Group 1

BSA 2Y1-2
OPERATIONS
MANAGEMENT
CHAPTER 2:
FRAMEWORKS FOR
ORGANIZATIONAL QUALITY
The objectives of this chapter are:

To provide an overview of the Malcolm Baldrige National Quality

Award and other related award programs, ISO 9000, and Six
Sigma as frameworks for quality and performance excellence; and

To understand the differences in scope, purpose, and philosophy

of these frameworks, so as to make informed choices when
deciding to pursue an approach to organizational excellence.
The Malcolm Baldrige National Quality Award and other
related award programs, ISO 9000, and Six Sigma.

Those awards are given by different organizations that measures

the quality of service, management, product and competency of
companies through their criteria.
Based on the Malcolm Baldrige National Quality
Award the purpose of the award are to:
 Help stimulate companies to improve quality and productivity for the pride of
recognition while obtaining a competitive edge through increased profit;
 Recognize the achievements of those companies that improve quality of their goods
and services and provide an example to others;
 Establish guidelines and criteria that can be used by business, industrial,
governmental, and other enterprises in evaluating their own quality improvement
effort; and
 Provide specific guidance for other enterprises that wish to learn how to manage for
high quality by making available detailed information on how winning enterprises
were able to change their cultures and achieve eminence.
Based on the Malcolm Baldrige National Quality
Award the Criteria for performance excellence:
1. Leadership: This category examines how an organization’s senior leaders guide and
sustain the organization.
2. Strategic Planning: This category examines how an organization develops strategic
objectives and action plans
3. Customer and market focus: This category examines how an organization determines
requirements, needs, expectations, and preference of customers and markets.
4. Measurement, Analysis, and Knowledge management: This category examines how
an organization selects, gathers, analyze, manages, and improves its data,
information, and knowledge assets, and how it reviews its performance.
5. Human Resource Focus: This category examines how an organization’s work
systems and employee learning and motivation enable employees to develop and
utilize their full potential in alignment with the organization’s overall objectives and
action plans.
Based on the Malcolm Baldrige National Quality
Award the Criteria for performance excellence:
6. Process management: This category examines the key aspects of an organization’s
process management, including key product, service, and organizational processes for
creating customer and organizational value, and key support processes involving all
work units
7. Business results: This category examines an organization’s performance and
improvement in key business areas-product and service outcomes, customer
satisfaction, financial and marketplace performance, human resource outcomes,
operational performance, and leadership and social responsibility.
Malcolm Baldrige National Quality Award Criteria
Framework:
The seven categories form an integrated management system as illustrated in the next
slide. The umbrella over the seven categories reflects the focus that organizations must
have on customers through their strategy and action plans for all key decisions.
Leadership, strategic planning, and customer and market focus represent the
“leadership triad” and suggest the importance of integrating these three functions.
Human resource focus and process management represent how the work in an
organization is accomplished and leads to business results. These functions are linked
to the leadership triad. Finally, measurement, analysis, and knowledge management
supports the entire framework by providing the foundation for a fact-based system for
improvement.
Malcolm Baldrige National Quality Award Criteria
Framework:
The Deming prize:

The Deming application prize was instituted in 1951 by the Union of Japanese Scientist
and Engineers (JUSE) in recognition and appreciation of W. Edwards Deming’s
achievements in statistical quality control and his friendship with the Japanese people.
The judging criteria consist of a checklist of 10 major categories: policies, the
organization and its operation, education and dissemination, information gathering,
communication and its utilization, analysis, standardization, control/management,
quality assurance, effects and future plans.
The Baldrige Criteria and the Deming Philosophy:

Specific portions of the Baldrige criteria that supports each of the Deming’s 14 points are
summarized here:
1. Statement of purpose – strategy development requires a mission and vision.
2. Learn the new philosophy – Communication of values, expectations, customer focus,
and learning is a key area of the organizational leadership item.
3. Understand inspection – The process management category addresses the
development of appropriate measurement plans.
4. End price tag decisions – this is implicitly addressed throughout the process
management category and in the criteria’s emphasis on overall performance and
linkage among processes and results
5. Improve constantly – Continuous improvement and learning is a core value of
Baldrige.
The Baldrige Criteria and the Deming Philosophy:

6. Institute training – The human resource focus category recognizes the importance of
training and employee development in meeting performance objectives.
7. Teach and institute leadership – Category 1 is devoted exclusively to leadership, and
its recognized as the principal driver of the management system
8. Drive out fear and innovate – The human resource focus, customer and market focus,
and strategic planning categories focus on work design, empowerment, and
implementation issues that support this point.
9. Optimize the efforts of teams and staff – The criteria have a significant focus on
teamwork and customer knowledge in product/process design and process
management, as well as in the human resource focus category.
10. Eliminate Exhortations – While not directly addressed, the focus on work and job
design as the driver of high performance makes this a moot point
The Baldrige Criteria and the Deming Philosophy:

11. Eliminate Quotas and MBO; institute improvement; and understand processes – The
leadership and strategy development items, as well as the measurement, analysis
and knowledge management and process management categories deal with fact-
based management and understanding processes.
12. Remove barriers – The leadership and human resource focus categories, as well as
the customer satisfaction and relationships item support this goal.
13. Encourage education – This is addressed directly in the human resource focus
category
14. Take action – This role of leadership is addressed directly in the leadership category.

