Improving Quality and Performance in Your Non-Profit Organization--Chapter 2

Chapter 2

Introduction to Total Quality Management

It doesn’t seem to matter whether the organization manufactures microchips or potato chips. Or whether it manufactures service for eight or delivers services itself. It claims to offer something valuable to the world’s largest, most sophisticated businesses as well as to your pre-teen’s lemonade stand. It is touted as working equally well, albeit with a few adjustments, in for-profit organizations and non-profit organizations. This management philosophy is sweeping through government at all levels as well—bringing transformational change to management practices of organizations as diverse as the Department of Defense and municipal governments of one-horse towns.

Total Quality Management, or TQM, has, in recent years, been acclaimed as the road to organizations capturing the Holy Grail, or at least the Baldrige Award or its comparable accolade for non-profit organizations, the Excellence in Service Quality Award. It may even have something to offer individuals in managing their private lives as well, but this has yet to be explored to any great extent.

While TQM has yet to solve the intractable problems of curing AIDS, bringing about world peace, ending world hunger, or eliminating the busy signal of America Online, its adherents assert it is only a matter of time before it successfully manages to ameliorate virtually any intractable problem—if only those organizations working on these problems would implement TQM as intended. Its detractors—and they are legion—generally criticize TQM on the difficulties of implementing it rather than the principles themselves.

TQM has had a colossal sway on business management in the last two decades. If it were just another management fad, it would be difficult to explain why the “market penetration” of TQM not only has increased within sectors, but has been adopted by new sectors, such as the healthcare industry.

The term “total quality management” has overshadowed virtually all aspects of management programs for almost three decades now in the United States with an aura of apparent invincibility. Like the term “managed care,” its meaning is not particularly precise, perhaps an indication more of its changing contextual framework to adjust to conditions rather than a reflection of amorphous content. It has come to mean a philosophy as much as a management technique or tool.

A concise definition appears in an article by Karen Bemowski in the February 1992 issue of Quality Progress:

TQM is a management approach to long-term success through customer satisfaction…based on the participation of all members of an organization in improving processes, products, services, and the culture they work in.

“ In discussing TQM with health and human service agencies, I have found it necessary to differentiate it from ‘quality assurance (QA),’” says Dr. Lawrence Martin of Columbia University. “Quality assurance is after the fact and evaluates a service’s compliance with professionally derived standards. TQM is up front (let’s build quality in at the beginning) and is derived not from professionals but from consumers.”

TQM is a general approach to management that seeks to improve quality, reduce costs, and increase customer satisfaction by restructuring traditional management practices. It requires a continuous and systematic approach to gathering, evaluating, and acting on data about what is occurring in an organization. In practice, many organizations that think they are implementing TQM, including many healthcare institutions, fail to meet the full spirit of Bemowski’s definition. Many fall short on policies directed to “long-term success,” often substituting policies designed for short-term success. Others fail to include “all members of an organization,” restricting participation to only a part of an organization. Still others fail to make the necessary changes in organization “culture,” invariably putting new wine in old bottles. As a result, it is difficult for dispassionate researchers to measure whether TQM works empirically, since there are many organizations that claim to use TQM but do so in an abbreviated form that often does not do justice to the process.

What are TQM Management Principles?

TQM management principles include the following—

1. It says that the primary objective of an organization is to meet the needs of its “customers” by providing quality goods and services, and to continually improve them. In the non-profit organization context, customers include not only the direct recipients of services, such as clients, but the organization’s board, elected and appointed government officials, the media, and the general public.

2. It instills in all organization members an esprit de corps that assures them that having quality as the number one goal is an important tenet. Organizational members are responsible for quality, even if it is related to an issue beyond the scope of his or her job. Eliminating the “it’s not my job” mentality becomes an achievable organizational objective.

3. It continuously searches for ways to improve every activity, program, and process. It does so by constantly seeking feedback from its customers, and promoting suggestions from all sources, both externally and internally, on how to improve.

4. It rewards quality, not only internally, but from its suppliers. It recognizes that poor quality from its collaborators, be they suppliers or other organizations, affects the organization’s quality.

