Quality Management Can Deliver Big Rewards with Little Expense

Total Quality Management helps small business owners ensure the quality of their goods or services by involving everyone in the business in the effort to satisfy customers with quality work and product.

Today's competitive market is characterized by accelerating changes, innovation, and massive amounts of new information. Much of this rapid evolution in markets is fueled by changing customer needs. Significant customer behavior and market changes happen almost overnight. Changes in market preference or technology, which used to take years, may now take place in a few short months.

As the pace of change accelerates, it becomes more difficult to maintain stable relationships with suppliers, customers, brokers, distributors, and even your own company personnel. "Putting out fires" and reacting to new emergencies is unfortunately the norm for many large and small companies caught in the whirlpool of technological change.

A new company or a small business has limited financial, personnel, and capital plant/equipment resources and is especially vulnerable to instability brought on by rapid changes in customer behavior. Breaking out of this reactive method of operating is essential if your business is to thrive.

One of the best ways to do so is to focus on the delivery high quality service to every customer. Commitment to quality and customer satisfaction programs are essential if a small business wants to successfully compete against larger competitors. A quality experience, from beginning to end, reinforces a customers' buying preferences for your products and services for their current and future purchases!

Evaluate the Role Quality Management Can Play in Your Business

Continuous quality improvement is the hallmark of successful companies, worldwide. For example, Proctor and Gamble is famous for consciously developing and introducing improved versions of its own current products under different brand names as a method for continuous quality improvement and significant technological advances. But continuous quality improvement does not always mean a limited quality improvement. Entire new product categories can be created by exploiting anomalies in quality and customer satisfaction. P&G created the disposable diaper industry with a significant advance in technology. Federal Express created the overnight letter and package delivery industry, now over $30 billion worldwide, by a significant advance in quality and customer satisfaction.

Does your company need to consider significant changes to provide improved quality and customer satisfaction? Is your company a leader, follower, or niche competitor in your industry category? Most small companies do not compete head-to-head or just follow larger, better-financed competitors. They usually seek a specialized niche of products or services.

A key insight into the need for significant change in quality or customer service is to examine:

• the history of the company: how it first became successful
• the history of the category: how it grew or changed
• the history of competitors: how they grew or changed
• the behavioral needs of customers: have they evolved?

What factors made your company successful? Does your company still have this edge? For example, many small companies are successful because they specialize in a small-volume category segment that a larger company could not make money on or would not commit resources to. Many small snack food companies exist because larger competitors, such as Frito-Lay, will not consider entering a business that does not have the potential for a minimum of $50 million in sales per year.

Or a small company may focus on a narrow segment of specialized customers. For example, think about a machine shop that produces only high-tech machinery for analyzing exotic metals for the aerospace industry. There may not be enough business for more that one or two such supplier companies in the country (or world). Being sensitive to changing customer needs, wants, and evolving technology or service requirements is critical for such a small company to survive.

What has happened to the product category you compete in? Has it changed, grown, shrunk, or evolved with changing end-user needs and wants? What is driving the evolution of the category? Is it new technology, changing customer behavior, or the advent of new information systems? How do you evaluate your company's ability to compete in its current categories? Is your company still successfully occupying its specialty niche? Or is it eroding or changing?

The rapid pace of information systems and technological advances may not only create new competitors, it may provide substitutes for your category's products and services that did not exist a few years ago. For example, it is becoming more common for fast food providers to compete head-to-head with local "standard restaurants" in business areas via fax orders. In the past, fast food restaurants did not consider regular restaurants as direct competitors because of their larger and slower menu preparation. However, standard restaurants now advertise directly to businesses for "fax-ahead menu" selection, so that customers' meals can be ready within minutes of arrival, exactly like a fast-food place.

If your company has lost its niche, is less distinctive in its products and services, or is contemplating starting a new business, significant improvements in quality and customer service or satisfaction may be required to survive. At the same time, do not overlook the possibility of small improvements in company functions.

Small Businesses Have Edge in Implementing Quality Improvements

Larger companies committed to total quality management (TQM) programs may appoint a special manager or VP of quality. In smaller companies, this task is usually undertaken by the chief executive officer (CEO) or the owner. Although it may seem counter-intuitive, a small company has great potential advantage over larger companies in implementing a TQM program with employees. There are fewer people to communicate with, and the manager in charge of implementing the TQM program is generally the owner or CEO. The CEO can make timely, binding decisions about TQM programs.

Personnel in all jobs must understand and commit to the TQM program and work as a team. Company personnel must have permission to go beyond the normal barriers between functional jobs (or departments, if you have them) to communicate in a timely manner on behalf of providing quality and customer satisfaction. All employees, regardless of job, status, or tenure, must understand and commit to customer satisfaction as a number one priority.