The consistencies among Deming’s 14 points and the Baldrige criteria attest to
the universal nature of quality management principles.
ISO 9000:2000

The International Organization for Standardization, founded in 1946 and composed of

representatives from the national standards bodies of 91 nations, adopted a series of
written quality standards in 1987, which were revised in 1994, and again (significantly) in
2000.The standards were created to meet five objectives:
1. Achieve, maintain, and seek to continuously improve product quality (including
services) in relationship to requirements.
2. Improve the quality of operations to continually meet customers’ and stakeholders’
stated and implied needs.
3. Provide confidence to internal management and other employees that quality
requirements are being fulfilled and that improvement is taking place.
4. Provide confidence to customers and other stakeholders that quality requirements
are being achieved in the delivered product.
5. Provide confidence that quality system requirements are fulfilled.
ISO 9000:2000 Quality management principles:

Principle 1: Customer Focus

Organizations depend on their customers and therefore should understand current and
future customer needs , should meet customer requirements, and strive to exceed
customer expectations.
Principle 2: Leadership
Leaders establish unity of purpose and direction of the organization. They should create
and maintain the internal environment in which people can become fully involved in
achieving the organization’s objectives.
Principle 3: Involvement of People
People at all levels are the essence of an organization and their full involvement enables
their abilities to be used for the organization’s benefits
ISO 9000:2000 Quality management principles:
Principle 4: Process Approach
A desired result is achieved more efficiently when activities and related resources are
managed as a process
Principle 5: System Approach to Management
Identifying, understanding, and managing interrelated processes as a system
contributes to the organization’s effectiveness and efficiency in achieving its objectives
Principle 6: Continual Improvement
Continual improvement of the organization’s overall performance should be a permanent
objective of the organization
Principle 7: Factual Approach to Decision Making
Effective decisions are based on the analysis of data and information.
Principle 8: Mutually Beneficial Suppliers Relationships
An organization and its suppliers are interdependent and a mutually beneficial
relationship enhances the ability to both to create value.
Six Sigma:

Six Sigma can be best described as a business improvement approach that seeks to find
and eliminate causes of defects and errors in manufacturing and service processes by
focusing on outputs that are critical to customers and a clear financial return for the
organization. Six Sigma philosophy is to have all critical processes, regardless of
functional area, at a Six Sigma level of capability.
The core philosophy of Six Sigma is based on some
key concepts:
1. Think in terms of key business processes and customer requirements with a clear
focus on overall strategic objectives.
2. Focus on corporate sponsors responsible for championing projects, support team
activities, help to overcome resistance to change, and obtain resources.
3. Emphasize such quantifiable measures as defects per million opportunities (DPMO)
that can be applied to all parts of an organization: manufacturing, engineering,
administrative , software and so on.
4. Ensure that appropriate metrics are identified early in the process and that they focus
on business results, thereby providing incentives and accountability.
5. Provide extensive training followed by project team deployment to improve
profitability, reduce non-value-added activities, and achieve cycle time reductions
The core philosophy of Six Sigma is based on some
key concepts:
6. Create highly qualified process improvements experts (“green belts,” “black belts,”
and master black belts’’) who can apply improvement tools and lead teams.
7. Set stretch objectives for improvement.
Comparing Baldrige, ISO 9000, and Six Sigma

Baldrige focuses on performance excellence for the entire organization in an overall

management framework, identifying, and tracking important organizational results; ISO
focuses on product and service conformity for guaranteeing equity in the marketplace
and concentrates on fixing quality system problems and product and service
nonconformities; and Six Sigma Concentrates on measuring product quality and driving
improvements and cost savings throughout the organization.
CHAPTER 3:
Performance Excellence ,
Competitive Advantage, and
strategic management.
The objectives of this chapter are:

• On how total quality contributes to competitive and discusses

the role of quality and performance excellence in an
organization’s business strategy.
• Examine the relationship between quality and profitability;
• Discuss cost leadership, differentiation, and people as principal
sources of competitive advantage, and their relationship to
quality;
• Describe the importance of quality in meeting customer
expectations in product design, service, flexibility and variety,
innovation, and rapid response;
The objectives of this chapter are:

• Discuss the role of information in strategic planning and

quality-focused decisions; and
• Describe the role of quality in strategy formulation and
implementation.
COMPETITIVE ADVANTAGE denotes a firm’s ability to achieve market superiority over its
competitors. In the long run, a sustainable competitive advantage provides above-
average performance.