5. It recognizes that staff must receive continuous training to improve their work performance.

6. It encourages all aspects of the organization to work as a team to solve problems and meet customer needs rather than competing against each other.

7. It empowers workers at every level, and permits them to be actively engaged in decisions that affect the organization, and to constantly look for ways to improve it.

8. It permits employees the opportunity to have pride in what they produce for the organization and to see the fruits of their labor measured in the quality of the service they provide rather than just having a paycheck.

9. It promotes a planning process that is geared toward continuously improving quality in everything the organization does.

A list of principles of quality management compiled by Dr. W. Edwards Deming, the man considered by many to be the founder of the modern quality movement, can be found in Appendix B.

In his 1993 book Total Quality Management in Human Service Organizations, Professor Martin points out that conventional management philosophy upholds that:

1. profits and “bottom line” are the number one driving force in management.

2. competition is preferable to cooperation.

3. change occurs in large pieces rather than incrementally and slowly.

4. American organization leaders engage in “cowboy management” that involves entrepreneurial leaders fighting bureaucracies to make changes.

5. management takes action to change things only when things go wrong.

Martin points out that TQM directly conflicts with each of these principles. Quality is the number one driving force in management. Cooperation is preferable to competition. TQM enhances slow, incremental change that involves continuous quality improvement, and change is based on careful planning rather than seat-of-the-pants instinct by the manager.

He also explains that TQM and “teams” go together.

“ TQM attempts to mix what might be called the ‘scientific management’ perspective (managing with data) with the human relations school—understanding interpersonal and group dynamics. This is accomplished by having teams work with data,” he says.

James H. Saylor in his 1996 book, TQM Simplified, A Practical Guide (Second Edition), levels an eleven-count indictment of conventional management practices. He says that traditional management seeks the quick fix rather than long-term solutions, “firefights” rather than adopts a disciplined approach to continuous improvement, operates traditionally rather than seeking innovation and creativity, makes improvements randomly rather than continuously, places a priority on inspection rather than prevention of defects, decides using personal opinions rather than facts, allocates money and technology for improvements rather than maximizing people power, controls workers rather than empowering workers, looks at individual performance rather than team performance, is motivated by profit rather than customer satisfaction, and relies on programs rather than a never-ending quest for quality. TQM addresses each of these issues.

The Baldrige Award and TQM

Perhaps the single most influential factor in accelerating the adoption of TQM principles in mainstream American business organizations has been the Malcolm Baldrige Award. The guidelines for the award explicitly recognize the concepts of TQM. Malcolm Baldrige served as Secretary of Commerce in the Reagan Administration from 1981 until his death in 1987 in a rodeo accident. Congress memorialized his interest in quality with a “National Quality Award” in his name, administered by a public/private partnership. The criteria for the award were put together by a panel of quality experts, and TQM principles serve as the basis for granting the award.

The award criteria are judged on a 1,000 point scale of performance in seven major categories: leadership, information and analysis, planning, human resource utilization, quality assurance, quality results, and customer satisfaction. The final two criteria comprise about half of the points. While results are important, the award is designed to make applicants also focus on the conditions and processes that led to the results. Within just a few years, the Baldrige Quality Award became one of the most highly sought after honors of the business community, although in recent years, according to some who should know, it has lost a bit of its luster.

In 1992, The United Way of America developed an analogous award for non-profit human service agencies, recognizing that quality improvement is just as important, if not more so, in charities as private business. Known as the Excellence in Service Quality Award (ESQA), 501(c)(3) charities are eligible for four levels of recognition, with judging and criteria patterned after the Baldrige Award. Unlike its business counterpart, the ESQAs are non-competitive in that there is no limit on the number of winners in any given year.

History of the TQM Movement

The TQM movement is attributed mostly to the work of three gurus: W. Edwards Deming, Joseph Juran, and Philip Crosby. Among other major contributors have been Armand Feigenbaum, Kaoru Ishikawa, Genichi Taguchi, Peter Drucker, Tom Peters, H. James Harrington, and A. Richard Shores.

Dr. Deming, a statistician, pointed out “seven deadly diseases” of American organizations, which include lacking meaningful strategic planning, maximizing short-term profits, basing remuneration on individual performance, accepting high medical costs, refusing to discourage managers from leaving, basing decisions on numbers that do not factor in quality information, and having excessive costs related to warranty of their products. Perhaps the most oft-quoted paper on the principles of TQM is Deming’s On Some Statistical Aids Toward Economic Production.

