Strategic Planning and the Baldrige Award LECTURE#28 TQM.

Strategic Planning and the Baldrige Award

LECTURE#28TQM

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Strategic Planning and the Baldrige Award

• The Baldrige Award recognizes the importance of integrating total quality principles with overall business planning.

• The Strategic Planning category addresses strategic business planning and deployment of plans.

• It stresses that customer-driven quality and operational performance are key strategic business issues that need to be an integral part of overall company planning, and emphasizes that improvement and learning must be integral parts of company work processes.

• The special role of strategic planning is to align work processes with the company strategic directions, thereby ensuring that improvement and learning reinforce company priorities.

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Strategic Planning and the Baldrige Award

The Strategic Planning category examines how organizations;• • 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.

• This is to help ensure that short-term action plans are aligned with the organization’s longer-term strategic 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.

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Strategic Planning and the Baldrige Award

• • Ensure that deployment will be effective – that a measurement system enables tracking of action plan achievement in all areas.

• The integration of quality planning with business planning occurred in the 1995 criteria revision.

• Most symbolic was the change in the category’s title from “Strategic Quality Planning” to “Strategic Planning.”

• This change signaled a “major emphasis on business strategy as the most appropriate view of- the-future context for managing performance.”

• The integration of quality and operational issues with business planning became a dominant theme, with a focus on “performance,” “Competitive position,” “customer-related,” and “operational” themes.

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CONDUCTING THE SWOT ANALYSIS

• The rationale for conducting a SWOT analysis before proceeding with the development of the strategic plan is that the organization's plan should produce a good fit between its internal situation and it external situation.

• An organization's internal situation is defined by its strengths and weaknesses.

• An organization's external situation is defined by the opportunities and threats that exist in its business environment.

• The strategic plan should, be designed in such away that it exploits an organization‘s strengths and opportunities, while simultaneously overcoming, accommodating, or circumventing weaknesses and threats.

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IDENTIFYING ORGANIZATIONAL STRENGTHS

• An organizational strength is any characteristic or capability that gives the organization a competitive advantage.

• The following are examples of common organizational strengths:– Financial strength– A good reputation in the marketplace– Strategic focus– High-quality products/services– Proprietary products/services– Cost leadership– Strong management team

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IDENTIFYING ORGANIZATIONAL STRENGTHS

– Efficient technological processes– Talented workforce– Faster time to market

• These are just some of the strengths an individual organization may have: many others are possible.

• The key is accurately defining an organization's strengths before beginning to develop its strategic plan.

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IDENTIFYING ORGANIZATIONAL WEAKNESSES

• An organizational weakness is any characteristic or capability that is lacking to the extent that it puts the organization at a competitive disadvantage.

• These are examples of common organizational weaknesses:– Strategic confusion/lack of direction– Obsolete facilities– Obsolete processes– Weak management team– Insufficient skills/capabilities in the workforce– Poorly defined operating procedures– Too narrow a product line– Products with decreasing demand

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IDENTIFYING ORGANIZATIONAL WEAKNESSES

– Too diverse a product line– Poor image in the marketplace– Weak distribution system– Weak financial position– High unit costs compared with those of competitors– Poor quality in products/services

• These are just a few of many weaknesses an organization may have.

• The main thing is to identify an organization's weaknesses accurately before undertaking the strategic planning process.

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IDENTIFYING EXTERNAL OPPORTUNITIES

• External opportunities are opportunities in the organization's business environment that represent potential avenues for growth and/or gaining a sustainable competitive advantage.

• The following are examples of external opportunities that organizations may have:– Availability of new customers– An expanding market for .existing or potential/planned products– Ability to diversify into related products/services– Removal of barriers that inhibit growth– Failures of competitors– New on-line technologies that enhance productivity or quality– Of course, other external opportunities might be available to an organization

besides these. – You need to identify all such opportunities accurately before undertaking the

strategic planning process.

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IDENTIFYING EXTERNAL THREATS• An external threat is a phenomenon in an organization's business

environment that has the potential to put the organization at a competitive disadvantage.