STRATEGY is the pattern of decisions that determines and reveals a company’s goals,
policies, and plans to meet the needs of its stakeholders.

STRATEGIC PLANNING is the process by which the members of an organization

envision its future and develop the necessary procedures and operations to carry out
that vision
Quality and Competitive Advantage:

A strong competitive advantage has six characteristics, each of which relates closely to,
and is supported by, a focus on quality and performance excellence.
1. A strong competitive advantage is driven by customers wants and needs.
2. A strong competitive advantage makes a significant contribution to the success of
the business.
3. A strong competitive advantage matches the organization’s unique resources with
the opportunities in the environment.
4. A strong competitive advantage is durable and lasting and difficult for competitors to
copy.
5. A strong competitive advantage provides a basis for further improvements.
6. A strong competitive advantage provides direction and motivation to the entire
organization.
Quality and Competitive Advantage:

The findings are illustrated below. The value of the product in the marketplace is
influenced by the quality of its design. Improvements in performance, features, and
reliability will differentiate the product from its competitors, improve a firm’s quality
reputation, and improve the perceived value of the product.
Sources of Competitive advantage:

Cost leadership:
Many firms gains competitive advantage by establishing themselves as the low-cost
leader in an industry. Low cost can result from high productivity and high capacity
utilization.
Differentiation:
To achieve differentiation, a firm must be unique in its industry along some dimensions
that are widely valued by customers. It selects one or more attributes that customer
perceive as important and position itself uniquely to meet those needs.
People:
The competitive advantage resulting from an organization’s people can drive
low cost and differentiation. Much of its cost advantage comes from its very
productive, motivated, and unionized workforce
Quality and Differentiation Strategies

Competitive advantage is gained from meeting or exceeding customer

expectations – the fundamental definition of quality. A business may
concentrate on any of several quality – related dimensions in order to
differentiate itself from its competitors. These key dimensions are:
• Superior product and product design
• Outstanding service,
• High agility,
• Continuous innovation, and
• Rapid response.
Competing in superior product design

Among the most important strategic decisions a firm makes are the selection
and development of new products. The quality of the product’s design is
influence by several dimensions which are:
• Performance – the primary operating characteristics of the product: the
horsepower of the engine or the sound quality of a stereo amplifier.
• Features – the “bell and whistles” of the product : antilock brakes or a
navigation system in an automobile.
• Reliability – the probability of a product’s surviving over a specified period of
time under stated condition of use: the ability of a car to start consistently in
all types of weather and the lack of failure of electronic components.
Competing on superior product design

• Durability – the amount of use one gets from a product before it physically
deteriorates or until replacement is preferable: the number of miles one
would expect from an automobile with normal maintenance
• Aesthetics – how a product looks, feels, sounds, tastes, or smells: the
sleekness of an automobile’s exterior and the black “high tech” look of
modern stereo components
The Role of Quality in Product Design

A firm must focus on the key product dimensions that reflect specific customer
needs. A focus on quality in product design requires significant investment in
engineering to ensure that designs meet customer expectations. Useful
techniques of quality engineering include:
• Concurrent Engineering – in which engineering and production personnel
jointly develop product designs that are both functional and easy to
manufacture, thus reducing opportunities for poor quality;
• Value analysis – in which the functions of every component of a product is
analyzed to determine how it might be accomplished in the most economical
fashion.
The Role of Quality in Product Design

• Design reviews – in which managers assess how well the design relates to
customer requirements and how it might be improved prior to releasing it to
production; and
• Experimental design – in which statistical experiments are applied to
determine the best combinations of product and process parameters for
high quality and low cost
Competing on Service

The importance of service was recognized in the early 1980s because of the
book In search of Excellence by Tom Peters and Bob Waterman. The quality of
the products and services found that the vast majority of consumers believe
that quality is determined by employee behavior, attitudes, and competence.
The Role of Quality in Service

For services, research shows that five key dimensions of service quality
contribute to customer perceptions:
• Reliability – the ability to provide what was promised , dependably and
accurately.
• Assurance – The knowledge and courtesy of employees, and their ability to
convey trust and confidence.
• Tangibles – The physical facilities and equipment, and the appearance of
personnel.
• Empathy – The degree of caring and individual attention provided to
customers
• Responsiveness – The willingness to help customers and provide prompt
service.
Competing on Agility