Other than the painful fact that Deming’s principles have been adopted by Japanese business and Japan achieved a major competitive advantage over those in the United States that lagged in accepting Deming’s perspective on quality, Deming probably would have been dismissed as a cantankerous eccentric.

Joseph Juran served in both government and the private sector. In 1979, he established the Juran Institute. He is credited with the definition of quality as “fitness to use,” meaning that the customer could do with the product what was intended. Juran described five dimensions of fitness to use: quality of design, quality of conformance, availability, safety, and field use. He applied a systematic dissection of the product’s lifecycle cradle to grave—from conception to design, manufacturing, inspection and test, and distribution—and used statistical techniques to improve all aspects of these five dimensions. Juran theorized that managing for quality consists of three basic quality-oriented processes, a quality trilogy: quality planning, quality control, and quality improvement.

Quality planning consists of creating a process to accomplish quality objectives under the operational constraints. Juran contends that poor planning is responsible for the waste that occurs once production begins. Quality control is the function that describes quality management once planning has been completed and operations begin. Finally, quality improvement is the endeavor that seeks constant improvement in quality. Juran notes that there is an analogous trilogy in the financial management process: budgeting, cost/expense control, and cost reduction.

Quality planning consists of—

• identifying the customer (both internal and external)

• determining his or her needs

• developing products and services and features of products/services the customer needs

• designing and building the process that produces those products/services in a way that meets quality goals “and do so at a minimum combined cost”—an important distinction compared to Deming.

Quality control requires choosing units of measurements, establishing performance standards, measuring actual performance, and taking action to correct any deficiencies from those standards.

Quality improvement consists of diagnosing what is keeping quality standards low and finding remedies, and consolidating the gains in quality improvement.

Juran’s view is that American managers are strong on quality control and, by a large margin, make it their top priority. However, they are weak on quality planning and quality improvement.

Juran has a prescription for improving quality, which typically begins by establishing a quality planning council within the organization. The task of the council is to—

• Establish corporate quality policies

• Establish corporate quality goals; review quality goals of divisions and major functions

• Establish corporate quality plans; review divisional and functional plans

• Review quality performance against plans and goals

• Revise the managerial merit rating system to reflect performance against quality goals.

Philip Crosby

Philip Crosby is one generation younger than Juran and Deming, and had worked as International Telephone and Telegraph’s (ITT) Vice President of Quality before becoming a private consultant, lecturer, and author on quality issues. In 1986, he set up the Crosby Quality College, which taught TQM principles to tens of thousands of executives and managers. Crosby focused on changing attitudes and behaviors in the workforce to instill an attitude in workers that would eliminate careless mistakes that created costly rework.

Crosby asserts that American management typically speaks in quantitative terms when talking about sales, employee compensation, inventory, budget, and about almost everything else—other than quality. This is despite measurable standards being available, which Crosby points out were developed by General Electric in the 1950s. Crosby was perhaps the first to put a “cost” on quality, aggregating costs of rework, scrap, warranty, inspection, and test.

Crosby’s writing on quality improvement is practical, and provides a guide for managers committed to calculating and reducing their COQ (cost of quality). Using golf analogies (not a bad thing to do considering his audience), Crosby passionately doesn’t speak down to his audience, but uses a folksy style to introduce his 14-point program (each with an action program and an “accomplishment” section explaining why) for quality management:

1. Obtain and enforce commitment to quality improvement by management.

2. Create a quality improvement team with folks from each department.

3. Find acceptable ways to measure quality in each department.

4. Evaluate the cost of quality.

5. Educate all workers about the cost of quality (or more appropriately, the cost of non-quality)

6. Facilitate corrective action by having workers at all levels communicate to management remedies for improving quality

7. Establish a Zero Defects Program

8. Provide training so that all supervisors buy into quality management

9. Create a “Zero Defects Day” and make the commitment to ZD long-lasting

10. Establish quality goals

11. Ask workers to describe problems that keep them from performing error-free work, and respond to these within 24 hours

12. Establish an award program to recognize outstanding achievement and those who meet their goals (Crosby suggests recognition rather than cash as the award)

13. Establish Quality Councils to report on the status of the quality management program and ideas for action

14. Start over again every 12-18 months, because turnover and changing conditions wipe out progress made in education and training.

