
availability or even profitability. The salespeople were making aUtheir goals, but the com·
pany was s truggling.

The Fitness for Purpose Decision

The great majority of products do conform to specifications. For the no nconfo rming
products there arises a new question: Is the nonconforming product nevertheless fit for
usc?
A complete basis for making this decision requil'es answers to ques tions such as

• Who are the user(s)?

• How will this product be used?
220 Key Concepts: What Leaders Need to Know about Qua l ity

• Are there risks to structural in tegrity, human safety, or the envjronment?

• What is the urgency f<>r delivery?
• Ho·w do the alternatives affe<:t the producer"s and the user's economics?

To answer s uch questions can involve consid erable effort. O rganizations have tried to
minimize the effort thro ugh. proced~.tral guidelines. The methods in use include:

• Jhmt nil uoucouformiug products as unfit for Lrse. This app roach is w idely used for
products that can pose dsks to humar'l safety or the cnvi ronmcn t- prod_uctssuch as
p harmaceuticals or nuclear energy.
• Create a meclumism for decisiou-making. An example is the material review board so
widely used in the d efense ind us try. This device is p ractical for mattersofim portance,
bu t is rather elaborate for the more numerous cases in which little ls at s take.
• Cre.nte a S"ystem of mulliple delegntiort. Under s uch a system? the uv jta) few" decisions
are reserved for a formal decision-making bod y such as a materia) review board.
The rest are delegated to o ther people.

Table 6.3 is an example of a table of delegation used by a specific company. (Personal

communication to one o f the authors.)

Disposition of Unfit Product

Unfit product is disposed of in vario us ways: scrap, sort? rework, return to s upplier, sell a t
a discount, etc. The internal costs can be esti mated to arrive at an economic optimum. How-
ever, the effects go be)•ond money: schedules are disrupted, people are blamed, etc. To

A.m ount of Product or Money at Stake Is:

EHect of
Nonconformanc:e Is on Small Large
Internal economics onty Department head directly Plant managers involved, quality
involved, quality engineer manager
Econom ic relations with Supplier, purchasing Supplier. manager
supplier agent, q uality engineer
Economic relations with Client. s alesperson. quality Client (for marketing.
client engineer manufacturing, t echnical, quality)
Field performance of the Product designer, Client (managers for technical ,
product sales person. quality manufacturing, marketing,
engineer quality)
Risk of damage to society Product design manager. General manager and team of
or or nonconformance to compliance officer. l a~er. upper managers
government regulations q uality managers

*For those industdes whose quality roisskm js really one of «>nform.ance to spedfkation (for example,
a tomic energy, s pace), the- real dec is i o n ~ m~ ker on fitness for use is the clic:nt or the government
ceguJa.tor.
TABL.E 6.3 Multiple Delegations of Decision-Making on Fitness for Purpose 3
 Quality Control: Assuring Repeatab le and Com pl iiant Processes 221

minimize the resulting human abrasion, some organizations have established rules of con-
duct, such as

• Choose the alternative tha t min imizes the to tal loss to all parties involved. Now
there is less to argue about, and it becomes easier to agree o n ho\•V to share the Joss.
• Avoid looking fo r blame. lnstead, treat the loss as an opportu nity fo r q uality
improvement.
• Use "charge backs" sparu1gly. Charging U1e vital few losses to the departments
re~pons ibl e has merit from an accoun ting v iewpoint. However, \Vhen appJied to the
numerous minor losses, this is often Wleconomic as well as detrimental to efforts to
improve quality.

Failure to use products that meet customer needs is a waste. Send ing o ut products tha t
do not 1nect c us tq mcr needs is worse. Pci'SOnn el who arc assig ned to make product conJot·
mance decisions sho uld be provided w ith deardefinitionsof responsibility as well as guide-
Lines for d ecision-making. Lead ers should, as part of their audit, ensure that the proCesses
for making product conformance decisions are appropriate to company needs.

Corrective Action
l11e final step in dosing the feedback loop is to actuate a change that restores conformance
with quality goals. Th.is s tep is popularly known as ''troubleshOl.)ting'' or "firefighting.~~
Note that the term "con-ectivc action" has been applied loosely to two very dillereot
situations, as shown in Fig u re 6.1. The feedback loop is well d esignet.i to eliminate sporadic
nonconformance~ like that "spike" in Figure 6.1; the feedback loop is no t welJ designed to
deal with the area of chronic waste • hown in the figure. Instead, the need is to employ the
quality improvement process c:Uscussed in Chapter 5, Quality Improvement: Crea ting Break-
throu.ghs i n Performance.
Vv'e wiU use the term "corrective actio n" in the sense of tro ubleshooting--eliminating
sporadic nonconformance.
Corrective action requires the journeys of d iagnosis and remedy. T hese journeys a re
simpler than for quality improvement. Sporadic problems are the result of adverse cbange,
so the diagnostic journey aims to discover w hat has changed . The remed ial journey aims to
remove the adverse change and restore confo rmance.

Diagnosing Sporadic Change

During the diagnostk journey. the focus is o n w hat has cha.ngcd. Somcti~ncs the causes are
no t o bv-ious, so the main obstacle to corre-ctive action is diagnosis. The diagnosis makes use
of methods and tools s uch as

• Forensic a utopsies to determine wi th precision the symptoms exhibited by the

product and process
• Comparison of products made before and after the trouble began to see what has
changed; :tlso comp:trison oi good and bad products made since the trouble began
• Comparison of process d ata before and after the problem began to see w hat p rocess
conc:Utions have changed
• Reconstruction of the chronology, w hich consists of Jogging on a time scale (of
hours, days, etc.) (1) the events that took place in the process bdore a1\d after the
sporadic change-that is, rotation of shifts, new employees on the job, maintenance
 Quality Control: Assuring Repeatable and Com pl iiant Processes 223

The Merits
Th ese sta tistical methods and tools have contributed in an important way to quality control
and to the other processes of the Juran Trilogy-quality improvement and quality planning.
For some types of q uality problemsf the statistical tools are more than useful -the problems
cannot be solved a t aU w itho ut using the a ppropriate s tatistical tools.
TI1c SPC movemcslt has s ucceeded i1\ tra.i.nUlg a great many superv isors and workers
in basic s ta tistical tools. The resulting increase in statis tical literacy has made it possible
for them to improve their grasp o f the behavior of p rocesses a n d prod ucts. In addition,
many have learned that d ecisions based o n data collectio n and analysis yield superior
results.

The Risks
11\ere is a danger in taking a tool-oriented approach to quality instead of a problem-oriented
or rc'Sult..<-Oriented approach. During thel950s, this preoccupation bccaJne so extensive that
the entire statistical quality contro l movement collapsed; th e word "statistical" had to be
eliminated. from the names of the d epartments.
The proper sequence in managing is first to establish goals and then plan how to
mee t those goals, including choosing the appropriate tools. Similarly, when deaUng with
problems-threats o r opportunities-experienced leaders s tart by first identifyin g the
problems. They then try to solve those p roblems by var ious means, including choosing
the proper tools.
During the1980s, 1\umerous orga.n iza tions did, in fact, try a tool-oriented approach by
train ing large numbers of their pel'sonnel in the use of statistica l tools. However, there was
no significant effect o n the bottom line. The reason was that no infras tructu re had been cre-
ated to identify which projects to tackle, to assign clear responsibi~ty for tackling those projects,
to provide needed resources, to review progress, etc.
Leaders should ensure that training in sta tistical tools does not become an end in itsell.
O ne fo rm of such assurance is through measures of progress. T hese measures should be
designed to evaluate th e effect o n operations, s uch as improvement in customer satisfaction
or product performance, reduction in cost of poor quality, etc. Measures s-uch as numbers of
courses held or numbers of people trained do not evaluate the effect on operations and
hen<:<l, should be regarded as subsidiary in nature.

Information for Decision-Making

Quality control requires extensive decision-making. These decisions cover a \\•ide variety of
subject matter and take place a t aU levels of the hierarchy. The planning for quality control
sbould provide an information network that can serve all decision-makers. At some levels of
the hie rarchy, a major need is for real-time information to permit prompt detection an d cor-
rection of nonconfo rman ce to goals. At o ther levels, the emphasis is o n s umma ries that
e nable leaders to exercise control o ver th e vital few contro l s ubjects. Ln addition, the network
should provide il'1fot mation as needed to detect major trCJ1ds, id e nti fy threa ts a nd opportu ·
n.ities, a nd evaluate the performance of organization units and personneL
ln some organizations, the q uality info rmation syste m is d esigned to go beyond control
of product features and process fe-a tures; the system is also used to con trol the q uality per-
formance of organiza tions and individuals, such as departmen ts and department heads. For
example, many organizations prepare and rcgulatly publish scoreboards showing summa·
rized q uali ty performance data for various market areas, product lines, operating fu nctions,
etc. These perfo rman ce data nre o ften used as indicators of the q uality performan ce o f the
personnel in ch arge.
224 Key Concep t s: What Leaders Need to Know about Qualit y

To provide information that can senre aU those purposes requires planning that js
directed specifically a t the information system. Such planning is best done by a multifunc-
tional team whose m ission is focused on the quality information system. T hat team properly
includes the customers as well as the suppliers of information. The management audit of the
qua1ity control system should include assurance that the qunlity it'lfo n natioo system meets
the need s of the various custorners.

