Management Decision

A Totally Integrated Management System

Ralph F. Long
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Ralph F. Long, (1990),"A Totally Integrated Management System", Management Decision, Vol. 28 Iss 7 pp.
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 44 MANAGEMENT DECISION 28,7
T
he three facets of an integrated manage-
ment system are discussed.
A Totally
Integrated
Management
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System
Ralph F. Long
If being aware of one's own faults and shortcomings is half
the battle then the other half must be the implementation
of solutions to overcome these — or, at the very least,
minimise the adverse effects they have on one's
performance.
Among the issues to be considered in this context must
be that:
• Pay increases can no longer be financed without
a real increase in productivity.
• National bargaining agreements are an outmoded
and inefficient means of agreeing employee salaries
and conditions.
• Proper, in-depth strategic planning is the foundation
stone of business growth.
• People are our most valuable asset is more than
a trite phrase with which to patronise employees.
• The demographic trends for the remainder of the
20th century will necessitate more effective use
and management of the human resource if the
business is to survive, let alone thrive.
• The customer has a choice between the quality of
our products and those of our competitors,
irrespective of their origins.
• The mis-match between corporate culture and the
personal values of the company's employees is
preventing the synergy which benefits the growth
of both.
• Only people with an innate belief in their own
quality and value produce quality goods and
services.
Organisationally any solution must be one which combines
the satisfaction of the corporate objectives with the
production of a standard of quality which meets not only
the needs but also the expectations of the customer and
rewards, appropriately, the individual contribution of the
employee.
The three major facets of any business operation,
therefore, must be:
• the business plan
• the total management of quality
• the process of performance related appraisal and
reward.
That these three are totally interrelated and inter-
dependent of one another becomes evident from an
examination of their prime objectives:
(1) The business plan: objective is to identify where it
is the organisation intends to be at some specific point
in the future and exactly how it intends, in the short
term, to direct its resources to achieving this.
(2) The management of total quality: objective is to
establish and foster an all-embracing corporate
culture of quality products and services which
consistently satisfies the needs and expectations
of the customer — both internal and external.
(3) Performance related appraisal and reward: objectiv
is to provide an effective means of identifying the
major tasks to be carried out by individuals in
relation to the company business plan together with
the required performance standards against which
rewards and benefits can be aligned.
Sadly, all too often, the three are expected to operate in
splendid isolation of each other; with the all too inevitable
results.
The Business Plan
The business plan is in fact a two-part affair comprising:
(1) A Strategic Plan (generally covering a three-five
years timescale) which sets down the corporate
vision of the future along with a series of goals
reflecting the corporate culture and values.
(2) An Operating Plan (covering one year to, at the
most, 18 months) in which is to be found the detail
relative to the short term objectives to be achieved,
the strategies and the tactical allocation of resources
to achieve those objectives.
 A TOTALLY INTEGRATED MANAGEMEN
The Strategic Planning Phase
It is important that the Board of Directors has a very clear
view of where the future of the company should lie and
from this should be formulated the corporate aim. This
is a specific and very compact statement — it should not
be longer than a single sentence — of what the company
aspires to become. Two examples of corporate aims which
have taken their place in advertising campaigns, albeit as
super-ordinate constructs, are:
• The world's favourite airline (British Airways)
• The world's first choice (Holiday Inns).
Supporting the aim are the strategic goals' statements
which are broad statements of intent, currently
unqualified, couched in present tense terms which
provide the picture of success towards which the
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organisation is impelled. These relate to the organisational
capabilities and fall under the following headings:
Market goals: the market positions the organisation
wishes to hold. It is the definition of this which
establishes the "business" the organisation is in.
Excellence goals: those things which, if done well by
all involved in the enterprise, will set the organisation
apart from others. These will have a major impact upon
quality and the management of quality.
Operational goals: those things which must be done
cost effectively and efficiently in order to remain in
business.
Stake-holder goals: the actions directed towards people
or organisations which are important to the future of
the company.
Another way of describing the corporate aim is to refer
to it as the "vision statement". It can address the market-
place or the products or services the company provides
and refers to the competitive edge. In effect it will answer
the questions:
• What (does the organisation do or intend to do)?
• Who (for whom does it intend to do it)?
• Why (does it intend doing it)?
However, not every vision statement need be related to
the growth of the organisation.
Take, for instance, JB and Partners: JB had started the
company — they operated in a specialised segment of the
construction industry — some 25 years ago and it now
has a turnover of around £31/2 million and some 35
employees. JB, himself, was in his late 50s and it was his
intention to sell out and retire. Recently he was made an
offer, for the second time, for his company which was
substantially less than its real market value. It was about
this time he began to realise that the company may not
be quite the attractive proposition it might be for a would-
be purchaser. He and his Board eventually defined their
vision statement as: "To structure and re-organise the
company in such a manner that it will become an attractive
proposition for a potential purchaser".
It is only at this point the operational planning process
can begin.
The Operational Planning Phase
Whereas the strategic plan is a broadbrush picture of the
long-term future, the operation plan for its part is very
much related to the creation of a sharper, short-term focus
and establishes a "milestone" along the route to the
future.
It commences with a review of "where the organisation
