Chapter 4
Strategic Quality Planning
S. Thomas Foster, Jr.
Boise State University
Slides Prepared by
Bruce R. Barringer
University of Central Florida
©2001 Prentice-Hall
Chapter Overview
Slide 1 of 2
• Strategy Content
• The Importance of Time in Quality
Improvement
• Leadership for Quality
• Quality and Ethics
• Quality as a Strategy
• Quality Strategy Process
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Transparency 4-2
Chapter Overview
Slide 2 of 2
• Deploying Quality (Hoshin Kanri)
• Does Quality Lead to Better Business
Results?
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Transparency 4-3
Strategy Planning
• Strategic planning has two important
dimensions.
• These are content and process.
• Strategic content answers the question of what
is to be contained in the strategic plan.
• Strategic process consists of the steps used to
develop the strategy.
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Transparency 4-4
Strategy Planning
• Strategic content refers to the variables,
definitions, components, and concepts that are
included in the strategy.
• Strategic process consists of the steps for
developing strategy within an organization.
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Transparency 4-5
Strategy Content
1 of 2
• Why is Quality Planning Important?
– As we have discussed in previous chapters,
quality improvement is a planned
managerial activity.
– Quality improvement involves identifying
potential improvements, prioritizing
potential areas for improvement, and
planning the implementation of projects and
improvements.
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Transparency 4-6
Strategy Content
2 of 2
• Strategy Content Variables
– Among the strategy content variables we
discuss are time, leadership, quality costs,
generic strategies(cost, differentiation, and
focus), orders winners, and quality as a
core competency.
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Transparency 4-7
The Importance of Time in Quality
Improvement
• Two Important Aspects of Time
– There are two aspects of time that we
discuss:
• The time it takes to achieve business goals
as a result of quality.
• The speed at which companies
improve.
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Transparency 4-8
The Importance of Time in Quality
Improvement
• Real-life experience shows that time is a key
variable in improving quality.
• A review of many studies and writings suggests
that time is an important variable to consider
when managing successful quality
improvement.
• Time is also an important component of
strategy.
• Thus, strategic planning is important for
continuous quality improvement.
© 2001 Prentice-Hall
Transparency 4-9
The Importance of Time in Quality
Improvement
• One of the approaches that some managers use
we will call the “management by dictate”
model.
• Using management by dictate, we set numeric
goals for the coming year.
• These goals are analogous to what Deming
referred to as creating goals and not providing
systems to achieve the goals.
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Transparency 4-10
The Importance of Time in Quality
Improvement
• According to Donald Wheeler, when goals such as
these are set, one of three things will occur:
1. People will achieve the goals and incur positive
results.
2. People will distort the data.
3. People will distort the system.
. The PDCA cycle allows for organizational
learning and freezing of learning to take place.
. We still do not know the optimal time for learning
to take place.
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Transparency 4-11
Leadership For Quality
Slide 1 of 5
• Leadership
– Leadership is the process by which a leader
influences a group to move toward the
attainment of super-ordinate goals.
• Super-ordinate goals are those goals that
pertain to achieving a higher end that
benefits not just the individual, but the
group.
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Transparency 4-12
Leadership For Quality
• Some leaders are selected because they have
the highest intellect.
• In still organizations, leaders are appointed.
• As a result, leadership is about the sharing of
power.
• This power takes many forms.
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Transparency 4-13
Leadership For Quality
Slide 2 of 5
Types of Power
Power of Expertise
Reward Power
Sometimes a
leader has special
knowledge (or is
perceived to have
special
knowledge).
If a leader has
rewards that he or
she can bestow on
subordinates in
return for some
desirable position,
the leader has
reward power.
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Transparency 4-14
Leadership For Quality
Slide 3 of 5
Types of Power
Coercive Power
Referent Power
If the leader has
power to punish
the follower for not
following rules or
guidelines, the
leader has coercive
power.
If a leader is
charismatic or
charming and is
followed because
he or she is liked,
then the leader has
referent power.