The Quality Control System and Polley Manual

A great deal o f quality planning is d o ne through "procedures," w hich are reaUy repetitive-
use plans. Such procedures are thought out, written out, and approved formally. Once pub-
Ushed, lhey become the authorized ways of conducting the company's affa.ks. It is quite
common for the procedures rclo ting to manogiJ>g fo r quality to be publish.cd collc.:tivcly in o
"quality manual" (l)f similar title). A significant part of the manual relates. to quality contro l.
Quality manuals add to lhe usefulness of procedures in several ways:

• LegitimnL"y. The manuals are approved at the hig hest levels o f organization.
• Easy t-o pnd. The procedures are assembled into a well-known reference source
rather than being scattered among: many memoranda, o ra l agreements, reports,
minutes, etc.
• Stable. The procedures survive despite lapses in memory and employee turnover.

Study of company quality manuals s hows that most of them contain a core content,
whkh is quite s imilar from company to company. Relative to q uality control, this core con-
tent i.ndud es procedures for

• Applying the feedback Loop to process and product control

• Ensuring that operating pwcesses are capable of meeting the quality goals
• Maintaining facilities and c-alibration of measuring instruments
• Relating to suppliers on quality matters
• Collecting and analyzing the data required for the q uality information .system
• Training the personnel to carry out the provisions of the manual
• Auditing to ensure adherence to procedures

The need for repetitive-use quaUty control systems has Led to an evolution of st<mdards
a t industry, national, and international loNels. For elaboration, see Chapter 16, Using l.nter-
national Standards to Ensure Organization Compliance. For an example o f developing stan-
dard operating procedures, including the use of videocassettes, see Murphy a.nd McNealey
(1990). Workforce participation during the preparation of procedures he lps to ensure lhat
the procedures wHI be followed-

Format of Quality Manuals

Here, again, there is much commonality. Tile gene raJ chapter~ of t-he m~mual i.nc1udc

1. An offidal s tatement by the general manager. It includes the sig-natures that confer
legitimacy.
2. Tile putp0$e of the manual and how to use it.
234 Key Con cepts: Wh at Le aders Need to Know about Qua l ity

luitJ'atives and projects. These s ho uld be m ul tifunctio nal teams Jau n.ched to address a
d eployed goal.. and whose successful completion ensures that the s trategic goals are
achieved. An initiative or project implies assignment of selected individuals to a team,
which is given the responsibility, tools, and authority to achieve th~ s pecific goaJ or
goals.

• After six years of planning and three years of construction, jet Blue's Terminal 5
opened at JFK. Terminal 5 offers Jet Blue customers their own parking lot and road
fo r improved access to the airJiner. It comprises twenty-six gates, affords the
highest in modern amenities and concession offerings, and due to its proximity to
the runway a.Uows Jet Blue to be more efficient in thdr procesS<$. TerminalS only
advances the company's s take in the Ncv~.r York travel market.

Deploymeul plnn. To t urn a vision into action, the vision must be br,oke11 apart and trans·
Ia ted into successively smaller and more specific parts-key stra tegies, s trategic goals, etc.-
to the leveJ of projects and even d epartmental actions. The detailed plan for decomposition
and distribution throughout the organization is called the "deployment plan." It includes
the assignment of roles and responsibilities, and the Identification of resou.rces needed to
implement and achieve tl1c project goals (Figure 7.4).
St•orecnrds nnrl key perfonunuce iJtdicnlors. Measu rements that are visible througho ut the
organization for evaluating the degree to which the strategic plan is being achieved.

• By the end of 2008, Jet BJue was the seventh largest passenger ca.rrier in the United
States and conducted 600 flights daily.

Vision! Key Strategic Annual Initiatives,

mission, strfltcgics go ::tis go:ols projects
Vlllues

-1
-

Vision )
-I
-I
- -
-I
3- 5 years Time I year

FtGuR£ 7.4 Deploying the vision. (Juran Institute, Inc.)

 Stra t eg i c Planning and Deploymen t : Mov i ng fr om Goo d to Grea t 235

Developing the Elements of Strategic Planning and Deployment

Establish a Vision
Strategic deployment begins with a vision that is customer-foc used. In the organizations we
know that are successfuUy making the transition to a more collaborati ve organization, the
key to success is developing an d Uving by a common strategic vision. \•Vhen you agree on an
overall direction, you can be flexible abou t the means to achieve it (Tregoe and Tobia 1990).
"Really powerful visions are simply to ld. The Ten Commandments, the Declaration of
Independence, a Winston Churchill World War ll sp<>ech-all pres<>nt m<>Ssag<>s that are so
simple and direct you can almost touch them. Our corporate strategies should be equally
compelling."
A vision should defi ne the benefits a customer, an employee, a sharehold er, or society at
large can expect fro m the o rganization:
Here are a few examples:

• Sam sung, the w o rld's largest manufactu rer of high-<Juality digital products is gt tide<l by a
singular vis ion: "to lead the digital conve.rgence movement."
Samstmg believes that through tech nology innovation today, we ' "ill find the solutions
we need to address the challenges of tomorrow. From technology comes opportunity-ior
businesses to grow, for citizens in emerging markets to prosper by tapping into the digital
economy, and for people to invent new possibilities. It's o u r aim to develop in novative
technologies and efficient p rocesses that create new markets, enrich people's lives, and
cont iJl uc to ma.ke Samsuog a trusted market leader.
• Sen tara Hea lth (based in the mid ~Atlanric states): \•Ve have commitmen.t to g row as 011e o f
the nation's lead ing health ca re organizations by creating innovative systems o f care that
help people achiev<> and main tain their b<>.st possible state of health.
• Kaiser Permanente (a large U.S.-based health care system): "We are committed to pro-
viding o ur members w ith q uality, cost-effec tive health care. Our physicians and ma.n·
agers wQrk togetber to improve ca re, serv ice, and the overall performance of o u r
organizatio n."

Each of the p receding v isio ns offers a very differe nt view of the dir<>ction and character
of the orga.nization. Ench COilvcys a general image to customers :md crnpiQyccs of w here the
organization is head ed. For the organization, the vision p rovides, often for the first time in
its history, a dear picture of w here it is headed and w hy it is going there.
Good vision statements should also be compelling and shared throug.hout the o rgan iza-
ti<>n. It is olten a good idea to make the v ision a stretch lor the o rganizat)on b ut possible o£
being achieved within th.ree to fjve years_, and to sta te a measurable achjcvcmen t (e.g., being
the best). In creating the vision$ o rganizations sho uld take into accoun t its customers, the
markets in ,,,rhich it wants to compete, the environment within w hk-h the organization opel'-
ates, and the current statt! of the organization's cul ture.
Vision s tatements, by themselves, are little m ore than words. Publication of s uch a state-
ment does not inform the members oi an organi zation what they should do differ<mtly from
w hat they have d o ne in th <> past. TI1e strategic deployment prOC'<'Ss and th<> strategic plan
become the basis fo r making the vision a reality. The words of the vision are jus t a reminder
of w hat the organization is p ursuing. The \.risio n m ust be carried out through deeds and
act.ions.
236 Key Concepts: What Leaders Need to Know about Qua li ty

Some contmon pitfalls when forming a vision are

• Focusing the vision excl usively on shaxeholders as customers

• Thinking th:tt once a stra tegic plan js written it ,,~,~iU be carried out w ith no further
work
• Failing to explain the vision as a benefit to customers, empk>yees, s uppliers, and
oth~r stakeholders

• Creating a v isi01"1 t-ha_t is cit he~: too easy o.r too difficult to achieve
• Failing to consider the effects t.h at the ropid changes taking place in the global
economy will have three to five years into the future
• Failing to involve key employees at all leve)s in creating the vision
• Failing to benchmark competitor.s or to consider all possible sources of information
on future needs, internal capabilities, and external trends

Agree on Your Mission

Most organizations have a mission statement A mission statement is designed to address
the question, VVhat b usiness(es} are we in ? A mission is often confused w ith a v ision and
ev~n published as one. A mission s tatement sho uld darify the organization'.s purpose or
reason for existence. It helps clarify who }'Our or~;a.nization is.
TI1e following are some examples:

• Sam.su.ng: Everything we do at Samsung .is guided by (H.tr miSSiion: to be the best

"d ig ital- e-company."
• Amazo.n .com: Our vision. is to be cart_h 's most custotncr.oeen t·ric C(..1rnpaJl )', to build a
place w here people can come find and discover anything they n1ight want to b uy
online.
• Dell: To be the most s uccessful computer company in the world and delivering the
best customer experience in the markets they share.
• eBay pioneers communiti~ built o n commerce, sustained by trust. and inspired by
opportunity. eBay brings together millions of people every day o n a local, national,
and international basis through an axray of websites that foc us on commerce,
payments, and communications
• Facebook is a social utility that helps people commlUlicate more efficiently with
their friends. family members, and coworkers. The company develops technologies
that facilitate the sharing of information thro ugh the social ,graph, the djgital
mapp;ng of people's real-world social connections. Anyone can s ign up for Facebook
and interact with the people they know in a t-rusted environment.
• Goc.,gle's mission is to organize the world's information and make it universally
accessible and usefuL
• The Ritz.·Carlton Hotel is a place whe-re the genuine care and comfort of ou r g uests
is o ur highest mission.
• Sentara Health: We w llJ focus, plan, and act o n o ur comntitments to our community
mission1 to o ur customers, and to the highest q uality standards of health care to
achieve o ur vision for the future.

In the Sentara example, the references to leaders!Up and the future may lead the reader
to confuse this mission statement (what business we are in) w ith a visio-n statement (wha t
242 Key Conc ep ts : What Le aders Ne ed to Know about Quality

team '"'orking togelher to maximize process efficiency and effectiveness. A lthough this may
sound easy, in p ractice it is not The senio r management team members may not want to give
u.p the monopolies they have enjoyed in the past. For instance, the manager of sales and
marketing is accusto med to d efining custome.r needs, the manager of engineering is accus-
tomed to sole responsibility for creating products, and the manager of ma,,ufactu dng has
enjoyed free rein in prod ucing products. In the short n m, these managers may not easily
give up their monopolies to become team players.