currently is", continues with the identification of what has
to be done to reach the milestone and concludes by
directing the resources of the company to answer the
question: How are we going to get there?
An audit of the current position of the company is
undertaken in relation to the environment within which
it must operate (the Marketeers would refer to this as
a SWOT (strengths, weaknesses, opportunities and
threats) exercise) as well as the manner with which it
actually operates. All the factors, both external and internal
to the company, which will have a direct or indirect bearing
upon the future are examined in terms of the threats and
opportunities as well as the strengths and weaknesses.
Such factors include:
• legislation
• the economy, national and international
• social and demographic trends (especially in
connection with the people resource).
Once this audit phase is complete it becomes possible
to commence the process of defining the objectives and
the strategic initiatives which must be achieved during the
forthcoming 12-month period and which will be the
milestones by which the progress towards the attainment
of the corporate aim is to be measured.
The objectives are, in fact, definite statements of intent
which are directly related to one of the goals, e.g. given
the goal was "to be recognised as the most technically
innovative company in our field", the objectives could well
be stated as: to introduce four completely new technical
product applications within the next four years.
The strategic initiatives for their part identify the major
strategies (the selected routes) which lead towards the
achievement of the objective and through that the
attainment of the goal. These will have a direct relationship
and bearing upon the primary business functions:
• Marketing and Sales
• Research and Development
 46 MANAGEMENT DECISION 28,7
• Production and Distribution
• Personnel
• Finance.
Thus, in relation to the objective above, the strategic
initiatives might be:
(1) Increase the R & D budget by 100 per cent.
(2) Establish joint research projects with the ten largest
of our customers.
(3) Set up market research "think-tank".
Thefinalstage in the operational planning is the planning
of the tactics by which foregoing is to be achieved — the
actual resources in terms of men, money, materials and
time required to carry through the plan.
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It is surprising just how many organisations at this point
seem to view the process as being complete in itself. The
real truth of the matter is that it is vital to the success
of the strategic plan overall, as well as to the operating
plan, that it is communicated effectively downwards to all
those involved and to obtain a total commitment to the
achievement of the corporate aim. Additionally, a process
of effective managerial control together with some method
of feedback on performance or progress towards the
achievement of the strategic goals and objectives must
be instituted.
One medium sized international company of my
acquaintance went further than the outline above, in that
they not only carried out strategic and operational planning
at Board level, but also instituted the process throughout
the organisation at divisional and regional board levels,
and at major functional department level. Thus, for
example, the Personnel and Training Department took
time out once a year to go through the process in order
to ensure their own activities were firmly dove-tailed into
and aligned with those of the organisation and its strategic
plan; so much so that on the wall behind the Personnel
Manager's desk was found the following aim: The aim of
my job is to sell the Company's products and services.
As one talked with both him and his staff one became
aware that, so far as they were concerned, every aspect
of the personnel function was directed solely at the
achievement of that aim.
The Total Management of Quality
The strategic excellence goals relate to those things which,
if done well, will set the organisation apart from its
competitors.
The inference, therefore, is that quality is an integral and
major part of the Business Plan Strategy and thus
establishes a requirement for the total management of
quality. Certainly the most succesful companies are those
which see quality (the meeting of customer requirements)
as being of paramount importance.
The definition of quality is: the fitness of the
product/service for purpose as measured by the customer
satisfaction. It must not be confused with grade which
deals with the degree of luxury or sophistication (a Range
Rover is a different grade of vehicle to a Land Rover and
both can be of good or bad quality).
Quality is driven by the customer's needs and expectations
and thefirststep towards achieving customer satisfaction
is the identification of these. The second is that of
continually striving to improve the quality of the
product/service to meet the evermore demanding needs
and expectations of the customer. The third (and final)
step is one of continuous production of a totally defect-
free product or service. Of itself, good quality creates
demand which in turn creates sales which in turn creates
profit. However, it should be noted, the traditional
understanding of the term "customer satisfaction" no
longer applies only to the end-user or purchaser. In the
modern business and commercial world it is also applicable
in the context of the next person to use the work produced
by the individual employee wherever he or she may be
employed within the organisation.
The fundamentals of total quality management are:
• Management commitment (from the highest levels
downwards through the company)
• Effective corporate policies and objectives
• Effective planning for achievement
• A quality improvement programme
• Employee participation (at all levels)
• Identification, measurement and communication of
the costs of mis-managing quality.
Total quality management focuses the attention of
managers and staff at all levels on the three vital factors
for success:
• customer satisfaction
• jobs done right first time
• continuous improvement of one's product or
service.
It involves critical self-analysis of one's policies, objectives
plans, resources and management strategies and style.
The most successful companies will be those which have
an ability (and the will) to adopt modern management
concepts, methods and organisational structures.
Total quality management is not a technique — it is a
company culture.
The TQM culture is directed towards the elimination of
the wastage of employees', subcontractors' or suppliers'
time (and this may be as much as 40 per cent) created
by not doing jobsrightfirsttime and involves all employees
at all levels within the company in a problem-centred,
action programme.
 A TOTALLY INTEGRATED MANAGEME