• Such external threats might include the following:– Entry of lower cost competitors– Entry of higher quality competitors– Increased sales of substitute products/services– Significant slowdown in market growth– Introduction of costly new regulatory requirements– Poor supplier relations– Changing tastes and habits of consumers– Potentially damaging demographic changes

• Many other external threats might confront an organization. • Accurately identifying every potential external threat before you begin the

strategic planning process is a must.

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DEVELOPING THE VISION

• An organization's guiding force, the dream of what it wants to become, and its reason for being should be apparent in its vision.

• A vision is like a beacon in the distance toward which the organization is always moving.

• Everything about the organization-its structure, policies, procedures, and allocation of resources-should support the realization of the vision.

• In an organization with a clear vision, it is relatively easy to stay appropriately focused.

• If a policy does not support the vision, why have it? • If a procedure does not support the vision, why adopt it?

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DEVELOPING THE VISION

• If the expenditure does not support the vision, why make it?

• If a position or even a department doesn't support the vision, why keep it?

• An organization‘s vision must be established and articulated by executive management and understood by all employees.

• The first step in articulating an organizational vision is writing it down.

• This is called the vision statement.

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DEVELOPING THE MISSION• We have just seen that the vision statement describes what an

organization would like to be. • It's a dream, but it's not “pie in the sky”. The vision represents a dream

that can come true. • The mission takes the next step and describes who the organization is,

what it does and where it is going. In developing the mission statement for any organization, one should apply the following rules of thumb:– Describe what, and where of the organization, making sure the component

describes the organization and its customers.– Be brief, but comprehensive. Typically one paragraph should be sufficient to

describe an organization’s mission.– Choose wording that is simple, easy to understand, and descriptive.– Avoid how statements. How the mission will be accomplished is described in

the “Strategies” section of the strategic plan.

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DEVELOPING THE GUIDING PRINCIPLES

• An organization’s guiding principles establish the framework within which it will pursue its mission.

• Each guiding principle encompasses an important organizational value.

• Together, all of the guiding principles represent the organization’s value system—the foundation of its corporate culture.

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Elements of a Total Quality Culture

• The existence of a set of cultural values necessary for successful TQ does not mean that all organization that wish to practice total quality must have the same culture.

• Many aspects of culture differ greatly from one quality oriented company to another.

• Company personnel may prefer to communicate in person or in writing; they may wear uniforms, gray flannel suits, or jeans.

• As long as they hold the core values of TQ, quality can find a home in their organization.

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Creating Quality at Strategic, Tactical and Operational Level

Design and redesign Consumerresearch

Customers

Processes

OutputsInputsSuppliers

•Many people see this as simply a diagram of a typical Production or Operation System that is linked to customers and suppliers. •Visionaries in the practice of TQ see this as a new model of an organization chart from a strategic perspective.

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The Functional Structure and Operations

• In the functional structure, the organization is divided into functions such as operations, marketing, MIS and maintenance, each of which is headed by a manager.

• In such organizations communication occurs vertically up or down the chain of command, rather than horizontally across functions.

• Functional structures provide organizations with a clear chain of command and allow people to specialize in the aspect of the work for which they are best suited.

• They also make it easy to evaluate people based on a narrow but clear set of responsibilities.

• For these reasons functional structures are common in both manufacturing and service organizations at plant and business unit levels.

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Problems with Functional Structure

• Despite its popularity, the functional structure is designed primarily for the administrative convenience of the organization, rather than for providing high-quality service to customers.

• From a TQ point of view, the functional structure has several inadequacies.

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The Functional Structure Separates Employees from Customers

• Few employees in the functional organization have direct contact with customers or even a clear idea of how their work combines with the work of others to satisfy customers.

• The functional structure tends to insulate employees from learning about customer expectations and their degree of satisfaction with the service or product the firm is providing.

• Being insulated from customers encourages in workers a narrow conception of their responsibilities.