Deploy Goals
The deployment of long- and short-term goals is the conversion of goals in to operational
plans and project.<. "Deployment'' as used here moans s ubd ividing tho goals and allocating
the subgoals to low er levels. This conversion requires careful atten tion to s uch details as the
actions need ed to meet these goals, who is to take these actions, the resources need ed, and
the planned timetables and milestones. Successful deployment requires establishment of an
infrastructure for managing the plan. Goals are deployed to multifunctjonal teams, func-
tions, and individuals (sec Figu re 7.7).

Subdividing the Goals

O nce the strategic goals have been agreed upon, they must be s ubdivided and communi-
cated to lower levels. The deployment process also includes dh•iding up broad go.1ls into
manageable pieces (short-term goals or projects). For example:

• An ajrline's goal of attaining 99 percent o n.. timc arriva ls may rc<.] uirc specific short·
term (eight to twelve months) initiatives to deal with such matters as:
• TI1e policy o f delaying departures in order to accommoda te delayed connecting
flights
• TI1e decis ion-making of gate age nts a l d e parture ga tes
• The availability of equipment to dean the plane
• The need for Ievisions in departmental procedures to clean the plane
• The state of empJoyee behavior and awareness

Strategic goals

Subdivided goals

Opcr~ui ng groups
cross-functional
projecls
Funclions/depts
projects

Proce-ss owners

FIGUR! 7.7 Deployment of strategic goals. (Juran Institute. Inc.)

 Strategic Planning and Deployment: Mov ing from Good to Great 243

• A hospital's goal of improving the health s tatus of the communitj es they serve ma)'
require initiatives that
• Red uoo incidence of preventable disease <Uld illness
• Improve patient acce.....;s to care
• Improve the management of chronic disease conditions
• Develop new services and programs in response to community needs

Such deployment accomplishes some essential purposes:

• The s ubdjvision continues un til it ide ntifies s pecific deeds to be d o ne .

• The allocation continues until it assigns s pecific respons_ibility fm: doing the specific
deeds.

TI1ose w ho are assig ned respons ibili ty respond by determining the resow·ces needed
and communicating this to higher levels. Many times, the council must define specific
projects, complete w ith team charters <tnd team members, to ensure goals a re met (see
Figure 7.8). (For more on the improvement process, see Chapter 5, Quality Jonprovcment:
Creating Brea kthroughs ifl Performance.}

Deployment to Whom?
The deployment process s tarts by identifying the needs of the organiz.at:ion and the upper
managers. Those needs delermine what deeds are required . The deployment process lec., ds
to an o ptimum set o f goals through consideration o f the resources required. The specific
projects to be carried out address the s ubdivided goals. For example, in the early 1980s, the
goal of having the newly designed Ford Taurus/Sable become "Best in Class" was divided

ShorHeml J.l I.- exec:ulive

Coordinating

Short-tcnn 1.2
I
I
..
Slll')t't-tenn 1.3

Business
Long-term bus uoir 2A
unil head
Strategic goal 2
Long-t.enn bus unit 213

Process
owner
Strategic goal 3

FtouR£ 7.8 Subgoals. (Juran Institute, Inc.)

244 Key Con c e pIs: Wh a I Leaders Need I o Ko ow abo u I Qua IiI y

into more than 400 specific s ubgoals, each related to a specific product featu re. The total
p la nn ing effort was e normous a nd required more than 1500 p roject teams.
To some degree, deploymen t can follow hierarchical lines, such as corpora te to d ivision
and d iv ision to flmction. However, this simple a rrangemen t fails when goals rela te to cross-
fu nctional business proccs.<;cs a nd p roblems that affect customers.
Major activities o f organizations are carried out by the use of interconn ecting networks
of busin ess p rocesses. Ead1 business process is a multifun ctional system consisting o f a series
o f sequential ope rations. Since it is multifunction al, the process has no single "owner"; hence,
there is no obvious answer to the q uestion, Deploymen t to w hom? Deployment is thus made
to m ultifunctional teams. A t the. co,, cJ usjon o f the team project, an ownc·r is idc_ntifJcd. The
owner (who may be more than one person) then monitors and main tains this b usiness pro·
cess. (See Ch apter 8, Business Process Management: C reating an Adaptal:>le Organization.)

Communicating the Plan: • catch Ball"

O nce th e goals have been established, the goals are communicated to the app ropria te o rga-
nization units. In effect, the execu tive leadership asks their top management, What do you
need to s up port this goal? The managers a t this lev e) discuss the goa) a nd ask th eir subord i-
nates a s im ila r q uestion, and so on. Th e responses are sum marized an d passed back u p to
the executives. This process may be repeated several times lmtil there is general satisfaction
with the final plan.
TI'is two-way commu n ication p rocess is caUed "catch ball," a term coined by the Ja.pa·
nese. Catch ball includ es the following:

• Cle.a r communication of \'\'hat top ma nagement prop oses as th e key focus a reas of
the s trategic p lan for the coming business year
• Id entification a nd no min ation by man agers at vario us lower levels of o ther a reas for
organization atte ntion
• Decisions as to w hat d e partments and functions should do about the a reas that have
been identified in the p lan

This two-way comm un ication requires th at the recipien ts be trai ned in hO\v to respo nd.
The most usefu l training is prior experience in quaJity im provement. Feedback from organi-
zations using catch ball su ggests that it outperforms the process o f •milateral goal-setting by
upper managers.
For example, Boeing Aerospace Syste ms has been very s uccessful in intr<Xlucing its s tra-
tegic q uality plan, with its mission, vision, key strategies, and strategic goals. To review and
refine mission statements, s trategies, and the overall vision of the organization, Boein g con-
ducts yearly asscssmenL.:o d rawing from c us tomer satisfaction as~mcn ts, humas' resource
assessmen ts, supplie r asses.~ments, risk assessments, and financial assessments. By essen·
tiaJiy taking feedback from aU face ts of their bus iness (customers, workfor;ce, s upplie rs, com-
munity, and s hareholders), Boeing is a ble to enact improved impleme ntation plans and
be tter ma.n age their allocation of resources. The identification of needs wiffhin the infrastruc-
ture, addressing problems w ithin the culture/train in g o f the workforce, a1'd modifying
ins titutionalized prOL--esses for the better are all results of continually deploying assessments
and cons istent communication between the management and its workforce.

A Useful Tool for Deployment

The t ree d iagram is a graphic too l t ha t a ids in the dep loyment p roce:;.s (see Figure 7.8).
It displays the hierarchical relationshi p o f the g oals, .lo ng -term goals, short-term goa ls,
246 Key Concepts: What Leaders Need to Know about Quality

AI\JlUal quaHty Specific l71'equency F'OI'Ill>ll Dat:l soul'ce Name

go:~Is mc:•stlrcmcnls

FIG.URE 7.9 Measurement of quality goals. (Juran Institute, Inc.)

As goals are set and deployed, the means to achieve them at each level must be analyzed
to ensure that they satisfy the objective that they s upport. Then the propos-ad resource expen-
ditLtre must be compared with the proposed result and the benefit/cost ratio assessed.
Examples of s uch measures are

• Fina.ncia I results
• Cains
• investment
• Return on investment
• People development
• Trained
• Active on project teams
• Number of projects
• Undertaken
• Ln process
• Completed
• Aborted
• New product or service development
• Number or percentage of successful product la unches
• Return on investment of new product development effort
• Cost of developing a product versus the cost of the product it replaces
• Percent of revenue attributable to new products
• Percent o f market s.hate gain attributable to products 1<-,uncl'lled duri1"1g the Jasl
two years
 Strategi c Planning and Deploymen t : Moving fr om Goo d to Grea t 247

• Percent of on-time p roduct launches

• Cost of poor quality associated with new product development
• Number of engineering changes in the first twelve months of introduction
• Supply-chain management
• Manufacturing lead times-fill rates
• Inventory tu rnover
• Pen:ent on-time delivery
• First-pass yield
• Cost of poor quality

Tile fo llowing is an example of measures that one bank used to mo,,Hor teller quality:

• Speed
• N u mber o f c ustornei"S in the q ue ue:
• Amount of time in the queue (timeliness)
• Ttme per transaction
• ·rurnaround ti me for no-\-v ait o r mail transactions
• Accuracy
• Teller differences in adding up the rnoney at the end of the day
• Amountchargcd off/amount hand led

Once the measurement system is in place, it must be reviewed periodically to ensure

that goals are being met.

Reviewing Progress
A formal, efficient review process will increase the probability of reaching the goals. When
planning actions.. an organization should look at the gaps between mca_suremc.nt of the cur·
rent state and Lhc target it is seeking. The review process looks at gaps between what has
been achieved and the target (see Figure 7.10).

t
Good
0
I
)<
I

"''
x'----} Gap + Feedback
-'" loop

Now

F1ouRE 7.l.O Review. (Juran Institute, Inc.)

248 Key Concep t s: What Leaders Need to Know about Qualit y

l' rojtt t U111sdint lnitWI Ke,'icw pc•inb Rc,•iew

ProJ«tS Targd s
le:~dl'rs nt~s.urtmenls pllm l('lldC'.I'
Rc~ourct~ A n ~l)'~l$ Plan Rc~ul li

Ftcu~E 7 .11 Progress review plan. {Juran lnseitute. Inc.·)

Frequent measurements of s trategic deployment progress displayed in graphic form

help identif)• the !,'«pS in need of attention. Success in dosing those gaps. dep ends on a for-
mal fet.'<lback loop with dear responsibili ty and nuthority for acting on those differences. In
addition to the review of results~ progress reviews a re n eeded for p rojects un der way to
ide ntify po tential problems before it is too late to take effective action. Every p roject should
h ave specific, pla.rl.ned review points, much like those in Fig ure 7.11.
Organizations today include key p erforman ce indicators as discussed in the foUo win g
sections.