Effective time management equals increased profitability.

There are three major activities which take up (use up)
the time available in the managerial day:
(1) Planning: A proactive executive function which
requires the identification and communication of the
task to be achieved, the acquisition and allocation
of the resources necessary to its achievement and
the implementation and monitoring of the plan
towards success. In essence the manager plans and
manages events through others.
(2) Controllbig: Likewise an executive function but one
which effective managers undertake from a
distance. The controls which must be exercised
towards the achievement of the task are established
during the planning process. In those instances
where this does not occur then the manager will
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find the need to continually exercise personal

control over both events and people — this is an
inefficient use of the scarce time resource.
(3) Firefighting: A totally reactive aspect of
management in both content and context. Invariably
the result of poor planning, communication and
implementation; this is extremely unproductive
since it frequently leads to doing jobs over and over
again because, in the words of the firefighter,
"There is never enough time to plan the solution
to the problem properly — it's the finger in the dyke
situation".
The terrible danger which organisations face is that the
firefighter is more often promoted because he/she is good
at fighting fires and therefore shows short-term, tangible
results.
for the management of quality on a day-to-day basis and
Figure 1 shows the results obtained by one large company everyone must be encouraged (and given the skills and
within the construction industry, of implementing a three- abilities) to make the appropriate decisions and take the
five years quality management programme. This programme right action automatically. One South Coast engineering
was interlinked with their three-five year business plan. company of my acquaintance discovered that by going down
this particular road they now have some 40 quality
inspectors who no longer have a role within the production
team. More importantly the increased number of practical
People, Your Most Important Resource staff suggestions related to the improvement of the product
I remember attending a seminar early in 1989 on the and the manner of its production is more than repaying
subject of training to overcome the skills shortage the cost of implementing Total Quality Management.
envisaged for the 1990s. One of the speakers began his
session by placing a £20 note and an ordinary brick, side Yet another company has gone a stage further. Suggestions
by side on the table in front of him and, along with an made by members of staff which are considered viable (by
intrigued audience, gazed at the two for a couple of the TQM Project Management Team) are recommended
minutes or so. He then turned to the assembly and stated for Board approval; together with complete resources
that no matter how long the finance and the raw materials budgeting. Once Board approval is obtained the employee
remained there on the table they would do nothing more responsible for the suggestion is given the authority and
than simply lie there and they would certainly not of accountability for the management of the project and the
themselves add value to the business. His message was resources allocated to it. In other words the individual
clear, "Only people add value to a business!". becomes responsible for the successful implementation, in
all its phases, of his/her original suggestion.
If companies are to achieve their strategic excellence goals
then every employee within the company from the highest There can be no doubt, the prime function of Directors,
to the lowest must be given personal responsibility Managers and Supervisors must be to:
 MANAGEMENT DECISION 28,7

