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Mr. stephen geach a case for quality
1. A Case for Quality
Let’s start paraphrasing a case that Conner made:
The Quality movement has little to teach you….
…….but it has much to remind you
So what is it we have to ‘remind’ them of?
2. Balanced Scorecard
Strategies IdentifyStrategic Objectives
Clarify Critical Success Factors
KPIs
Identify CSFs
Finance Cr
To succeed
itic
financially, how
a lS
should we appear to uc
our stakeholders ce
Customer
ssF
To achieve our ac
vision, how should tor
we appear to s ≡K
Ca our customers
us PI
e Internal Process s
an To satisfy our stake
dE holders & customers,
ffe what business processes
ct must we excel at
Learning & Growth
How will we
Kaplan and Norton sustain our ability to
change and improve
3. The Way Organizations Work
Managing Director
Increase Profits by 10% SVP, Operations
Reduce churn (turnover) VP, Marketing
Increase customer satisfaction Director, Customer Service
Reduce hold times
Director, IT
Faster access to all customer information
Project Manager
Eliminate disparate systems
4. Customer Value Proposition
Value = Product/Service Attributes + Image + Relationship
Functionality Price Quality Time
Kaplan and Norton
5. Marketing Mix
Price
Quality
Attributes Product /
Promotion
(Value Service
Propositions)
Place
Clark 2000
6. Marketing Mix
Price
Quality
Attributes Product /
Promotion
(Value Service
Propositions)
People, Processes,
Place Proactive Customer
Service
Clark 2000
8. Different Roles of our People
Not directly involved with the
Involved with the marketing mix
marketing mix
Contactors: Sales and Marketing, Modifiers: Switchboard Operator,
Frequent Customer Service. HD Coordinators, Dept Secretaries.
or periodic
Customer Responsible for building relation- No direct contact with customer but
contact ships. Need personality to be still needs to be responsive to
responsive to customers. customer.
Influencers: Product Groups, Isoteds: Finance, HR, IT, Quality.
In-frequent
Development Groups.
or no
No direct contact with customers,
Customer
No direct contact with customers but but as support providers their
contact
are often involved with traditional contribution is crucial to the
elements of marketing mix. organization.
Employee Influence on Customers:
which should influence the appropriate Employee selection,
rewards, performance, and training requirements.
Judd
9. Customer Satisfaction
Image
Expectations
Perceived Customer Customer
value satisfaction loyalty
Perceived
quality of
“hardware”
Perceived
quality of
“humanware”
ECSI
10. Balanced Scorecard
Financial Results Internal Business Process Results
These include measures of the critical business
These include measures that indicate processes that have the greatest impact on
whether a company’s strategy, customer satisfaction and in achieving the
implementation, and execution are financial objectives (20:80 key work).
contributing to the bottom line improvement.
Financial objectives can be measured by Examples include product design and product
operating income, ROCE, sales growth, development (innovation) and manufacturing,
revenue generation. marketing and post sales service (operations).
Customer’s Results Learning & Growth Results
These measure the infrastructure an organization
These include measures such as customer must build to create long term growth and
satisfaction, customer retention, new improvement, and include measurements of
customer acquisitions, customer profitability, people, systems and organizational procedures.
and market share, in targeted customer and
market segments. Examples include employee satisfaction,
retention, training and skill sets; information
system capabilities; alignment of procedures to
recognize employee incentives in line with
organizational success, etc.
Kaplan and Norton
11. Hi
HOSTAGES BELIEVERS
No where else to go Loyal
Trapped due to APOSTLES
lack of competition or Speak out for you
high switching costs
Repeat
Med
Business DEFECTORS MERCENARIES
Dissatisfied,
may become….. Satisfied but not loyal,
price sensitive
TERRORISTS
Speak out against you
Lo = -10 OK=0 Hi=+10
Customer Satisfaction
(Jones and Sasser)
13. Malcolm Baldrige National Quality Award
Quality is judged by customers. Thus quality
must take into account all the product and
service features and characteristics that
contribute value to the customers and lead to
customer satisfaction, preference, and retention.
Value and satisfaction may be influenced by
many factors throughout the customer’s overall
purchase, ownership and service experience.
These factors (values) include the company’s
relationship with the customers that helps build
trust, confidence, and loyalty.