Product and Service Performance

There may be several product or service feat ures. For the great majority o f product fea tures,
there exist performance metrics and technological sensors to p rovide objective product
e:valuatjon.

Competitive Quality
These mctrics relate to those q ualities tha t influe nce product sa la bWt)•-fo r example,
promptness of service, responsiven ess, cotutesy of pre-sale and after-saJe service, and o rder
fuHillment accuracy. !'or a u to mobiles, q ualities include top speed, acceler ation, braking dis-
tance, an d safety. For some product fea tures, the n eeded data must be acqtlired fro m cus-
tomers through negotia tion, persuasion, or purchase. For othe r product features, it is feasible
to secure the da t~l throug h laboratory tests. In stiU other cases~ it is necessary to conduct
market research.
Trends mus t now be s tucUed so that goals for n ew p rod ucts can be set to correspond to
the s tate o i competition anticipated at the time of launch.
Some organi7.ations opc_ratc as na tural monopolies, for example, regional p ublic u tili·
ties. In s uch cases, the industry association g athers and publishes perfol'mance data. In the
case of internal monopolies (e.g., payroll p reparation, transpo rtation)~ it iis sometimes feasi-
ble to secure competitjve information from organizations that offer similar servic;,; for sale.
250 Ke y Con c e pIs: Wh a I Le ad e r s Ne e d I o Ko ow abo u I Qu a Ii I y

dictates the choice of s ubjects and identifies the measures needed on the u pper management
scorecard.
The scorecard should consis t of several conventional components:

• Key performance indicators (at the highest levels of the organization)

• Quantitative reports on performance, based on data
• Narrative reports on such matters as threats, opporh.mitieS1 and pertinent events
• Audits conducted (see "Business Audits" later in this chapter)

TI1ese ronve ntionaJ componen ts are s upplemented as required to de31 with the fact that
each organization is different. The end result s hould be a report package that assists upper
managers to meet tne quality goals in much the same way as the financial report package
assists the upper managers to meet the £inanda.l goals.
The council has the ultimate responsibility for designing s uch a scorecard. ln large orga-
nizations, design of such a report package requires inputs from the corporate offices and
divisional offices alike. At the division level, tl:te inputs should be from multifunctional
sources.
TI1e report package s hould be specially designed to be read a t a glance and to permit
easy concentration on those. exceptional matters that call for a tte ntion and action. Reports in
tabular form sho uld present the three essentials; goals, actual performances, and variances.
Reports in graphic form should, at the least, show the trends of performances against goals.
The choice of format should be made o nly after learning the preferences of the c ustomers,
that is, the upper managers.
Managerial reports are usually published monthly or '1uarterly. The schedule is estab-
lished to coincide with the meetings schedule of the council or other key reviewing body.
The editor of the scorecard is usually the director of quality (quality manager, etc.), who is
usually also the secretary of the council.
Scorecards have become an increasing staple in corporations across the globe, so much
so that they have moved bej•ond their initial purpose. Scorecards have now been created not
just to document an o rganization's bottom line but to judge how green an organization actu-
ally is. A "Ciimote Counts" Organization Scorecard rates org:ulizations across dillerent
industry sectors in their prac-tices to reduce global \varming and create greener business
practices. Organizations that are making concerted efiorts to alleviate these c-a uses receive
higher scores. Like regular scorecards, the informa tion is available to the public, and the
opportunity to further a positive public image is at hand. Items include

• lead ing indicators (e.g., quality of purchased components)

• Concturent indicators (e.g., product tes t results, process condi tions, and service to
customers)
• Lagging indicators (e.g., data feedback from c us to me rs and returns)
• Data on cost of poor quality

The scorecard should be reviewed formally on a regular schedule. Formality adds legit-
imacy and status to the reports. Scheduling the reviews adds visibility. The fact that upper
managers persoJ,ally participate in the revie\.,rs indicates to the rest of the organizatjon tha t
the reviews are of great importance.
Many o rganizatio ns have combined their measurements from financial, customer,
o pe rational, Rnd human resource areas into "instrument panels" or ''balanced business
scorecards."
 Strategi c Planning and Deployment: Moving fr om Good to Grea t 251

Business Audits
An essential tool for upper managers is the audit. By "audit/' we mean an independent
revie\V of performance. "Independent" signifies that the auditors have n o direct responsibil-
ity fo r the adequacy of the performance bein g a udited.
Th e purpose of the audit is to provide indepen dent, tmbiased information to the operat-
ii',S mallagcrs a;, d o thers who have a need to know. For certain aspects of performance, those
who have a need to know indude the upper managers.
To en sure quality, upper management mus t confirm that

• The systems are in p lace and operating properly

• The desired results are being achieved

Crowing to encompass a broad range of fields, quaJity audits are now utilized in a p le th-
ora of industries, including science. The Royal College of P<lthologists implemen ts quality
audjts on a munber of their research reports. The quality audit e nsures tltat individuals and
teams are meeting the procedures and s tandard s expected of them and that their work is in
line \vith the mission of the s tud y.
These a udits may be based on externalJy developed criteria, o n specific intern(! I objec-
tives, n r o n some combination o f both. T1H·ec well· known external sets of criteria to aud-it
organization performance are those of the United States' Malcolm Baldrige National Award
for Excellence, the European Folmdation Quality Management Award (EFQM), and Japan's
Deming Prize. All provide s imilar c riteria for assessing business excellernce thro ughout the
entire oro~.niza. tjon.
Traditiooa Uy,qua lity a udits have been used to provide assurance that: products conform
to specifications and that operations conform h) procedul'es. At upper-managernent levels,
the s ubject ma tter o f q uality audits expands to provide answers to su ch questions as

• Axe our policjcs and goals appropriate to our otga.ni7..ation's mjss-io.n?

• Does our q uality provide prod uct satisfaction to o ur clients?
• Is our q ua Uty competitive w ith the moving target of the marketplaoo?
• Are we making progress in reducing the cost of poor quality?
• Is the collaboration a mong o ur functional departments adequate to ensure
optimizing organization performance?
• Are we meeting o ur respo nsibi.lities to society?

Questions s uch as these a re not answered by conventional technological a udits. More-

over, the audito rs wh o conduct technological a u dits.:;eldom have the man agerial experience
and training needed to cond uct business-orie nted quality a ud its. As a con1sequence, o rgani-
zations that w lsh to carry out q uality audits oriented to business ma tters usuaJly d o so by
using upper managers o r outs ide c-onsultants as a uditors.
Juran (1998) has stated:

One of the things the upper managers should do is maintain an audit of how the processes of
managing fo r achievi.ng the plan i~ bei_ng carr ied o ut. Now, w hen you go into a,n audit, you have
three things to do. One is to identify w hat are the questions to whkh_we need aJ\SW"ers. l"hat's
nondelegable; the upper m anager~ have to participate in identi.fyi.ng these questions. Then you
have to put together the ioformMion that's needed to give the answers to tho~e questions. That
can be delegated, and that's most of the work, collecting a nd ;malyzing th~ dato.1. And tht're's tht'
decis ions of what to do in Jight of those answers. That's no ndelegable. Thali's something the
upper ma.nagers _m~ISl partidpale in.
252 Key Concepts: What Leaders Need to Know about Quality

Audits conducted by executives at the highes t levels of the organizatio n w here the pres-
ident personally participates are usually called " Tile President's Audit" (Kondo 1988). Such
audits can have major impacts thro ughout the o rganization. The s ubject m atter is so hmda-
mental in nahtre that the audits reach into every major func tion. The personal participation
of the upper ma nagers s implifies the problem of communica ting to the upper levels and
increases the likelihood that action wiiJ be fol'thco ming . The very fact that the uppeJ· manag-
ers participate in person sends a message to the entire organiza tion relative to the prio rity
placed on quality and to the kind of leadership being provided by the upper managers-
leading, not cheerleading (Shimoyamada 1987).

Lessons Learned
There are some important lessons learned about the risks in implementing s trategic
deployment:

• Pursuing too many objectives, long term and short term, at the sam e tim e will dilute
the results and blur the foc us of the organization.
• Excessive planning and paperwork wiiJ drive o ut the need ed activities and
demotiva te managers.
• Trying to plan s trategically witho ut adequate data about custom ers, competitors,
and internaJ employees can c reate an unachievable plan o r a plan with targets so
easy to achieve that the financial improve ments are no t significaot e nough.
• If leaders delegate too much of the responsibility, there will be a :real and perceived
l:tck of direction.
• For an organization to elevate quality and customer focus to top priority creates the
impression that it is reducing the importa.nce of finance, which formerly occupied
that prio rity. This perceived downgrading is particularly disruptive to those w ho
have been associated with the fo rmer top-priority financial g<n1ls..

\Nhen embarking on strategic planning, the biggest disruption is created by imposing a

s tructured approach on those who pre fe r not to have it. Resistance to the s tructured approach
will be evident at the outset. The single most important prerequisite for embarking on a long-
term, effective, organizationwide im prove ment effort js the creation of an. environment con-
ducive to the many changes that are necessary fo r s uccess. Organizatio ns. have aggressive!}•
sought to eliminate these barrie rs that have taken years or decades to establish. The process
of change takes time1 however, and change will occur only as an e vo lutionary process.