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Transparency 4-15
Leadership For Quality
Slide 4 of 5
Types of Power
Legitimate Power
Legitimate
power comes
with the
position.
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Transparency 4-16
Leadership For Quality
Slide 5 of 5
• Leadership Dimensions
– Trait dimension
• Leadership characteristics tied to the personal
“traits” of leaders (such as height and intelligence).
– Leader skills (see next slide, Table 4.1)
• Attributes such as knowledge, communication,
planning, and vision.
– Leader behavior
• This approach discusses how leaders behave to
identify specific leadership styles and the effects of
leadership style on subordinate performance.
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Leadership Skills
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Leadership For Quality
• Leadership Dimensions
– Leader behavior
• Leaders who are successful in leading qualityrelated efforts must be worthy of trust.
• Leaders are consistent over time in their actions so
employees will trust the leader enough to pursue
quality.
• Leadership must be absolutely consistent and fair
in gaining and earning trust or else future potential
for quality improvement will be reduced.
© 2001 Prentice-Hall
Transparency 4-19
Leadership For Quality
• Nothing can damage a quality improvement effort faster
than management failure to consider implementing
changes that employees recommend.
• Employees may begin to think “nothing will already
change.”
• Another important attribute of quality manager is
commitment over the long term.
• Commitment to quality means that leader provide
funding, slack time, and resources for quality
improvement efforts to be successful.
© 2001 Prentice-Hall
Transparency 4-20
Leadership For Quality
• As we see in the case of Solectron (Quality
Highlight 4.1), the leadership of Winston Chen is
key to its success.
• One of the things a leader must be able to do is
manage conflict in the organization.
• Leaders must be able to resolve conflict
effectively in organization.
• Leaders resolve conflict in a variety of ways as
next slides.
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How Leaders Resolve Conflict
Slide 1 of 2
• Passive Conflict Resolution
– Some managers and leaders ignore conflict.
• Win-win
– Leaders might seek solutions to problems that satisfy
both sides of a conflict by providing win-win
scenarios.
• Structured Problem Solving
– Conflicts can be resolved in a fact-based manner by
gathering data regarding the problem and have the
data analyzed by a disinterested observer.
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Transparency 4-22
How Leaders Resolve Conflict
Slide 2 of 2
• Confronting Conflict
– At times, it is best to confront the conflict and help
subordinates resolve conflicts.
• Choosing a Winner
– In some cases the leader may choose a winner of
the conflict and develop a plan of action for
conflict resolution between the parties.
• Selecting a Better Alternative
– Sometimes there is an alternative neither of the
parties to the conflict has considered.
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Transparency 4-23
How Leaders Resolve Conflict
• Preventing Conflict
– To create an environment that is relatively free of
conflict.
– As shown in Table 4.2, these organizational design
fundamentals are useful in reducing conflict in
organizations.
– By carefully defining goals, rewards,
communication systems, coordination, and the
nature of competition in a firm, conflict can be
reduced or eliminated.
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Transparency 4-24
How Leaders Resolve Conflict
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Transparency 4-25
Quality and Ethics
Quality appears to be good business.
Quality is also good ethics.
It is unethical to ship defective products knowingly to a
customer.
Reliable products reflect an ethical approach of
management’s care for its customers.
“We build good ships. At a profit if we can, at a loss if
we must. But, we build good ships”—New Bedford, a
shipbuilder.
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Transparency 4-26
Quality and Ethics
• Companies focusing on their customers often
develop a set of ethics that includes valuing
employees.
• Companies such as HP are seriously striving to
improve the lives of their employees.
• Environmental friendliness is seen as an ethical
concern.
• As a result, more companies are implementing
recycling programs and making efforts to
improve environmental practices.
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Transparency 4-27
Quality as Strategy
• Although quality can still win orders in some
market, in many markets quality has become an
order qualifier.
• This means that high-quality production is an
essential ingredient to participation in the
market.
• Quality is still an effective tool in successful
exporting in the international market.