14. Quality of Management
is a prerequisite for the
quality of products and services
Europe’s 500 study
1996
15. Benchmarking
“Planning without awareness of what your
competitors are doing is like flying a plane
over the Alps in heavy fog without any
instrument controls”
Jan Howard
16. The preceding slides remind us how:
Strategic planning can identify critical success factors that, through effective
policy deployment, give sustained improvement to our value proposition.
Effective leveraging and linking of the marketing mix impacts product
positioning and our quality value proposition.
By designing customer service around the marketing mix we can build and
maintain customer relationships which can lead to improved customer
satisfaction.
Through managing processes, we can identify our capabilities, and through
active benchmarking, we can identify capabilities of our competitors.
Through monitoring objective results, and involving our people, we can plan
and manage effective change.
Important the quality and commitment of management is to all of the above.
17. Business Systems
Deming’s definition of a system:
A network of interdependent components that
work together to try to accomplish the aim of the
system
Kaplan and Norton’s definition of a system:
A set of processes and practices used to align and
control an organization.
18. The Way Organizations Work
Managing Director
Increase Profits by 10% SVP, Operations
Reduce churn (turnover) VP, Marketing
Increase customer satisfaction Director, Customer Service
Reduce hold times
Director, IT
Faster access to all customer information
Project Manager
Eliminate disparate systems
19. Demonstrable Results
USA Results European Results
% improvements of award winners % improvements of award winners
when compared with benchmarked when compared with benchmarked
companies companies
Stock price 36% Share value 36%
Sales Operating income 48% Sales 17%
Sales 37% Sales over Assets 5%
Total assets 42% Capital Expenditure Over sales 4%
Employees 16% Assets 20%
Return on sales 8% Total cost over Sales 1.4%
Return on assets 3%
( Singhal / Hendricks) ( CQE)
20. ECONOMIC CASE FOR QUALITY
During a survey of CEOs and top executives, when
asked:
‘does quality contribute to the bottom line or not’,
99% of the 603 respondents said they believe
quality contributes to the bottom line.
When asked why quality contributes, respondents
most often mentioned increased revenue through
repeat business, referrals and customer loyalty; less
rework; and savings on labor and materials.
Greg Weiler, ASQ project leader - 2004
21. The Topic of this Presentation
A Case for Quality
has already been made……..
but senior management may not have heard it yet!
Managing Business Systems Ver: 1 “ It is no use saying ‘we are doing our best.’ You have to succeed in doing what is necessary.” Winston Churchill 1874-1965 UK Prime Minister
In order to determine which metrics ultimately drive strategy, or in order to determine which metrics to leverage to impact business performance, a series of cause and effect relations must first be developed for strategic objectives. In identifying critical success factors, the KPIs should become apparent. As Kaplan and Norton explain, this process begins with the senior executive management team working together to translate strategy into strategic objectives. It helps the build a consensus around its vision and strategy by: Considering emphasis on revenue and market growth, profitability or cash flow generation. Identifying the customer and market segments in which it competes. Identifying those key processes critical to the achievement of breakthrough performance for customers and shareholders, for which suggests strategy maps. Understanding the rationale for significant investment in re-skilling employees, in information technology and systems, and in enhanced procedures. The illustration of theses linkages are referred to as strategy maps or success maps (Neely et al, 2000). Similar to road maps, the strategy map is a visual representation of an organization’s support plans for it mission and vision. From the high level corporate map, it is possible to produce subsequent drill down maps for organizational units and. To be complete, a process map should also include measurements for support activities (Dyson, 2004) and be linked to an action plan. Managing Business Systems Ver: 1
Managing Business Systems Ver: 1 Customer Value Proposition Kaplan and Norton (1996) maintain that value proposition is the key concept for understanding the drivers of the customer perspective core measures; they communicate what employees should be doing on a day-to-day basis. As such, they suggest the following attributes as being common to all industries: Product/Service attributes; which relates to the functionality of the product or service, time, quality and price and where time, quality, and price are identified as being performance drivers for customer satisfaction. Customer relationship; which relates to the delivery of the product or service, including the response time dimension and the customer’s perception of purchasing from the company. Image and reputation; which relates to the intangible factors that attract a customer to a company. However, through constructing a BSC, and customer based objectives and feedback about the value proposition, a company is able to define itself for its customer.