Change the old, outmoded habits, beliefs and Figure 2. The Communication Loops ofPerformanc
attitudes which inhibit performance for those which Related Appraisal
revitalise and realise the expectations of everyone.
Train employees at all levels in the necessary skills
of communicating, problem solving and decision
making. The strategic operating plan
Put into place the organisational structure, policies produced by the main board
and procedures which provide the necessary
nourishment to the morale and motivation of all
involved in the success of the enterprise.

Performance Related Appraisal and Reward

I
Whatever the reasons for implementing any form of
appraisal there is one imperative for an effective and
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successful performance related appraisal and reward

scheme, that is the overriding aim must be: to ensure the The divisional/subsidiary
achievement of the corporate strategic and operating plans produced by
through the efficient use of the human resource. divisional/subsidiary boards

The most successful schemes are those which are

specifically designed to meet the organisational needs.
They are closely aligned with the strategic and operational
planning process, applied equally to the highest in the
organisation as to the lowest; capable of providing objective
scales of measurement which have a direct relationship
to the critical items of the business and are an integral
part of the organisational culture which allows employees Departmental operating plans
to see and understand the value and importance of their produced by departmental
contribution to the company's success. Effective managers and staffs
performance related appraisal will:
• Provide a management control mechanism which
identifies to individuals that part of the corporate
plan for which they are accountable.
• Establish performance feedback loops between
managers and subordinates and between staff and
management which have a direct bearing upon the
progress towards the achievement of the (annual) Personal operating plans
operating plan. (performance related appraisals)
• Give line managers a motivational tool for which
they are responsible and which supports and
strengthens their position, yet encourages an
effective partnership between them and their
subordinates.
• Provide a basis for a performance related reward
structure. a missile guidance system and provide any corrective action
at the actual moment of necessity.
As can be seen from Figure 2, a vital communications loop
is established by which information related to the annual The operating plan (and indeed the strategic plan too) is
operating plan is cascaded down through the organisation a dynamic entity. It follows, therefore, that the personal
by stages to connect with the personal operating plan of operating plan is equally dynamic because it will contain:
the individual (also an annual event). At the same time
information directly related to progress towards the • brief details of the job to be undertaken during the
achievement of the operating and strategic plans is carried year ahead;
back to board level. The loop should, ideally, operate in • the key results tasks jointly agreed between
a teleometric manner, i.e. it should act in the manner of manager and subordinate;
 A TOTALLY INTEGRATED MANAGEMENT SYSTEM
• the jointly agreed standards of performance against
which the individual's achievement will be
measured;
• an identification of the actions which will be critical
to the successful completion of the personal
operating plan
Once one has agreed the parameters of operation by the
individual and the standards by which his/her performance
is to be measured it now becomes possible to assess on
a yearly basis the actual performance achieved in terms
of, for example, standard, above average or outstanding.
It then becomes a relatively simple task to evolve the
means of Performance Related Reward and, as a by-
product, update the job description which would be used
in the recruitment situation.
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The proper business
plan is the fulcrum of any
organisation
One method (depicted in Table I) utilises a matrix. In
essence there are three salary points at which
performance is measured: Scale Minima; Scale Maxima-
plus and a Mid-point. The difference between the
minimum and maximum points was 26 per cent of the
minimum salary. Actual performance of individuals is
measured in terms of outstanding, above average and
standard. As can be deduced, there is an encouragement
to employees at the lower end of the salary band to
achievement of an outstanding performance rating early
on in their appointment. Equally, those who have been