References
Boot, H. Socia l Responsibility & The Corporate Va lues Statement, http:/ /ezincartides
.com/?id=1871566, 2008
Godfrey, A. B. (1997). " A Short H is tory of Managing Quality in Health Care." ln Chip
Caldwell, ed., Tl1e Hnndbook for Mn11nging Clumge i11 Henlth Cnre. ASQ Quality Press,
Milwaukee, WJ.
Godfrey, A. B. (1998). "Hidden Costs to Society." Quality Digest, voL 18, no. 6.
j et Blue Airways, Termina1 5, jFK International Airport, http:/ / phx.corporate-ir.net/External
.File?item=UGFyZWSOSUQ9M,M zODAzfENoaWxkSUQ9Mz.E2NTMwfFJ~cCU9MQ=
=&t=l, 2008.
Juran,J. M. (1988). ]11rn11 011 Plnntlingfor Quality. Free Press, New York.
256 Key Con cepts: Wh at Le aders Need to Know about Qua l ity

High Points of This Chapter

1. Creating a s ustainable and adaptable organb:ation requires th~t all key business
p rocesses are managed on a day~to-day basis. TilisoccUI'S when a n organization has
fully deployed its v ision a nd mission.
2. Strategic goa ls tied to the organization vision, v,.rhich a re shared by executive
leadership and deployed througho ut the organization in the fo rm of key busin ess
objectives are commonplace.
3. lvlultifunctional, full-time business p rocess teams, owned and s upported by the
management system (education, communica tion, performance management, recognition
and reward, compensation, and new career pa th structures) arc i.dc.ntified.
4. The charter of each team is to continuously and dramaticalJy improve the
effectiveness and efficiency of each major business proe<~ss to w hich it is assigned
o n an ongoing, daily managed basis.
5. Process owners are empowered and held accountable to act in su pport of these ke)'
b usit'lcss objectjvcs.
6. Skills in performru>ee excellence m ethods and project man ageme nt to e nable man)'
of its sched ules, costs, and work plans bch' 8 coordinated and implemented
throughout the organization i.s required.
7. Executive manage ment promotion of the impo rtance, impact, ptOgress, and success
o f the Business Process Management (BPM) effort throug hout the o rga nization and
to external stakeho lders is a prerequisite.
8. Organization leaders who have adopted BPM as a management tool know that
process managemen t is a continuous managerial foc us, not a single event or a q uick
fix. They also know that a constant focus o n b usiness processes is essential to the
long·tcrm success of their organization.

Why Business Process Management?

The dynamic environment in which business is conducted today is characterized by w hat
has been referred to as "the s ix Cs": change, complexity, customer demands, compctitivt> prt.?ssure,
co!> f impacts, and constraints. All have a great impact on an organi 2A:1.tion's. ability to meet its
s tated business goals and objectives. Organh:ations have respond ed to these fac tors by
developing new products and services. They also have carried out numerous "breakthrough
projects" and are at a maturity level conducive to process ownership.

A business proe<~ss is the logical organization of p eople, ma terials, e ne rgy, "'quipment, and
information into work activities designed to produce a required end result (product or service)
(Pall1986).

"01ere are three principal dimensions for me.a suring process performance: effectiveness,
efficiency, an d adaptability:

1. The process is effective if the outp u t meets customer n eeds. It is efficient w he n it is

effective at the least ~"'st.
2. The process is ndrrptnble when i t remains effective and efficient in th e face of the
many changes that occur over time.
 Business Process Management : Creating an Adap t abl-e Organizat ion 265

Defining the Current Process

Th e owner(s) and the tearn collabora te to d efine the process p recisely. In accomp lishing this,
the sta rting poin t and p rincipal reference is the p rocess d ocu mentation d eveloped by the
q uality coun cil d uring the selection of key p rocesses a nd ide ntification of owners and teams.
This d ocumentation includes p reliminary statemen ts of mission and goals.
Effective missiOI''I <H'Id goal s tatements explicitly decJa_rc

• The plupose and scope of the process

• "Stretch" ta rgets for customer needs and business needs

(The p u rpose of the stretch ta rget is to motivate aggressive process im p rovemen t

activity.) For example, a mission s tatement for the Special-Contract Management P rocess
is to provide competitive specia l pricing and supportive terms and conditions for large
information systems p roc ureme nts tha t meet custome r needs for value, contractual
s upport... a nd timeliness a t affordable cost.
The goals for the same process a re to

• Deliver approved. price and contract support document within 30 days of date of
customer's letter of intent.
• Achieve a yield o f special-<:ontract proposals (percent o f p roposals dosed as sales)
of not less than 50 percent.

The team must reach a consensus on the su.ihlbility of thesestat<lmen!s, p ropose mod ifj.
cations for the q uality counci l's approval, if necessary, and a lso document the scope, objcc·
tives.. and conte nt. Based on availa ble d ata a nd t."'IIectivc team cxpel'ience, th e team will
document process flow, p r<-x:ess .strengths and w eaknesses, p erformance h isto ry, measures,
costs, complaints.. e nv ironment.. and resources. This \!/ill probi'!bly involve narratjve docu-
mentation and will certainly requ.ire the use o f flow c:Uagrams.
SOLU'Iding the b us iness proet.:-ss starts w ith inve-ntorying the major subprocessl~s-six to
eight o f them is typical- that the busin ess process comprises. The invento ry mus t include
the ...s tarts with" s ubprocess (the first s ubprocessexecuted )1 the ...e nds-with"" subprocess (the
last executed), and the major s ub processes in between. If they hm•e significant effect on the
quality of the p rocess output~ activ ities upstrean1 of th e process a re included w ithin the p ro-
cess bound a ry. To provide focus an d a void ambigu ity, jt is aJso helpful to list s ubprocesses
that are explicitly excluded from the b usiness p rocess. TI1e accumulating in fo rmation o n
process components is represented in diagram form1 which e.v olves from a coiJection of s ub-
processes to a flow diagram as the steps o f the planning p hase are completed.
Figure 8.3 shows a high -level diagram o f the special-contract process that resulted from
p rocess analysis b ut before the p rocess was red esigned . At the e nd o f the p rocess defin ition
step, such a diagram is not yet a flow diagram, as there is no indication of the sequence in
which the s ubprocesses o<:<:ur. Establishing those relationships as they p r esently exi.s t is the
work of Step 2.

Discovering Customer Needs and Flowcharting the Process

For the process to work well, the team must ide ntify all custo mers... determine their need s,
and prioritize the informa6on. Prio rities enable the team to focus its attention and spend its
energies where they will be most effective.
Determining custo me r need s a nd expectations requires o ngoing, discip lined activity:
Process owners m ust ensure that this activ ity is inco rporated in the d ay-to -day conduct of
the business process as the c ustomer requirements s ubprocess an d assign accountability for
266 Key Conc epts: What Le aders Ne ed to Know about Quality

' '
; Spect:•l !
s~'"i"·' :
:: CJ1,SIA¢~'fii!S : soflw%1r-: ! Pl'QCI!SS
:
;d<::,•..:lopmo::nt! model
·----------'
' '

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boundar)·
...
-·-..
S uppliers Bnmc:h Regjon HQ-ndmin.
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re\•lcw& CliSt/ pros..
La~eac:CJ ,
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·----------'
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28 ~ljlh!nll:ll "'Wrmv:.ls; pJ<lll -
nppr0 \'111 ~ malizc pre:swl:ll ioo
SC<:oturact

ILegend: - - PrQduct --- - ln fu n nnl ion

FtouRt 8.3 High-level diagram of the special.oontract process.

its performance. The output of this vital activit)' is a continually updated customer require·
ment sta tement.
O n the process flowchart, it is us ual to indicate key s uppliers and custo mers and their
roles in the process as provid ers o r receivers of materials, p roduct, information, and the like.
Although the diagram can ser ve a number of specialized purposes, the most jmportant here
is to create a co mmon, h.igh ..level understanding among the o wner and the team members of
how the pnx""'CSs wo rks- how the s ubproc._--esses relate to each o ther and to the cus to mers and
s uppliers and how information and product move aJ'Otmd and through the p rocess. ln creat-
ing the p rocess flowchart, the team w ill also verify the list of customers and may, as under-
s tanding of the process deepens, add to the list of customers.
'n1c p rocess flowchart js the tcan·r 's pl"i.mn.ry tool for :.t1lalyzi11g the process to determine
whether it ca.n satisfy customer need s. By wa lk ing through the chal't together, step by step,
sharing q uestions and colJective experience, the team determines w hether the process is cor-
rectly represented, making adjustments to the diagram as ne<:essary to reflect the process as
it presently operates.
When the step is complete, the team has a st:lrting point for a.n alyzing and improving
the process. In Figure 8.4, the product flow is shown by solid lines and the in formation flow
by dotted lines.

Establishing Process Measurements

\.Vha t ge ts measured gets d one. Establishing, collecting, and using the correct measures is
critical in m anaging business pro cess q uality. ' 1Process capability," " prOC€'-SS perfor-
mance," and o ther p rocess measures have no practical signHicance if the p rocess they
 Bu s iness Process Management: Creating an Adaptabl-e Organizat ion 267

tl1easurement
......... .......... model
:
''
'
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~
--
Hra.nch A Rt.'):io n 6 c
!{C\1i i!W, Log in.
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e e .. · ..- Information I
F1auRE 8.4 Flowchart of the special-contract process Including process control pohH.s.

p urport to de~r ibe js not rnanaged . To be managed, the process m ust fulfill certain mini-
mum condi tions:

1. It has an owner.
2. It is defined.
3. Its manager:nent infrastr ucture is in place.
4. Its requirements are established.
5. Its measurements and control points are established.
6. It demonstrates stable, predictable, and repeatable performance.

l·\ process that fulfills these minimum conditions is said to be numagenblt,. Manageability
is the precondition for all further work in BPM.
Of these criteria, (1) through (4) have already been addressed in this chapter. Criteria (5)
and (6) are addressed as fo llows.