Managing Business Systems Ver: 1 Marketing Mix The term marketing mix is used to define the potential levers that organizations can manipulate in order to achieve our required product positioning. This slide shows the interdependent relationships, or linkages, between the elements of the marketing mix. T his linkage has an impact on the quality attributes that address issues such as: Customer expectation Consistency, to achieve a logical and useful fit between two or more elements of the marketing mix Integration, to achieve an active, harmonious interaction between the elements of the marketing mix The degree of leverage available for each marketing mix element to support the total marketing mix. and ultimately product positioning
Managing Business Systems Ver: 1 The Extended Marketing Mix Ryals maintains that a consistent approach to customer service can be achieved by constructing customer service around the marketing mix elements, as shown in this slide. The people, processes and pro-active customer service are an extension to the traditional marketing mix, this extension was required as many thought the 4 Ps were to restrictive and had too much emphasis on short-term transactions. The extra 3 Ps are aimed at building and maintaining long term relationships and can be regarded as enablers for the traditional marketing mix. Proactive Customer Service The extended marketing mix regards Customer Service as: “ being concerned with the building of relationships with customers and other markets or segments to ensure long-term relationships which are mutually trusting and profitable, and which reinforce the other elements of the marketing mix”. Others may say it is simply ‘all the activities to accept, process, deliver and bill customers, and to follow-up on problems’.
If you manage by project, then you are fire fighting Managing Business Systems Ver: 1
Managing Business Systems Ver: 1 People When viewing people as an element of the marketing mix, it is important to understand how different people relate to the customer, and to what extent they have an impact on the marketing mix. In applying the tool shown above, we are able to segment our people and focus on service provision and training to ensure service quality. By classifying the employee frequency of contact with the Customer as being; Contactors, Modifiers, Influencers Isoteds, the appropriate selection, rewards, performance, and training requirements can be identified. The slide is an application of Judd ‘s classification of people. Did you know? In reviewing the causes of customer migration, Tom Peters argues that 75% of customers migrate because of the human side of doing business with their prior provider of the product or service. (Judd, as cited by Clark 2000)
Managing Business Systems Ver: 1 Customer Satisfaction The European Customer Satisfaction Index (ECSI) methodology states that good customer satisfaction will give good loyalty, and the determinants of customer satisfaction are image, customer expectations, perceived quality and perceived value. Further to this, it can be argued that, as Customers realize the effect customer satisfaction and customer retention has on profitability and corporate success, their Customer Service requirements and expectations are becoming more demanding. Did you know? InfoQuest CRM studied 20,000 customers to find that: A totally satisfied customer contributes 2.6 times as much revenue as a some-what satisfied customer. A totally satisfied customer contributes 14 times as much revenue as a some-what dissatisfied customer. A totally dissatisfied customer actually decreases revenue at a rate equal to 1.8 times what a totally customer contributes to a business. This means that even with twice as many totally satisfied as completely dissatisfied customers, business is standing still.
Managing Business Systems Ver: 1 In the early 1990’s it was generally accepted that the traditional performance management techniques, such as revenue generated, sales volume, gross and net profit did not adequately support long-term strategic management of an organization. In developing the Balanced Scorecard (BSC), Kaplan and Norton addressed the financial perspective and the following: Customer perspective; where the chosen measures should define who the target customers are and what the value proposition is in serving them. Internal process perspective; where chosen measures should be based on strategy to give a leading indicator for the customer perspective. Learning and the growth perspective; where chosen measures might include employee measurements such as training, leadership, retention, satisfaction. As Kaplan and Norton have stated, a BSC provides both a template and a common language for assembling and communicating information about value creation. However, Bible et al writes that the template has to be customized to meet the needs of the different markets, strategies, and environment of each and every organization.
Managing Business Systems Ver: 1
Managing Business Systems Ver: 1 This shows the classic spring back that follows change. It could be argued that spring back is due to a lack of internalization of the issues relating to the change. Commitment and Participation Wilkinson et al maintain that employees are not cultural dopes and that their support for change is dependent on trust in management and the perceived benefits to themselves, or shared amongst themselves. Lawyer argues that employees are most motivated to make a business successful when they understand and have ongoing information about it (communication), have the power to make decisions (empowerment), and are rewarded according to their success (careful appraisal). Buchanan et al argue that the resistance to change can be reduced (commitment and participation can be gained) through improved understanding. The following s a list a number of change success factors, against which issues that promote the successful implementation of quality management are identified: Ensuring top sponsorship. Involving employees – influence, communications. Giving quality communications – employee representation Providing quality training – training linked to quality. Using clear performance measures – realist expectations.
