Editor's Note: "Rebalancing Quality Priorities" is a three-part series describing a new approach to quality management from a customer and risk management perspective that involves the entire organization. This is part 3. Also see part 1, "Rebalancing Quality Priorities," and part 2, "Quality Equals Risk Management."
If asked to list a corporation's sexiest functions, most people would put quality toward the bottom of the list. Relatively few companies have a corporate vice-president for quality. It's rarely a stopover for up-and-coming talent. It's almost never a source of new ideas or energy. It's a support organization, viewed not just as "second fiddle" but as fourteenth violinist in a large orchestra. Yet as we've seen, it has potentially profound implications for corporate performance.
But consider a function that, 10 or 15 years ago, was described in similar terms: procurement. Back then, the procurement function was a lazy backwater with little observable influence, a place to store ineffective executives where they wouldn't do much harm. Yet as experts pointed out at the time-and events have since proven-a more strategic view of procurement could have a powerful impact on a company's bottom line.
Procurement served as a catalyst for cost savings. Quality can be the catalyst for reduced risk, lowered costs, and especially an improved customer experience-and with it the increased revenues that come from repeat sales. By transforming quality culture, and embedding the strategic quality mindset throughout the organization, companies can improve performance and manage risks to address the challenges of the next 10 to 15 years. Quality ends up being less about engineering characteristics -- metals tolerances, design standards, process checkpoints -- and more about change management. How do you create organizational excitement about quality? How do you inspire people? How do you empower quality and coordinate it across other functions?
As a case study, consider a company faced with the erosion of the quality of the customer's experience -- Starbucks. The ubiquitous coffee seller faced decreasing operating margins, driven by several factors including declining customer satisfaction ratings. So in January 2008, its board asked founding CEO Howard Schultz to return to that role and lead a transformation. Schultz quickly communicated a new corporate strategy firmly tied to improving the quality of the customer experience. Starbucks applied renewed rigor and discipline to all areas of its business, focusing deliberate attention on inspiring employees and business partners with messages emphasizing a return to the company's original values. While still a case in progress, Starbucks' 2009 annual report points to measurable improvements in service quality, beverage quality, and store condition, a 10 percentage point increase in customer satisfaction, and an increase in operating margins for the first time in more than five years. From this (and similar) examples, we glean three success factors:
- A quality transformation requires adopting a strategic mindset towards quality. Quality organizations are not traditionally strong drivers of corporate strategy; in many cases, there may be no clear quality strategy that is communicated throughout the company. Just as Starbucks emphasized the importance of quality to the firm's new direction, we believe best-in-class organizations not only must have an explicit quality strategy, but also must seamlessly integrate quality into their enterprise strategy. They must consistently prioritize quality against competing objectives and align all functional activities towards common quality goals. The degree to which an organization's quality and functional strategies align with its enterprise strategy will dramatically impact the organization's focus and effectiveness on all quality initiatives.
- Embedding high quality performance as part of a firm's DNA requires inspirational and capable leadership. Clearly, Howard Schultz's return to the helm of the company he founded was a critical element to its transformation. Some companies have even appointed a Chief Quality Officer to raise the significance of quality in the organization and to lead change. But regardless of the level or title, this leader must be capable of communicating the quality strategy across all levels of the organization. As corporate quality takes on a new role, it will face potential organizational resistance-and in many cases only a charismatic champion will be successful in overcoming these barriers. While support from the top is an obvious necessity, the individual's ability to gain support from the rest of the company will be a key determinant of success.
- In order for a firm to truly embrace a dedication to higher quality as part of its culture, employees at all levels need to perceive that something has, in fact, changed. Specifically, leadership across the organization must demonstrate that expectations regarding quality have changed. Now, there must be a new level of discipline with regard to quality deliverables at project milestones, new observed criteria by which employees are rewarded and promoted, and a change in which metrics are tracked rigorously. This appears to be the case in the Starbucks example -- with the change being a successful application of standards and values of the past -- and that may become Toyota's objective as well.
- Establishing a culture of quality requires a different set of strategic skills than those employed in quality's yesteryear. Again, there is no single solution, because different companies are at different starting points in their quality journey. But we believe that a key driver of future success will be the place where such conversations and initiatives start: the quality function.
Quality is like motherhood and apple pie: something that everyone can support. But -- as any mother will tell you -- that doesn't make it easy. And as the world changes, the emphasis and role of the quality function must change as well. Leading quality organizations are integrating the voice of the customer across the enterprise, actively managing customer perceptions and delivering unparalleled service. They are addressing the full spectrum of risk management by balancing the prevention of defects and the detection and elimination of those that do slip through. Finally, they are transforming the culture of the quality organization through a strategic mindset, strong leadership, and a commitment to change. With these initiatives, they are getting a head start on addressing the challenges of the next decade.
Joachim Ebert is a partner with A.T. Kearney based in Dallas. He can be reached at [email protected]. Vijay Natarajan is a principal with A.T. Kearney. Andrew Newsom and David Qu are managers.