If major American companies were slow to react to the realization that the stellar economic success in Japan was being attributed to TQM, healthcare institutions were a decade behind the curve. Not surprisingly, healthcare institutions, particularly hospitals, have been at the vanguard of TQM adoption by non-profit organizations. One reason for TQM to finally catch on is that there has been a major transformation of the hospital industry.

First, large for-profit conglomerates have built empires consisting of newly acquired hospital chains, such as Columbia/HCA Healthcare Corporation and Tenet Healthcare Corporation. Hundreds of hospitals have converted from non-profit orientation to for-profit. Even those that have not converted are still subject to the financial and competitive pressures that resulted in hundreds of hospital mergers during the 1980s and 1990s.

Decreased Medicare and Medicaid reimbursements by the Health Care Financing Administration (HCFA); managed care; cut-throat marketing efforts; strong cost containment pressures from insurance companies; the high cost of, and the competition for, medical technology; and required public disclosure of hospital costs and clinical outcomes have been among the trends that have changed the face of the healthcare industry. Other factors have been increased consumer competition (health care users had new incentives to shop around for medical care); major restructuring of the third-party payment system by both government (Medicaid, Medicare) and insurance companies; and government regulation of managed care practices.

Reading the literature on TQM in healthcare organizations, one comes to realize that TQM is not being implemented to any great degree in a holistic, system-wide, full-blown way, but rather piecemeal, and in a manner that is targeted to reducing cost. This is not consistent with the TQM philosophy, and the potential benefits of this management strategy may be missed as a result.

Managed care has revolutionized the healthcare industry in recent years. Healthcare practitioners view this revolution in practical terms, for the most part. TQM is seen by some practitioners as a means to objectively measure quality, which is important to both third-party payers (such as insurance companies) and patients. Hospital executives have come to realize that quality control can reduce costs.

TQM principles are finding their way into non-profit settings other than healthcare, such as community centers, arts organizations, and human services agencies. Focusing on the needs of the “customer” rather than on the “bottom line” is a value that the non-profit sector should feel comfortable with compared to its for-profit counterparts. When a non-profit organization’s leadership becomes excited about TQM, it can become contagious, provided that the behaviors of the leaders are consistent with their words. When it “happens,” those in a TQM environment notice the difference, whether they work there or benefit from the organization’s services. Workers feel empowered. Clients notice a positive difference in staff attitudes. Everyone associated with the organization feels good about it.

Tips for Implementing TQM

1. Diagnose the present state of your organization. This includes a scan of client satisfaction, attitudes and morale of staff, and the standing of the organization in your “market.” Assess the extent of commitment by top executives to a formal change process, if the organizational culture will support change, and if TQM is a “good fit” compared to alternative change management strategies.

2. Design the TQM Program. Decide who will be in charge of leading the effort. Decide the roles of staff and outside consultants. Choose the particular TQM implementation model, and consider modifications required. Look at how communications will have to be improved and expanded. Decide how stakeholders such as clients and funders will participate. Assess what changes need to be made in your mission statement, vision statement, and values statement.

3. Develop the TQM System. Prepare and distribute training materials, and conduct training. Implement a pilot program to demonstrate the techniques, if appropriate. Quantify current baseline outcomes and prepare strategic outcome goals. Identify resources to allocate to the project, and consider risks and costs involved as a result of potential disruptions or failure. Put together a record-keeping and data-collection system, work procedures, and policies to promote quality. Designate problem-solving teams.

4 Install the Program. Continue training, and implement the TQM program. Collect and analyze data and use it to make mid-course corrections and incrementally improve processes.

5. Evaluate the Program. Measure progress against the strategic goals, and periodically perform an audit of the effectiveness of the program.