Process Measurements
In deciding what aspects of the process to measure, we look for guidance to the process mis-
sion and to o ur list of customer needs. Pr<.x:ess measures based o n customer needs provide a
way of measuring process effectiveness. For example, if the customer reqt.tires delivery of an
order w ithin 24 hours of o rder placement, we incorporate into our order-fulfillment process
 8 usin ess Process Man ag em en I: Crea ling an Ad apIa b loe 0 rg an iz al ion 269

The traditional busi.n css view T he proccs.-> \':lew

Bu~:~iness objective ( nusiness indicntor Process meusu re

Key pl'ocess
I
Percent o f sales quota Contract management Contract close rate
achieved
Percent o f revenue
PI'Oduct developm ent Developmenl cycle
plan a<:hievcd
Higher revenue time
Value of orders
Backlog management
c~mcelled af1er Account management
and sysrem nssumnce
shipme.nt timeliness

Receivable <k1ys
Uill i rlg qu<llil)' inde;<
outstanding

Reduce costs S.G&A Manufacturing Man ufac wring cycle

1ime
lnvcnrory turns

F1cURE 8.5 Typical process measu rements and the traditional business indicators.

il'• Figure 8.4. Feedback loop design and o ther issues surrounding proces..c; control are cov ..
ered in detail in Chapter 6, Q uality Control: Assuring Repeatable and Compliant Processes.

Process Variability, Stability, and Capability

As in all processc-.s, business processes e xhibit variabili ty. The tools o f s tat5stical process con ..
trol such as Shewhart charts (see C hapter6) help the team to minimize process variation and
assess process stability.
Evaluation of process capability is an important s tep in process q ua lity improvement.
Process capability is a measure of variation in a process operating under stable conditions.
The p hrase "Under s table cond itions" means tha t all variatjons in the p rocess arc attribut·
able to random causes. The usual criterio n fo r stability is that the p rocess, as plotted and
interpreted o n a Shewhart con tro l chart, is "in control.,.
Statistical process control, process capability, and associated tools are useful components
of the process team's tool kit. They are covered in det•il in Chapter 18, Core Tools to Design,
Co ntrol, and Improve Perform<lncc.
The ou tput of the measurement step is a measurement plan, a list of process measure-
ments to be made and the details of making each o ne, including who will make it, how it will
be made, and on what schedule.

Analyzing the Process

Process analysis is perfo rmed for the fo llow ing purposes:

• Assess the current process fo r its effectiveness and efficiency.

• ldentrt)' the underlying causes of any performance inadequacy.
• Identify opportunities ft>r jmprovement.
• Make the improvement:;.
270 Key Concep t s: What Leaders Need to Know about Qua l it y

Business process Sub-process Activity Tas k

Procurcn1cn1 S npplicr seJection Supplier s urvey O ocumco l~tlj on of

oUJtside. supplier

Development Hardware design Engineering change Convening the

engi neering change board

0ft1cc ·Providing Managing caleodars Making <l ch•:mge 10

adminisu·ation administrative ex isting caJendar
support services

f iGUA£ 8.6 Three levels OFdecomposition .

First, referring to the p rocess flowchar t, the tea rn breaks the process i nto its compone nt
activities us ing a procedure caJied uprocess d ecomposition,'' which cons ists o f progressively
breaking apart the process, level by level, s tarting a t the macro level. As decompositjon pro-
ceeds, the process is descr ibed in ever-finer dotail.
A.s the s trengths and weaknesses of the p rocess are understood a.t o .nc level, the BPM
team's in terim theories and C01'1 d usions will he lp decid e w he re to go next· wi Lh the a na lysis.
The team will discover that certain s ubprocesses h ave more influen ce on the per forman ce of
the overall business process than othenl (an example of the Pareto principle). These more
sigojficant subprocesses become the target for the next level of analysis.
Decomposition js complete when the process parts are small enoLtgh to j Ltdge as to their
effectiven ess an d efficien cy. Figure 8.6 shows examples from three levels of d ecomposition
(subprocess, activity, and task) of three typical bus iness proces""s (procurement, develop-
ment engineerin g, and office ad ministration).
Measu rement data are collected according to the measurement p la n to determine process
effectiveness and efficienq~ The d ata are a nalyzed for effectiveness (conformance to cus-
to mer needs ) an d long-term capability to meet current an d h ttu re customer requirements.
The goal for process efficie ncy is tha t all key business processes op erate a t minimum
total proCe..o;s co..~t and cycle time while still meeting c usto.mec requirements.
Process effectiv~ness a nd effideu cy arc a na lyzed conc:u rre nt ly. Maxi mjzing effectiveness
and efficien cy together means th at the process prod uces high quality a t 10\v cost; in o ther
words, it can provide the most vnlue to the c ustomer.
"Bus iness process adaptability" is the ability of a process to readily acc<>mmodate
changes both in the requirements and the envirOJ\ment while maintaining its effectiveness
and e fficiency over time. To a na lyze the busin ess process, the flow diag(.am _is examined in
lour s te ps and modified as necessary.
The J>rocess Analysis Summ ary Report is the culmination and key output of thls process
analysis s tep. It includes the findings from the analysis, that is, the reasons for inadequate
process perfo rmance a.n d potential solutions that have been pro posed and recorded b)'
owner and team as analysis progressed. The comple tion o f this report is an opportun e time
for an executive o w n er I stake ho lder review.
The owner/stakeholder reviews can be highJy motivational to owners, te.c1ms, stake-
ho ld ers. Of particular inte rest is the p resentatio n of potentia l solutions for' improved process
opera tion. 1l1ese have been collected througho u t the p la nning p hase a nd s tored in a n idea
bin . The d esign s uggestions are now documented and o rganized for executive revie w as
_part of the process analysis summary repo r t p resenta tion.
 Bu s iness Process Management : Creating an Adap t abl-e Organizat ion m
Ln reviewing potential solutions, lh e execu tive O\·\"ner and the q uality t."''w1cil provide
the selection criteria for accep table process design alternatives. Knowin g up per man age-
ment's criteria fo r proposed solutions helps to focus the p rocess-man agement team's design
efforts and makes a favorable reception for the reengineered new process plan more likely.

Designing (or Redesigning) the Process

In Process Design, the team defines the specific operational means for meeting stated prod-
uct goals. The result is a newly developed Process Plan. Design ch a nges faU into five broad
categories: work(Jow, techn ology, people and organization, physical infrastructure, an d
policy and regulations.
In the design step, the owncra.n d the tecun must decide whether to crea te a new process
d esign or to redesign the existing process. Creating a new d esign might mean radical cha ngei
redesjgn generally means increme n ta l c hange with some carryover of exis ting desig n
features.
The team will generate many design a lternatives, with input from both in terna.l and
external soutees. One a.pproach to generating these design aJtcrn.a tivcs from iJ)tc.ma l soutees
is to train task level performers to apply creative th inking to the redesign of their process.
fdeas generated in these sessjons a re documented and added to the idea bin . Bench -
marking can provide a rich source of ideas from external sources, including ideas fo r radical
change. Benchmarking is discussed in detail in Chapter 15.
ln designing fo r process effectiveness, the variable of mo..<t in tettl$t is usuaJly process
cycle time. ln service-oriented competition, lowest p rocess cycle time is o ften the decisive
fea ture. Furthermore, cycle-time reduction usually translates to efficiency gains as weJI. For
many p rocesses, the most promising :;ource of cycle-time reduction is introducing new tech-
no logy, especially in formation techno logy.
Designing for speed creates surprising competitive benefits.: growth of market share and
reduction of in ventory rel]tLirements. Hewle tt-Packard, Brunswick Corp ... GE's Electrical
Distribution an d Control Division, AT&T.. a nd Benetton are a mong the companies w ho have
reported stunning achievements in cycle· tune reduction for both product development and
ma nufacturing (Duma ine 1989). Jn each of the companies.. the gains resu lted from efforts
based o n a focus on major processes. O ther common features of these efforts included the
following:

• Stretching objectives proposed by top management

• Absolutely adhering to the schedule, once agreed to
• Applying state-<>f· the art information technology
• Reducing management levels in favor of empowered employees and self-d irected
work teams
• Putting speed it> the cul ture

Ln desjgning for speed, successfuJ redesigns freqllently originate from a few relatjvely
simple guidelines: eliminate ha ndoffs in the prtxcs.s,eliminate problems ca used upstream of
activity.. remove d elays or enors d uring hand offs between functional at~•eas, an d combine
steps that span businesses or fu nctions. A few illustrations a re provided as follows:

• Elimittnfe handoj(s iu the p-rocess. A " ha ndoW' is a transfer of matett'ial or information

from one person to another, especially across departmental boundaries. In any
process involving more than a sin_g le person, ha.ndoff$ are ine!f.rita.ble. It m ust be
rccogni7,.ed, however~ that t·he hand o ff -is ti me consum ir)g a nd full of peril fo.r process
 Business Process Management : Creating an Adap t abl-e Organization Z73

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FtcuRe 8.7 High-level process sch&matlc.