© 2001 Prentice-Hall
Transparency 4-28
Quality as Strategy
Slide 1 of 8
• Quality as a Strategy
– We now discuss quality as a strategy from the
perspective of generic strategies. These generic
strategies are cost, differentiation, and focus.
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Transparency 4-29
Quality as Strategy
• Costs of Quality
– New definitions of cost are expansive, considering the
the summation of costs over the life of a product.
– This includes service, maintenance, and operating
costs for products
– The life cycle costs for many products may be
staggering when environmental costs are considered.
– There are two broad categories of costs: costs due to
poor quality and costs associated with improving
quality.
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Transparency 4-30
Quality as Strategy
• Costs of Quality
– Taguchi and others have provided insight into
the issue of quality costs.
– The title of the classic book by Crosby Quality
Is Free reveals an interest in the costs of
quality.
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Transparency 4-31
Quality as Strategy
Slide 2 of 8
• PAF Paradigm
– Prevention costs are those costs associated with
preventing defects and imperfections from
occurring.
– Prevention costs include costs such as training ,
quality planning, process engineering, and
other costs associated with assuring quality
beforehand (see Table 4.3).
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Examples of Prevention Cost
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Quality as Strategy
• PAF Paradigm
– Appraisal costs are associated with the direct
costs of measuring quality.
– These can include a variety of activities such as
lab testing, inspection, test equipment and
materials, losses because of destructive tests,
and costs associated with assessments for ISO
9000 or other awards (see Table 4.4).
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Transparency 4-34
Quality as Strategy
Slide 3 of 8
Table 4.4 Examples of Appraisal Costs
Laboratory acceptance testing
Inspection and tests by inspectors
Inspection and tests by non-inspectors
Set-up for inspection and testing
Product quality audits
Review of test and inspection data
On-site performance tests
ISO 9000 qualification activates
Quality award assessments
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Transparency 4-35
Quality as Strategy
Slide 4 of 8
• PAF Paradigm (continued)
– Failure costs are roughly categorized into two
areas of costs.
• Internal failure costs are those associated with
on-line failure.
• External failure costs are associated with
product failure after the production process.
• This includes failure after the customer takes
possession of the products (see Table 4.5).
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Transparency 4-36
Examples of Failure Cost
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Transparency 4-37
Accounting for Quality-Related Costs
• One of the impediments to the collection of
quality cost data has been the lack of
acceptable accounting standards for these
costs.
• A reason for this is that accounting rules
require definitions that are not open ended or
open to alternative interpretations.
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Transparency 4-38
Lundvall-Juran Quality Cost Model
• The Lundvall-Juran model is a simple economic
model, is shown in Figure 4.1.
• It states that as expenditures in prevention and
appraisal activities increase, quality conformance
should increase.
• This is an interesting case because there should
be an economic quality level that minimizes
quality-related costs and this flies in the face of
the idea of continuous improvement proposed by
Deming and others.
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Transparency 4-39
Quality as Strategy
Slide 5 of 8
Figure 4.1 Lundvall-Juran Quality Cost Model
Cost
C1 + C2
cmin
C1 =
0%
© 2001 Prentice-Hall
Prevention &
appraisal costs
C2 =
Failure Costs
q
Conformance Ratio
100%
Transparency 4-40
Quality as Strategy
Slide 6 of 8
• Differentiation Through Quality
– Differentiation is achieved by a competitor if
the customer perceives the product or service to
be unique in an important way
– It is increasingly difficult to differentiate
products based on quality alone.
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Transparency 4-41
Quality as Strategy
• Quality Through Focus
– Think of a product that is particularly regional
or is marked to a particular group.
– That limited region or group is the object of
the focus strategy.
– Such a focus strategy can be very profitable.
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Transparency 4-42
Quality as Strategy
Slide 7 of 8
• Order Winners
– Terry Hill of the London Business School
defined a process for setting strategy that is
centered on the identification of the order
winning criteria (OWC).
- Table 4.6 provides an overview of the planning
framework defined by Terry Hill.