• This is often expressed in statements such as “It’s not my job” or “I just work here.”

• Even when such employees want to help customers, they often have such a limited understanding of how their organizational system works that they are unable to do so.

• This often results in de-motivated workers and poor quality work.

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Functional Structure for a Manufacturing Company

President

EngineeringDirector

FinanceDirector

ProductionDirector

MarketingDirector

ManagerPlant # 1

ManagerPlant # 2

OperationsManager

Quality ControlManager

PurchasingManager

AccountingManager

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Functional Structure for a Manufacturing Company

• Most of us have experienced this phenomenon when we call a large organization trying to get help and get switched to several different people before (if we’re lucky) finding someone willing and able to help us.

• If our needs as customers relate to the product or service as a whole, but the knowledge and responsibilities of anyone with whom we deal relate only to their function, we are doomed to disappointment.

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The Functional Structure Inhibits Process Improvement

• No organizational unit has control over a whole processes, although most processes involve a large number of functions.

• This is because the breakup of the organization into functions is usually unrelated to the processes used to deliver a product to the customer.

• This structure is likely to create complex, wasteful processes, as people do things in one area that must be redone or undone, in another.

• For example, some organization maintain a group of engineers whose sole responsibility is to redesign products so that they can be manufactured effectively.

• The engineers who design the products in the first place worry only about product performance, not manufacturability.

• (For another example of problems in coordinating design and manufacturing) Worse yet, if one function tries to improve its part, it may well make things worse (more wasted time and effort, more cost) for another part of the process.

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The Functional Structure Inhibits Process Improvement

• In this environment, continuous process improvement doesn’t stand a chance.

• This arrangement obviously stands in the way of continuous process improvement.

• Organizations pursuing TQ often retain their quality assurance departments, but these units act more as coaches or facilitators to employees, rather than as the group with primary responsibility for quality.

• In summary, the functional organization compromises total quality in several ways: It distances people from customers and insulates them from customer expectations.

• It promotes complex and wasteful processes and inhibits process improvement.

• It separates the quality function from the rest of the organization, providing people with an excuse for not worrying about quality.

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Redesigning Organizations for Quality• Poor organization design can be devastating to a company.

One of Deming’s 14 Points is to “break down barriers between departments” because “people in various departments must work as a team.”

• This slogan captures in a nutshell what the TQ philosophy entails for organizational design.

• People cannot contribute to customer satisfaction and continuous improvement if they are confined to functional prisons where they cannot see customers or hear their voices.

• Some of the more effective ways to break down these barriers are to focus on processes, recognize internal customers, create a team-based organization, reduce hierarchy, and use teering committees.

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Focus on Processes• A process is how work creates value for customers. • Common business process include acquiring customer and

market knowledge, fulfilling customer orders, purchasing, developing new products or service, strategic planning, production or service delivery, distribution, research and development, information management, performance measurement, and training, to name just a few.

• Individuals or groups, known as process owners, are accountable for process performance and have the authority to manage and improve their process.

• Process owners may range from high-level executives who manage cross-functional processes to workers who run machinery on the shop floor.

• Assigning process owners ensures that someone is responsible to manage the process and optimize its effectiveness.

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Process versus FunctionFu

nctio

nal F

ocus

Proc

ess

Focu

s

CEO

Vice President Vice President

DepartmentManager

DepartmentManager

DepartmentManager

DepartmentManager

DepartmentManager

Process B

Process A

Process C

Process E

Process D

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Process versus Function• A process focus, as opposed to the functional structure, is shown

above. • Nearly every major activity within a business involves some form of

cross-functional cooperation. • A process perspective links all parts of an organization together and

increases employee understanding of the entire system, rather than focusing on only a small part.

• In addition, it helps managers to recognize that problems arise from processes, not people.

• By aligning the structure of an organization with the actual work processes that the organization performs, customers may be served more effectively.

• Process management involves the design of processes to develop and deliver products and services that meet the needs of customers, daily control so that they perform as required, and their continual improvement.