Cntc-gory Key elemeots

\Vorkflow Process an~1lomy {m~tcro/micro; cross-funclional; in lr~~ fun c LionaJ ;

imer-depa11mental; intm-depnrunental)

Technology Lnformation technology: aulomation

People and organi~ation Jo~s; j<>\><J¢:;.;riplion; 1mining nni! <!cvclopnwm. )WrCorrmm~c

management compensaLion (ince.ntive-based or mot):
recognition/ re ,vard: union i n voh'c m en~i 'earns: self-dircclcd work
teams: reporting relationships: de· layering.

lnfras to-ucture (physical) Lo<:ation: spac.e: layout: equipmenl; tools: fu rnishings

Policy/r·egulations Govcmment: communily; industry: company; s lundards; cuhurc

New·process design issues Grwjronmeowl, quaHty, coslS, soutcing

FrcuRt 8.8 Specif•c categones ot problems to be addressed.

274 Key Con c e pIs: Wh a I Leaders Need I o Ko ow abo u I Qua IiI y

Of the five categories listed in Figure 8.8, "people and organizatio n" is usually the
source of the most ch allenging c ha nge issues in any BPM effort. Imp lementatio n issues in
the p eople and organiza tio nal design category include new jo bs, which are usually bigger;
new job d escriptio ns; tra ining people in the new jobs; new pe rftlrmanc~ p lans and objec-
tives; new compensation systems (incentive pay, gain s hating, and the like); new tecogn i..
tion a nd reward mechanisms; new labor contracts with unions; intl'Oduc:tion o f teamwork
and tenm-building concep ts essential to a p rocess o rientation; formation of self-directed
work teams; team education; reduction o f management layers; new reporting relation-
ships; devek>pment and management of severance p lans for those whose jobs are elimi-
nated; temporary COI'Itjnuatio n of benefits; outplacement programs; a n d new ca reer paths
based o n knowledge and contrib utio n, rather than on promotion within a hierarch y. The
list goes o n. Additionally, there are c hanges in technology, policy, an d physical infrastruc-
ture to deal with.
The importan ce of change management skills becomes clear. Deploying a new process
can be a threat to th ose affected. The owner and the team mus t be s killed in overcomin g
resistance to change.

Creating Readiness for Change

Change happeliS when fo ur conditions are combined. First, the c urrent state must be seen as
Lmsatisfactory. even painful; it must constitute a tension for change. Second, the re must be a
satisfactory alternative, a vision of how things can be better. 'Illird, some p rae tica l s teps must
be available to reach the satisfactory state, induding instruc tion in how to take the steps, and
support during the journey. Fourth, to maintain the change, the oq,>aniw lion and indiv idu-
als m ust acquire s kiiJs and reach a state of self-e£fia1cy.
TI1ese four conditions reinforce the intent to change. Progress toward that change must
be mon itored continuously to make the chan ge permane nt. ln the operatiional management
phase, operational controls, continuous improvement activ ity, and ongoing re view and
assessment a ll contribu te to ensuring that the ne\',r process plan '"ri ll continue to pcrfonn as
p la nned.

Planning for Implementation Action

Th e o u tp u t o f this step is a complex work plan, to be carried out by the o' 'lner a nd the BPM
team. They wiU benefit from skills in the techniques of P roject Management.

Deploying the New Process Plan

Before ach.1 ally implementing the n ew process, the tearn tests the process p lan. T hey test
selected compone nts of the p rocess and may carry out computer simulations to predict the
performance oi the new p rocess and determine its feasibility. A lso, tests help the team refine
the "roll out" of the process and decide whether to con duct parallel oper ation (old process
and new process running concurrently). The team must decide how to deploy the n ew pro·
cess. There are several options

• Horizonta l deployment, function by fu nction.

• Vertica l deployment, tnp down, all functions at O fi CC.
• i\.fod ularized dep_loyn,ent, activity by activity~ un til all a re deployed.
• Priority deployment, s ubprocesses and activities in priority .sequence, those h aving
the highest potentia l for" improvement going first
 Business Process Management : Crea ting an Adap tabl -e Organizat ion 275

• Trial deployment, a small-scale p ilot of the en tire process, then expansion for
complete implementation. This technique was used in the first redesign of t he
s pecial-contract management process, that is, a regional tria l preceded national
expansion. The insurance organiza tion USAA cond ucts all p ilot tests of new
process designs in their Great Lakes region. In addjtion to "work;ng the bugs
o ut of the new d esign befo re going national," USAA use-s d.'lis approach as a
"career-broadening experience for p romising managers/' and to "roll out the
new d esign to the rest of the organization with much less resistance" (Garv in
1995).

Full deployment of the new process includes developing and deploying an upda ted
control plan. Figure 8.9 lis ts tllc contents of a new p rocess plan.

Operational Management Phase: Managing the New Process

The OperationaJ tvlanagement Phase begins w hen the process is put into operation. The
major activities in operational management are (1) process q uality control, (2) process q uality
improvement, and (3) petiodic process review and asses.c;mcnt.

Business Process Metrics and Control

"Process control" is an o ngoing managerial process, in w hich the actual performance of the
o perating process is evaluated by measurements taken at the control points, comparing the
measurements to the quality targets, and taking action on the difference. n,e goa.J of pro~
cess control is to maintain performance of the business process at its p lanned level. (See
Chapter 6, Quali ty C<>ntrol: Assuring Repeatable and Compliant Processes.)

Proct~plan

Process purpose or missi on

Process goals and targets
Pnteess management inrrnstructure (process owner, team. stakeholder)

Process conrmcl
Process dcsc,·ipLion And modcJ
Custome•· requi•·ements (customer list, customer needs, requi•·emcntS stmement
Process 11ow

Measurement plan
Process analysis summary report
Control plan
lmplemeotation ac1ion plan
Resource plan

Schedules and timeline

FlGURf 8.9 Contents of a new process plan.

 Business Process Management : Creating an Adap t abl-e Organization m
acceJerate improvements and results. At the same time, these tools are increasing organiza-
tional nexibility and technology-enabled responsiveness. Many successful organizations
have found that the Linkages are dear.
According to JBM (l~eference: ''Aligui11g Business PrOCC'.$S Maungemenf, Servict·-Orie~tfed
Arclu'tccfw·e, nud l.ea11 Six Sigma for Real Busim.>ss Results), early adopters -who have w orked
their way past cultural and organizational ba rriers are seeing impressive performance and
financial results, seen as follows:

• Improved respo nsive ness to market chal1enges and changes thro ugh aligned and
s igni ficantly more flexible business and technical architectures
• Improved ability to innovate and achieve strategic differentiation by driving change
into the market and tuning processes to meet the specific needs of key marke t
segmcl_\ ts
• Reduced process costs thro ugh automation and an improved ability to monitor,
detect, and respond to problems by using real-time data, automated alerts, and
planned esca]a lion
• Significantly lower technical implementation costs tluough shawd pr~s models
and higher levels o f component reuse
• Lower analysis costs and reduOld risk tluough process simulation capabilities and
an improved ability to gain feedback and buy-in prior to coding

nu~ rewards C..'\1) be great, especially for those w ho t-ake action now.

References
Dumaine, B. (1989). "How Managers Can Succeed through Speed." Fortune, February. 13,
pp. 54-60.
Garvin, D. A. ('1995). "Leveraging Processes lor Strategic Advantage." Nnrvard Business Revinu,
September/October, vol. 73, no. 5, pp. 77-90.
Hall, G., Rosenthal, )., and Wade, J. (1993). "How to Make Rccnginecring Really Work.''
Hnrvnrd Busit1ess Review, November/December, vol. 71~ no. 6~ pp. 199- 130.
Kane, E. ) . (1986). "IBM's Focus on the Business Process.'' Qufllity Progress, April, p. 26.
Kaplan, R. S., and Norton, D- P. (1992). "The Balanced Scorecard-Measures that Drive
Perfonnanoo." Harvard Busi11ess Review, january/February, vol. 7, no. I , pp. 71-79, reprint
#92105.
Levi, M. H. "Transformation to Process Organization.u interfacing Technologies Corporation,
http:I I www. interfacing.com/ up loads/File/The%20Business%20Prt>cess-Meir%20Levi
.pdf
Pall, G. A. ('19!t7). Quality Business Pro«'SS Mnungemeut. Prentice-Hall, Inc., Englewood Clills, NJ.
Riley, j. F., Jr. (1989). £xecutit~e Quality Focus: Discussion Lender's Guide.. Science Research
Associates, Lnc.,-Chicago.
Riley, ]. F.,Jr., Pall, G. A., and Harsh barger, R. W. (1994). Reeugiueeriug Processes for Competitive
Advantage: Business Process Qunlity Mnnagemt1JI (BBPM), 2nd cd., Ju rnn Institute, l"c.,
Wilton, CT.
This page intentionally /eji blank
 CHAPTER 9
The Juran Transformation
Model and Roadmap
Joseph A. DeFeo and Janice Doucet Thompson

About Uis Chapter 279 Breaktkreuglls in Ortanizatioul Strectare 239

Higtl Poiots of This Chapter 279 Breaklkrougjls in Curretll Petfomance 295
hnuonrieg a CaHore 280 Breaktkroaglls in Cullllre 296
The Jurao Transformatioo Madel 280 Ai"ansfnmation Rnadoup 308
Broakthroughs io leadership aid Refereoces 312
Manage11ent 236

About This Chapter

Creating the state of perfo rmance excellence in o rganizations will enable our globaJ society to
avoid technologicaJ failure!i from harming the environment and, ultimately, its people. Trans-
forming an organization from o ne cuJture to another js not an easy task. However, it can hap-
pen when an orgaruza tion creates systema tically signiiicant, s ustainable, "''d beneficial
change. We provided the universal p rinciples in C hapters 1 through 8. Tn is chapter outlines
the me..ms to pull the tmiversal into one r<H1dmap to create a culture of performance excel-
lend'. The systematic approach that we call the Juran Transformation Model can enable any
o rganization to transform itself by know ing what to expect. Transformation usually requires
six o rganizational breakthmug hs before a s tate of pedorman1."'e exce llence can be attalned.