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Hill’s Strategy Framework
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Quality as Strategy
• Quality as a Core Competency
– Communication, involvement, and a deep
commitment to working across
organizational boundaries.
– It involves many levels of people and all
functions.
– Core competencies do not diminish with use.
– Competencies are enhanced as they are
applied and shared.
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Transparency 4-45
Quality as Strategy
Slide 8 of 8
• Quality as a Core Competency
– Quality, in and of itself, is probably not a
core competency.
– However, core competency is built on the
foundation of a long-term commitment to
quality and continual process improvement.
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Transparency 4-46
Quality Strategy Process
• There are many different processes for
developing strategy.
• We will highlight a strategic planning process
for firms:
-- forced-choice model, a little or no experience
developing strategy.
-- mature strategic planning process, please see
A Closer Look at Quality 4.1.
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Transparency 4-47
Quality Strategy Process
Slide 1 of 2
• Forced-Choice Model
– The forced-choice model is one of several
strategic-planning models that could be
adapted to demonstrate integrated
quality planning.
– The forced-choice model is particularly
useful for companies that are relatively
inexperienced in strategic planning.
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Transparency 4-48
Quality Strategy Process
• The forced-choice model is generic and is used
simple for explanation purposes.
• The forced-choice model is used by firms that
are new to strategic planning.
• Figure 4.2 provides an outline of the forcedchoice strategic planning model.
© 2001 Prentice-Hall
Transparency 4-49
Quality Strategy Process
Slide 2 of 2
Figure 4.2 Forced-Choice Model
Environmental Assessment
6. Broad economic assumptions
7. Key government
and regulatory issues
8. Major technological forces
Organization’s Position
1. Statement of mission
2. Interrelated set of financial
and non-financial objectives
3. Statement of strengths
and weaknesses
9. Significant market
opportunities and threats
4. Forecast of operational needs
10. Explicit strategies of competitors
5. Major future programs
11. Strategic options
Requirements for implementing options
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Contingency plans
Transparency 4-50
Quality Strategy Process
• The forced-choice model is particularly useful
for companies that are relatively
inexperienced in strategic planning.
• Individual steps are listed in Table 4.7,
emphasizing quality-related issues.
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Transparency 4-51
Forced Choice Steps
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Deploying Quality (Hoshin Kanri)
Slide 1 of 2
• Hoshin
– Hoshin is Japanese for a compass, a course, a policy,
or a plan.
• Kanri refers to management control.
• In English, this is generally referred to as policy
deployment.
- Implicit in the Hoshin Kanri is the use of the
basis seven tools of quality ( chapter 10), the new
tools of quality, and quality function deployment.
© 2001 Prentice-Hall
Transparency 4-53
Deploying Quality (Hoshin Kanri)
• Hoshin Process
– Figure 4.4 gives an overview of the Hoshin
process.
– The company develops a three- to five-year
plan, and senior executives develop the current
year’s Hoshin objectives.
– Then the process of catchball occurs.
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Transparency 4-54
Deploying Quality (Hoshin Kanri)
• Hoshin Process
– Catchball is the term used to describe the
interactive nature of the Hoshin planning
process.
– Catchball involves reporting from teams and
feedback from management.
– As shown in Figure 4.4, functional managers
also should develop Hoshins in conjunction
with upper management.
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Deploying Quality (Hoshin Kanri)
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Transparency 4-56
Does Quality Lead to Better Business
Results?
Slide 1 of 3
• “Do Quality Efforts Pay Off?”
– An answer to this question was provided by
Deming’s concluding the quality will pat off.
– The effects of quality on business results is
mixed.
– Some firms have been widely successful with
their quality efforts and other companies have
been unsuccessful in gaining bottom-line
results.
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Transparency 4-57
Does Quality Lead to Better Business
Results?
• “Do Quality Efforts Pay Off?”
-- There are two primary reasons for this:
• First, there are many variables that affect
profitability besides quality.
• Second, many companies implement quality
incorrectly.
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Transparency 4-58
Does Quality Lead to Better Business
Results?
• many companies implement quality
incorrectly.