in post for some time (and have not progressed career-
wise for whatever reason) were also encouraged to remain
outstanding performers because:
(1) Each year the minimum salary scale is adjusted in
line with the appropriate current market percentiles/
quartiles with the corresponding adjustment of the
other two points.
(2) It is possible to go above the maximum of the salary
band.
The Benefits of Totally Integrated
Management System
"No plan survives contact with the enemy", is an oft
quoted maxim.
However, a properly put together business plan can
indeed, must survive that contact because it is the fulcrum
Table 1.Performance Related Reward Matrix
Possible Percentage Annual Pay Award for Performance
Salary Points
Performance
Rating Minima Mid-point Maxima-plus
% % %
Outstanding 14 12 10
Above-average 9 8 7
Standard 6V2 6 5
around which the success of the organisation will revolve.
It can only survive if it and the other major facets of the
operation are fully and properly integrated.
To achieve this, three needs must be acknowledged and
satisfied:
(1) The Need to Communicate Effectively
The strategic and operational objectives must be
communicated to all levels within the organisation
and in such a manner they can be readily
understood and assimilated. Equally information of
value and importance to the success of the
corporate aim must find its way to board level, no
matter where it originates within the company.
(2) The Need to Co-ordinate Effectively
Frequently within organisations it happens that
different departments have conflicting operational
objectives, e.g. the Sales Department objectives
may be the maximisation of the sales effort whereas
the Finance Department may be engaged in a
company-wide cost cutting exercise. Though there
may be an apparent incompatibility it must be
possible to co-ordinate both activities to achieve
the overall business plan.
(3) The Need to Control Effectively
The perceived fear of many managers is that if they
allow others the autonomy and responsibility for
aspects of the job for which they are held
accountable they will no longer have control over
events. The simple reality is that out of total quality
management will come the necessary corporate
policies and operational procedures and, further
still, from the conducted performance related
appraisal scheme will come the jointly agreed
controls at staff level.
It is the appropriate level of interaction between these
three which is the point of integration and is best displayed
by Figure 3.
 MANAGEMENT DECISION 28,7

Figure 3. enables employees to both understand them and

be committed to the achievement of them.
The Totally Integrated Management System
• Every employee with the company will, in the
words of SAS Airlines, view each customer as an
individual whose needs and expectations are
paramount.
• The growth of a corporate culture and belief that
only quality people produce quality goods and
services.
• Managers at all levels are provided with a range
of effective motivational tools with which to achieve
through people.
• Effective teams are developed at all levels within
the organisation.
• Salary increases are funded through increased
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performance rather than paper productivity

agreements to which very few within the
Total organisation are committed.
quality Performance
management related
appraisal/reward
The proof of any pudding, irrespective of its ingredients,
programme must always be in its eating. Suffice it to say I know of
one company in the South of England which used strategic
planning, total quality management and a performance
related appraisal and reward scheme to:
• Increase its turnover ten-fold (circa £10 million to
There are a number of benefits which accrue from a totally over £100 million) over four years.
integrated management system, the major among them • Increase its profit by the same ratio (£3 million to
being: around £30 million) during the same period.
• The corporate aim and objectives are cascaded • Increase its profit per capita of staff during the four
down through the organisation in a manner which years from £10,000 to £16,000.

Ralph F. Long is currently a Director of Managing Change Effectively Ltd, a Management Consultancy operating in the UK.

Application Questions
(1) How do sub-systems and sub-cultures in your organisation affect the achievement of super-ordinate objectives?
(2) Do personnel motivation and reward systems reflect your organisation's mission, strategy and objectives? If not,
how could they be improved?
(3) What do you understand by the term ' Total Quality Management?" Ask one of your colleagues and compare his/her
answers to yours. Are there significant discrepancies?