Managing Business Systems Ver: 1 ISO 9001 Scope: This International Standard specifies requirements for a quality management system where an organization needs to demonstrate its ability to consistently provide product that meets customer and applicable regulatory requirements, and aims to enhance customer satisfaction through the effective application of the system, including processes for continual improvement of the system and the assurance of conformity to customer and applicable regulatory requirements.
Managing Business Systems Ver: 1 The Europe 500 study was a study of Europe’s top 500 entrepreneurs. During this study, more than 90% of the entrepreneurs were committed to quality assurance, but a large majority were aware that quality assurance required additional attention. The findings showed that the premium has to be on the quality of management in order to guarantee the quality of the products and services. It also recognized the critical impact the following has upon developing quality management: business processes quality assurance the involvement of employees and customers leadership based on quality principles
Managing Business Systems Ver: 1 Strategic Tool The American Productivity & Quality Center (AP&QC) firmly links benchmarking with strategic intent. In providing internal analysis and valid external comparisons, the AP&QC argue that benching marking provides reality to the direction-setting process of a company, and as such, benchmarking is tied to strategic planning. Process Improvement Allaire, the CFO of Xerox, argues that the prime objective of benchmarking is to understand those practices that will provide a competitive advantage in the market place, in which target setting is secondary, through identify opportunities for accelerated change and performance improvement centered on measuring current practices, against exogenous entities and their subsequent implementation.
Managing Business Systems Ver: 1
Managing Business Systems Ver: 1
Managing Business Systems Ver: 1 These tables are the results of independent research, each shows that the successful implementation of TQM / Business Excellence gives positive ‘bottom line’ results. Further to this, the research found that during the TQM implementation period that preceded the winning of the award, there was no significant difference in results between selected companies and benchmark companies.
Managing Business Systems Ver: 1
Managing Business Systems Ver: 1 Blind, K. (2006). A Taxonomy of Standards in the Service Sector: Theoretical Discussion and Empirical Test. The service Industries Journal, Vol. 26, No. 4, pp. 397-420. Connor, P. E. (1997). Total Quality Management: a Selective Commentary on Its Human Dimensions, Public Administration Review, November/December, Vol. 57, No. 6, pp. 501-509. Govender, K.K. (1998). Managing Service Quality by Managing the Service Customer. South African Journal of Business Management , Vol. 29, No. 3, pp. 89-99. Johansson, P. and Olhager, J. (No Date). Industrial Service profiling: Linking Service Operations to Manufacturing Strategy. URL: http://www2.ipe.liu.se/rwg/igls/igls2002/Paper081.pdf [June 2007] Jones, T.O. and Sasser, W.E. (1995). Why Satisfied Customers Defect. Harvard Business Review , November-December, pp. 88-99. Kaplan, R.S. and Norton, D.P. (1996). The Balanced Scorecard: translating strategy into action. Harvard Business School Press: Boston. Kaplan, R.S. and Norton, D.P. (1996). Translating Strategy into Action: The Balanced Scorecard . HBS Press: Boston. Luk, S.T.K. and Layton, R. (2002). Perception Gaps in Customer Expectations: managers versus Service Providers and Customers. The Service Industry Journal , Vol. 22, No. 2, pp. 109-128., Parasuraman et al. 1988. ‘SERVQUAL: A Multiple-item Scale for Measuring Consumer Perceptions of Service Quality’, Journal of Retailing, Vol.64, No.1, pp.12–40. Shahin, A. (2004) SERQUAL and Model of Service Quality Gaps: A Framework for Determining and Prioritizing Critical Factors in Delivering Quality Services. Delivered to the 4 th International Conference on Quality Management. URL: http://www.qmconf.com/Docs/0077.pdf . [June, 2007]. Clark - Cranfield School of Management. (2000). Marketing Management: A Relationship Marketing Perspective , Palgrave: Basingstoke and New York. Ryals- Cranfield School of Management. (2000). Marketing Management: A Relationship Marketing Perspective , Palgrave: Basingstoke and New York.