- That you can claim you are implementing
quality does not guarantee you will be successful.
- Quality improvement takes along time, and
many firms desire quick returns on investment
for quality training program.
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Transparency 4-59
Does Quality Lead to Better Business
Results?
• many companies implement quality
incorrectly.
- When these results are slow in coming, the
companies give up midstream and wonder why
their quality efforts were ineffective.
- At the same time, quality programs have been
shown to be effective in a variety of cultures and
industries when implemented correctly.
- We need to understand the relationships between
quality and other variables.
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Transparency 4-60
Does Quality Lead to Better Business
Results?
Slide 2 of 3
• Quality and Price
– The price-quality relationship becomes
increasingly unclear when culture differences in
an international setting are considered.
– Different cultures could perceive the pricequality relationship either positively or
negatively, resulting in variations in financial
performance.
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Transparency 4-61
Does Quality Lead to Better Business
Results?
• Quality and Price
– Another reason the the price-quality relationship
might be difficult to assess has to do with the increase
in high-quality, low-priced goods over the past two
decades.
– An example of these alternative methods of pricing is
apparent in the many Japanese consumer electronics
that are less expensive in U.S. markets than in their
native Japanese market.
– Research is unclear concerning the price-quality
relationship.
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Does Quality Lead to Better Business
Results?
• Quality and Cost
– A fundamental difference exists between a lowcost strategy based on competitive pricing, and a
low-cost orientation that is based on continual
learning and production competence.
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Transparency 4-63
Does Quality Lead to Better Business
Results?
Slide 3 of 3
• Quality and Productivity
– The relationship between quality and
productivity is clear. The elimination of waste
results in higher productivity.
– Simplification of processes also results in
flows that are simpler and of higher
productivity.
– There are many different measures of
productivity.
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Does Quality Lead to Better Business
Results?
• Quality and Productivity
– Total-factor productivity measures are
generally considered the most robust means of
measures productivity.
– Several measures have been developed that
simultaneously monitor the relationship
between quality and productivity.
– It appears that changes to processes and
procedures often will result in a temporary
worsening of productivity.
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Transparency 4-65
Does Quality Lead to Better Business
Results?
• Quality and Productivity
– The variable appearing to be able to moderate
the effects of too much change is training.
– Changes resulting from process improvement
must be managed and paced at the rate that
the firm cab absorb.
– The “rate of absorption” of change that
different firms can handle is variable and can
be managed by creating a learning
organization.
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Does Quality Lead to Better Business
Results?
• Quality and Profitability
– In recent study of quality and profitability,
Adam found that quality improvement in
specific firms to be more long term rather than
immediate.
– This make some intuitive sense as quality
improvement may not be recognized by the
customers for some time.
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Transparency 4-67
Does Quality Lead to Better Business
Results?
• Quality and Profitability
– High quality is no guarantee of success.
– Firms must still successfully market, manage
cash, and do the many other things that ensure
profitability.
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Transparency 4-68
Does Quality Lead to Better Business
Results?
• Quality and the Environment
– Companies have to address many environmental
issues.
– Besides the regulatory requirements, firms realize
more and more that environmental friendliness is
part of being a good corporate citizen.
– Firms are implementing quality-based
environmental management, sometimes referred
to as total quality environmental management
(TQEM).
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Does Quality Lead to Better Business
Results?
• Quality and the Environment
– These systems involve a holistic “system” view of
the process causing environmental degradation.
– This involves a focus on preventive rather than
reactive clean up.
– Other technique that is used in TQEM is life cycle
costing.
– Figure 4.5 is an example of life cycle costing for a
typical hamburger.
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Does Quality Lead to Better Business
Results?
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Does Quality Lead to Better Business
Results?
• Quality and the Environment
– Regardless of one’s political stance concerning
these issues, the debate will rage for many years;
and regulation likely will not reduce over time.
– It is in the best interest of management to address
these issues in a proactive manner.
– Quality management philosophies and continuous
improvement approaches can help in addressing
these issues.
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Transparency 4-72