Up Close: James Benté

James Benté serves as Vice President, Quality, for the Valley Health System in Beaver, Pennsylvania, which includes Sewickley Valley Hospital (SVH) and the Medical Center, Beaver—two community hospitals located in western Pennsylvania. In that position and a parallel position with Volunteer Hospitals of America, Benté has been on the front lines of the quality revolution and has seen it from a non-profit organizational perspective. SVH began a formal TQM program in 1989 and has realized a progressive return on its initial investment in this change management strategy. Over the years, significant improvements in quality management have led to increased customer satisfaction, decreased operating costs, and enhanced employee satisfaction, Benté reports. Several years ago, SVH was presented the Pittsburgh Quality Award by the Pittsburgh Quality Network, sponsored by the Chamber of Commerce.

“ It is not really true that the non-profit sector, and especially healthcare, has not been focused on quality issues (as has been alleged),” he says. “ Rather, non-profit organizations do not have a good understanding of how to appropriately address and make quality happen.” For example, he says that in the healthcare sector, quality assessment was a retrospective process, and was viewed as a way to assure quality.

“ It is only a recent development that prospective rather than retrospective quality control, such as process design and real time process control, has made a significant impact. Simply put, we have always been concerned about quality; we simply did not know how to effectively deal with it,” he says.

Benté suggests that some of the same factors that make quality important in the for-profit sector lend themselves to the non-profit sector as well. He sees the competition of the market as a driving force behind the movement for quality in the healthcare sector.

“ It is important for hospitals to maintain customer loyalty and achieve effective utilization of scarce resources, just as in the for-profit sector,” he maintains. “This is especially true in healthcare today, where the choice of the healthcare provider is often driven by the insurer who bases purchasing decisions on financial and outcome data.”

Benté relates the story of how TQM was first implemented at SVH.

“ The first efforts involved educating and securing the commitment and participation of the board of directors, physician leadership, and all senior management,” he recalls. The next step was formal training in quality management techniques provided by Philip Crosby Associates. This training involved each manager attending a 4-day program known as Quality Improvement Process Management College (QIPM) in order to understand how to effectively change the organization’s culture and how to implement processes that would support the employees.

“ There were also several senior and middle managers identified to attend a 4-day train-the-trainer course in Quality Education System (QES),” Benté remembers, explaining that QES is a 20-hour course taught over 10 weeks, and was provided to all of the hospital’s managers and supervisors. Physicians were provided with a 6-hour course, Quality Management for the Medical Staff (QMMS). The general staff of the facility received a 4-hour course titled Quality Awareness Experience.

“ The goal of this education was first to provide a common framework and language within the organization and second, to provide individuals with basic problem-solving and problem-prevention tools and techniques,” he observes. He says that another key aspect of the process was the implementation of a system that prioritized and sanctioned teams to deal with system-wide problems.

Benté is a true believer when it comes to touting the benefits of TQM.

“ Valley Health System remains a very viable organization, with high customer satisfaction and community support,” Benté says proudly. “In 1998, when other healthcare organizations were having their financial viability questioned, we had our bonds upgraded by three of the major bond-rating agencies. We have just completed a survey by our accreditation organization, and both campuses have preliminarily scored in the mid-nineties.”

What advice can he offer non-profit executives with respect to improving the quality of their organizations’ services? He offers six suggestions. “First, understand that the way to increased customer satisfaction, productivity, and product/service reliability is by reducing variation. In order to achieve this, the organization must use real time, online data, and subject it to appropriate analysis using tools such as Statistical Process Control.

“ Second, truly understand what the customer wants, and then focus on those aspects of the process/products that are most important in meeting those needs.

“ Third, do not underestimate the knowledge and creativity of the staff, and their importance in customer satisfaction.

“ Fourth, ninety-five percent of the problems an organization faces are due to systems and not people. Managers must remember that every process is uniquely designed to deliver the results it produces. Therefore, the focus must truly be on controlling processes, and not people.

“ Fifth, the vast majority of individuals come to work wanting to do a good job, and make a contribution. If employees start to become disenchanted with the job, it is important to look at what management is doing wrong and why the organizational systems are failing the employees.

“ And finally, give the management change time to work. Dr. Deming once said that it takes 10 years of change for every 50 years of entrenched organizational culture. We are a quick fix, quick results society, and not seeing immediate results often causes organizations to give up on a solid strategy.”