Human Resources: Executive Summary:Quality Management

In this era of globalization, the call for effective quality management is becoming considerably more urgent than it was a quarter of a century ago. Back then, U.S. car manufacturers were just beginning to understand that the quality-control and continuous-improvement strategies of W. Edwards Deming had transformed Japanese companies into formidable competitors. Now, firms are contending with complex global supply chains, wide-scale outsourcing, pricing wars, and international labor pools and standards, all of which require heightened quality mechanisms.

Even as product failures drained some $14.5 billion from U.S. automobile profits in 2004 alone, recent trends show a marked expansion of investment in quality programs. In fact, Quality magazine's Sixth Annual Quality Spending Survey projects that U.S. manufacturers and equipment suppliers will spend a whopping $4.4 billion on quality measures in 2006 - up 51% from 2005 and exceeding pre-9/11 expenditures. Underscoring what survey analysts are calling a "powerful growth trend," roughly 65% will go toward test, measurement and inspection equipment, a 56% increase from what was projected for that category in 2005.

Yet, the quality spending boom, according to some analysts, actually indicates a degree of caution among manufacturers. Fearing overcapacity in a fluctuating global economy, many companies are seeking higher productivity levels through improved quality measures rather than through the acquisition of more factories and industrial facilities.

Registering varying degrees of success, quality strategies that eliminate defects (Six Sigma) and excess (Lean) have become embedded in the public and private sectors. According to the global research firm Aberdeen's 2006 Lean Benchmark Report, for example, some 90% of 300 manufacturers say they are "Leaning out," or adopting Lean manufacturing processes, but only 20% of these are considered "best-in-class" with a fully realized Lean culture. Nevertheless, the survey indicates that these best-in-class firms effectively met (60%) or exceeded (24%) shareholder expectations. A shortage of executives versed in Lean management strategies suggests that firms may need to train high-potential in-house talent.

The use and status of Six Sigma, however, appears to be on the wane. A 2005 Bain & Company global survey, for example, shows Six Sigma's value ranking as a management tool at 3.89 (on a 5-point scale), just equivalent to the established mean, while the share of companies using Six Sigma (34%) is positioned well below the established mean (54%). Experts blame the high costs of Six Sigma training programs and their failure to deliver desired cost savings due to poor deployment and insufficient top-level support.

Yet many hybrid quality programs combining Six Sigma with Lean, such as that operating at Xerox, are fueling an upsurge in profits. Xerox used a high volume of "Black Belt trainers," clearly defined managerial roles, consistent profit-tracking and value-driven project selection - all sustainable quality strategies aligned with day-to-day business operations under the watchful eye of top management.

Indeed, most experts agree that successful quality programs hinge on a total organizational "culture shift." Quality winners must employ solution-based technologies, mentoring from the highest executive level and a focus on key metrics. But these, along with continuous training programs and cross-departmental teamwork, are only part of the quality equation. A firm's commitment must go beyond statistical analyses and cost-saving measures, say analysts, to include leaders that grasp a company's core assets, vulnerabilities and challenges, both internally and within the context of industry competition.

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The Institute for Corporate Productivity (i4cp, inc.) improves corporate productivity through a combination of research, community, tools and technology focused on the management of human capital. With more than 100 leading organizations as members, including many of the best-known companies in the world, i4cp draws upon one of the industry’s largest and most-experienced research teams and Executives-in-Residence to produce more than 10,000 pages annually of rapid, reliable and respected research and analysis surrounding all facets of the management of people in organizations. Additionally, i4cp identifies and analyzes the upcoming major issues and future trends that are expected to influence workforce productivity and provides member clients with tools and technology to execute leading-edge strategies and "next" practices on these issues and trends. i4cp is a for-profit company with offices in St. Petersburg, Florida.