High Points ofThis Chapter

1. A breakthrough is d efined as the purposeful creation of significant, sustainable
beneficial change. It is o ften associated with process imp·r ovement targets.
Transformation requires that the org;ul.ization attain breakthroughs. TI1e required
breakthroughs are leadership and management, organization structure, current
perfo rmance, ct~ tUJ-e, and adaptability and s llstainability.

279
 The Juran Transformation ModeH and Roadmap 281

.Juran 'fransformation ModeJ

Ad;~ptab ilily &

sustainability lr- - - - - - - - - - - - - , str uCLU.I'e
Organization musl complete
five breakthl'oughs to
create sustainable change

Culrure

FIGUA£ 9.1 Juran Transformation ModeL {Juran Institute. Inc. 2009.)

organizational subsystem that must change. Each is essential fo r s upporting organizational

lHe; none by itself is s ufficient. tn effect1 the breakthroughs all empower the operational s ub-
system whose mission is to achjeve te.c hnological pfoficiency in producing the goods,
services and information fo r which cus tomers will pay for or use. There is some overlap and
duplication of activities and tasks among the different breakthro ugh types. This is to be
expected because each s ubsystem is interrelated with all the others, and <each is affected by
activities in the o thers. The a uthors acknowled ge that some issues in each type of b reak-
through may have already b~n addressed by the reader's organization-:;o much the better.
If this is the case, if you did not start your oro'<lflization's performance cxceiJcncc journey
from lhe beginning, p ick up U1e journey from where your organization presently finds itself.
Closing the gaps w ill likely be pa rt of your organization's next strategic b usin ess planning
cycle. To close the gaps, design s trategic and operational goals and projects to reach those
goals and deploy lhem to all func tions and levels.

Breakthrough and Transformational Change

Breakthroughs can occur in a1'1 organization at a ny time, usually as the re.._o;ull o f a specific
initiative, such as a specific improvement project (e.g., a Six Sigma, improvement project; a
design of a new ~rv ice, o r the invention of a new techn o logy). These changes can produce
sudden explosive bursls of beneficial change for your oro>anization and society. But they
may no1 be enough to c.1use the culture 10 change or suslain ilself to the changes tha t
occurred. Th is is because it may no t have happened for the rig h t reasoo. H was not p urpose·
ful. It came about through chance. Change by ''chance" is not predictable or s ustainable.
\!\'h a t an organ ilation need s is predictable change.
Today's organizations operate in a state of perpetual, unpredictable change that requires
the people in them to prod uce continuous adaptive improvements as pressure mou.n ts for
282 Key Concepts: What Leaders Need to Know about Qua li ty

new improvements to be made from the outside. These improvements m ay take monlhs or
even years to accomplish because it is the cumulative effect of man}' coordinated and
interrelated orgaruzationaJ plans, policies, and breakthrough projects. Taken together, these
diligent efforts gradually transform the o rganization.
Org'<lr'liz.ations that do no t inte nd to cha nge usually will w he'' a crisis-or a fear of
irnpending cris is-triggers a neet.i for change within an o rganization. Co nsider the follow·
ing scenario:

Two of the largest competitors have introduced 1\ew prodncts tha t •Ue betteJ' than oa.t rS. Conse-
quc:-ntly, sales o f products X and Yare heading stto:;.1dity dow·n, <end taking; o ur mark("t share a long.
Our new product introduction time is much slower than the rompetltlon, malking the s ihaation
even worse. The new plant can't seem to do anything right. Some equipment js often down, 0'\ lld,
even when in operJt.iOJ\, produces too maJ\Ycostly defe-ctive items.
Too many o f our invoices are retu rned because of errors, with the resulting postpone ·
meot o( revenue ac1d o.1 growing J\umber of unsatisfied custorners. t\Ot to me:ntion the hassle
and <"OSts of re\'IOrk. A<"Counts receiv.-.ble have been m uch too high and art gradually
in~rensing . We are beconUng afraid that the future may offer additional threats we need to
ward off or, more importrm tly. plan for so they can be prevented altogether. Leadership
mus t tak~: action, or the organization is going to .:xperience a loss of market s hare, cus tomer
base, and revenue.

Breakthroughs Are Essential to Organizational VItality

TI1ere are four important reasons why an organization cannot survive very long without the
medicinal renewing effects of continual breakthrough:

1. Tl~e costs of poor quality (COPQ) continue to increase if they are not tackled . They
are too high. One reason is that organizations are plagued by a continuous onslaught
of crises p recipitated by mysterious sources o( chronic hig·h costs of poody
per-forming processes. As \Ve stated in Chapters 1 and 5, the tot31 chronic levels of
COPQ have been reported to be as high as 20 percent or more of the costs of goods
sold. Thjs number varies by type of industry and organiza tion. It is not unusual
for these costs a.t times to exceed profit or be a major contributo r to losses. In any
case, the average overall level is appalling (because it is substa1."1tial and nvoidnble),
and the toll it takes on the organization can be devastating. COPQ is a major
driver of many cost-cutting initiatives, no t only because it can be so destructive
if left unaddressed but also because savings realized by reducing COPQ directly
affect the bottom line. Furthermore, the savings continue, year after year, as long
as remedial improvements are irreversible, or controls are placed on reversible
improvements.
2. It makes good busiJlCSS sense that mysterious and chronic ca uses of waste must be
discovered, removed , and prevented from retur ning. Breakthrough improvement
becomes the preferred initial method of attack becmt"" of its ability to uncover and
remove specific root causes and to hold the gains-it is de;;igned to do just that. One
could describe breakthrough improvement methodolog)' as app lying the scientific
method to solving performance problems. Breakthro ugh improvement methodology
closely resembles the medical model of diagnosis and treatment.
3. Chronic and couthmous chmrge. Another reason w hy b reakthroughs are requir-ed fo r
organizational survival is the state of chronic accelerating change found in today's
businc.>ss environme nt. Unrelenting change has become so po\"•erful and so pervasive
that no constituent part of an organization finds itself immune .from its effects fo r
 The Juran Transformation ModeH and Roadmap 283

long. Because any or all components of an organization can be threatened by

changes in the environment, if an organization wishes to survive.. it is most Hkely to
be forced into creating basic changes tha t are powerful en ough to bring about
accommodation with new conditions. Performance breakthroughs, consisting as it
docs of severn) specific types of b.rcakthrough in various organi?.a.tion fu nct-io i,S, is
a powerful approad1 that is capable of determining countermeasures sufficiently
effective to prevail agains t the inexorable forces of change. An organization may
have to re·in,rent itself. It may even be driven to reexamine, and perhaps modify, its
core produc-ts, business.. service or even its customers.
4. Without couti11uous improveme111, orgm1izafi0115 die. An o ther reason why breakthro ughs
are esse.ntial for organizational survival is fou.rad in knowledge derived from
scien tific research into the b~havior of o tgani7.ations. Leaders can learn va luable
lessons about how organizations fu nction and how to manage them by examining
open systems theory. Among the more important lessons taught by this theory is
the notion of uegnt;ve entropy. NegaHve entropy refers to characte ristks that hwnan
organizations share with biologic:al systems such as the living cell, or the living
organism (which is a collection of cells). EHiropy is the tendency of all Hving things-
and all organizations-to head toward their own extinctio n. Nega tive e ntropy
consis ts of countermeasures that livjng systems and sociaJ systems take to stave
off their ov.'n extinction. Organisms replace aging cells, heal \'\'Ounds, and fight
disease. Organiza tions build up reserves of energy (backlogs and supplies) and
constantly replace expended e nergy by acquiring more e nergy (s.."lles and raw
mate rials) from their environme nt. Eventually, living organism s lose the race. So
do organizations if they do not continually adapt. heal"wounds" (make performance
breakthrough improvements), and build up reserves of cash and goodwill. The
Juran Transformation Model is a means by w hich organizations can stave o ff th eir
own extinctio n.

Systems Thinking and Transformational Change

Organizations are like living organisms. They consist of a number of subsystems, each of
which performs a vital specialized function that makes specific, unique, and essential contri·
butions to the life of the \vhole. A given individual subsystem is devoted to its own specific
function such as design, production, management, maintenance, sa.les, procurement, and
adaptability. O ne cannot carry the biologicaJ analogy very far because livin g organisms sepa-
r<lte subsystems with physicallxnmdaries and s tructures (e.g., cell walls, the nervous system,
the digestive system, the circulatory system, etc.). Boundaries and s tructure of subsystems in
human organizations, on the other hand, are not physical; they are repeti tive events, activi-
ties, and transactions. The repetitive patterns of activities are, in effect, the work tasks, proce-
d ures/ and processes carried out by organizationa1 (unctions. Open sys tems theorists call
these pa tterra,..:; of acUvities role_.;. A role consists of o ne o r more recurren~ activjtics o ut of a
total pa ttern of activities w hich, in combination, produ ce the organizational output.
Roles are maintained and carried out in a repetitive, rela tively stable manner by means
of multtalty understood sets of expectations and feedback loops, shown in Figure 9.2, The
Triple Role Open Systems theory and Juran's model focuses particularly o n the technical
methods, human relationships, organization structures, and interdependence of functional
roles associated wjth t-hese activities and transactions. Detailed knowledge of the repetitive
transactions between the organization and its environment, and also within the organization
itself. is essential in accomplishing breakthroughs because the~ transactions determine the
effectiveness and efficiency of performance.
 S••i •ct laha l1l3

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