Small Changes Can Make a Difference

For many small companies, the secret of continued business success in competing against larger companies is to do everything a little bit better than the competition.

Many companies search only for the great quantum leap in quality or products that will provide a competitive edge, often at the expense of making smaller improvements. But those quantum leaps may be few and far between, while the chance to make small improvements is there almost every day. Quality (and uniqueness) of product is important.

It is also important to have quality in serving customers, quality in advertising and promotion programs, quality in packaging, in company trade show booths, in design, engineering, written and oral communications, trade logos or symbols, and so on. For example, Procter and Gamble is famous for its marketing expertise. However, it also insists on quality and expertise in oral and written communications in all departments, including careful documentation and analysis of event successes and failures. Much of its success is based on trying to do every task in a consistent and high-quality manner.

Do an extraordinary job of the ordinary. Sometimes, a small company has an advantage in simply delivering products and services as ordered by customers, on time, every time. Domino's Pizza built a small company into a large company by guaranteeing delivery of pizzas within 20 minutes. If the delivery took longer than 20 minutes, it was free, regardless of weather. Although safety concerns subsequently caused Domino's to change this policy, it created an expectation and perception in the minds of customers that they would receive faster-than-ordinary service.

Many local distribution companies have trouble satisfying orders, meeting delivery turnaround times, and keeping out-of-stocks down for their grocery store and mass outlet customers. The number of items stocked by modern chain stores and therefore direct-store-delivery distributors has multiplied several fold in the last decade, going from less than 5,000 to close to 20,000 items per average store. Some superstores stock over 50,000 items.

Distributors struggle to fulfill "just the basics" of routine delivery of ordered items on a daily basis. The distribution complexity, evolving store item counts, and growing end user customer needs and wants for variety and "mass customization" is rapidly changing the way new and current products will be delivered to stores and customers in the future. The giant retail stores of today are rapidly approaching a physical limitation on their ability to receive and stock products in their stores on a daily basis.

Try a quality improvement exercise. Every company, regardless of size, can improve quality and customer service. A simple exercise to improve quality is to track an order from its inception to final delivery. Try this checklist and see if any improvements can be made:

• How are products and services sold (with what materials)?
• How and by whom is the order obtained from your customer?
• How is the order recorded for your company and your customer?
• How is the order processed within your company?
• Is there a system to check for any order discounts to customers?
• How long does it take to process and deliver the order to the customer?
• Do you have any accuracy checks for the order, with the customer and internally?
• How is the final product or service delivered to your customer?
• Have you checked customer relationship "manners" with everyone who has direct contact with your customers?
• Have you allowed everyone associated with order processing to meet periodically and discuss improvement possibilities?
• Do you have a customer follow up procedure for orders?
• Do you review your order and service satisfaction level at least quarterly with each customer?

Won't Total Quality Management Drive Up My Costs?

The idea of "quality" is free. You don't need to invest in an elaborate, "canned" program to focus on delivering the highest quality products and customer service. In fact, studies on successful implementation of TQM programs and customer service show a significant improvement in company efficiencies, sales, and profitability, often with fewer people and at less cost than before.What's more, increased good will and customer loyalty are valuable intangible assets can lower costs and provide tangible gains in productivity, sales, and ultimately profits.

Most companies, small and large, operate well below 100 percent of their potential efficiency. What is your evaluation of operating efficiency for your company? 50 percent? 75 percent? 40 percent? Some of this under-utilized potential may be measured in quantitative terms, such as plant capacities, the ratio of parts meeting standard to the number of rejects, or the turnaround time for orders to delivery. However, much of this underutilized potential is more subtle, difficult to see, and difficult to correct.

When each employee is personally committed to quality and customer satisfaction, people will be doing more things right and better the first time. This results in lower costs, less waste, and higher productivity. Much of the success of Japan's auto industry rests less on innovation and more on a commitment to quality and efficiency. Only recently have U.S. automakers approached the efficiency and productivity of Japanese automakers. U.S. automakers are also lowering costs, waste, and substandard assemblies, while increasing sales and profits. Detroit's attention to car buyers' wants, needs, and customer satisfaction has also yielded gains in U.S. car sales compared to the imports for the first time in decades.

Will TQM Training Waste Time?

Companies new to TQM programs worry that training and discussion sessions will detract from available productive company time, lowering efficiency and increasing costs. Successful TQM programs have just the opposite effect. Every employee in every company can provide examples where efficiency can be improved.

Most companies survive with large inefficiencies and unnecessary costs because they have reached a point with large enough sales and margins that these problems may not be readily apparent. If employees are encouraged and rewarded for TQM participation, with higher job satisfaction and perhaps even financial incentives, customer satisfaction, production, efficiencies, sales, and profits will increase. Costs and customer problems will decrease.