Success in Globally competitive markets requires a capacity for flexibility and

rapid change of product variety; this is called AGILITY. FLEXIBILITY means
adapting successfully to changing environmental conditions and process
requirements.
The Role of Quality in Agility

To be Agile, an organization needs both effective processes and the ability to

modify those processes as business conditions change. For example, it
requires the ability to continually monitor and sense changing customer needs
and expectations, change designs as necessary, and rapidly roll out new
processes and products. Drawing on the principles of TQ, a customer-focused
organization and a process orientation are necessary prerequisites for agility
Competing on Innovation

Many firms focus on research and development as a core component of their

strategy. Such firms are on the leading edge of product technology, and their
ability to innovate and introduce new products is a critical success factor.
Innovation has become the most important factor in satisfying demanding
consumers in today’s technological world.
The Role of Quality in Innovation
Managing for Innovation is one of the Core Values and Concepts in the Malcolm
Baldrige Award Criteria. The award criteria encourage innovation though several
means:
• The criteria are nonprescriptive.
• Customer-driven quality emphasizes the “positive side of quality” –
enhancement, new services, and customer relationship management.
• Human resource focus stresses employee environment, development, and
recognition, and encourage creative approaches to improving employee
effectiveness, empowerment, and contributions
• Continuous improvement and learning are integral pats of the activities of all
workgroups.
• The focus on future requirements of customers encourages companies to seek
innovative and creative ways to serve their patrons
Competing on Time

In today’s fast-paced society, people hate to wait. Time has come to be

recognized as one of the most important sources of competitive advantage.
CYCLE TIME refers to the time it takes to accomplish one cycle of a process
(e.g., the time from when a customer orders a product to the time that it is
delivered, or the time to introduce a new product).
The Role of Quality in Time Competitiveness
Significant reductions in cycle times cannot be achieved by simply by focusing on
individual subprocesses; cross-functional processes must be examined all across
the organization. Through these activities, the company comes to understand work
at the organizational level and to engage in cooperative behavior. Major
improvements in response time often require work organizations, processes, and
path to be simplified and shortened. To accomplish this , more attention needs to
be paid to time performance.
Strategic Planning for Performance Excellence
Through strategic planning, leaders mold an organization’s future and manage
change by focusing on an ideal vision of what the organization should and could
be three, five or more years in the future. The objective of strategic planning is to
build a posture that is so strong in selective ways that the organization can
achieve its goals despite of unforeseeable external forces
Quality and Performance Excellence as a Strategic
Focus
The traditional focus of business strategies has been finance and marketing, which
parallel two of the principal sources of competitive advantage-cost and
differentiation- discussed earlier in this chapter. Performance excellence leads to
improvements in both areas , and therefore, can be viewed as a strategy in itself,
particularly when one considers the importance of meeting customers wants and
needs.
Quality in the Process of Strategic Planning
Strategic planning helps leadership mold an organization’s future and manage
change by focusing on an ideal vision of what the organization should and could
be 10 to 20 years in the future and developing objectives and actions plans both in
the short and longer term to achieve that vision.
In viewing strategic planning as a process, an organization need to:
• Plan for the long term, and understand the key influences, risks, challenges,
and other requirements that might affect the organization’s future opportunities
and directions.
• Project the future competitive environment to help detect and reduce
competitive threats, shorten reaction time, and identify opportunities.
• Develop action plans and deploy resources – particularly human resources – to
achieve alignment and consistency, and provide a basis for setting and
communicating priorities for ongoing improvement activities.
Quality in the Process of Strategic Planning
• Ensure that deployment will be effective – that a measurement system enables
tracking of action plan achievement in all areas.

Strategic planning consist of two principal activities: DEVELOPMENT and

IMPLEMENTATION. Strategy development consists of defining the mission of the
organization – the concept of the business and the vision of where it is headed;
setting objectives – translating the mission into specific performance objectives;
and defining strategy- determining specific actions to achieve the performance
objectives. Implementation focuses on executing the strategy effectively and
efficiently, as well as on evaluating performance and making corrective
adjustments when necessary.
Quality in the Process of Strategic Planning
• Ensure that deployment will be effective – that a measurement system enables
tracking of action plan achievement in all areas.

Strategic planning consist of two principal activities: DEVELOPMENT and

IMPLEMENTATION. Strategy development consists of defining the mission of the
organization – the concept of the business and the vision of where it is headed;
setting objectives – translating the mission into specific performance objectives;
and defining strategy- determining specific actions to achieve the performance
objectives. Implementation focuses on executing the strategy effectively and
efficiently, as well as on evaluating performance and making corrective
adjustments when necessary.
THANK YOU!