This book is about a Business Excellence (BE) strategy that has total customer satisfaction in its foundation. When it comes to satisfying the customer and RETAINING the customer, there is no better statement than what Mahatma Gandhi said:
A customer is the most important visitor on our premises. He is not dependent on us. We are dependent on him. He is not an interruption in our work. He is the purpose of it. He is not an outsider in our business. He is part of it. We are not doing him a favour by serving him. He is doing us a favour by giving us an opportunity to do so.
Mahatma Gandhi
Thus, when it comes to serving customers, and offering them an experience that will make them come back to the products and services offered by you time and time again, a small minority of organizations stand out from the crowd for the energy, commitment, and innovative thinking they apply to do it right. There is a world of difference between those who are truly driven by customer focus and those who simply pay lip service to the ideal, while following a separate agenda. Who are these focused companies? The marketplace offers some clues about which companies are serving their customers best; after all, if you’re making profitable sales to millions of customers, you must be doing something right. But that is only part of the story. An organization wanting to sustain and continually improve its competitive performance over many years needs to have a strategy—a BE strategy.
BE is a powerful integration of proven strategy elements, tools, and processes that will give your company a significant advantage when they are deployed as prescribed across the organization. It is a holistic view that reduces opportunities for suboptimization–optimization (“a situation where a process, procedure, or system yields less than the best possible outcome”—Business Dictionary).
A BE initiative could start by studying BE models adopted by many countries. The most common model is the Baldrige Criteria for Performance Excellence. The Baldrige National Quality Program and the associated award were established and enacted in the United States. The law is named as the Malcolm Baldrige National Quality Improvement Act of 1987. The program and award were named for Malcolm Baldrige, who served as U.S. Secretary of Commerce during the Reagan administration, from 1981 until 1987. In 2010, the program’s name was changed to the Baldrige Performance Excellence Program to reflect the evolution of the field of quality from a focus on product, service, and customer quality to a broader, strategic focus on overall organizational quality—called Business Performance Excellence.
Every organization understands that achieving performance excellence is imperative in order for it to succeed in today’s business world. To achieve this level of excellence, organizations need to operate at many different levels and with many different perspectives. BE models like the Baldrige model create the framework for organizations to think strategically.
As Figure 1.1 illustrates, the Baldrige model focuses on BE. To attain excellence, organizations use a variety of improvement methodologies, such as those shown here. The Baldrige model does not replace these methodologies, but instead integrates these tools and methods to help companies achieve excellence.
Figure 1.1 shows how the excellence pyramid relates to Quality Management System, Lean, and Six Sigma. The Baldrige Criteria, Lean, and Six Sigma are complementary, and not mutually exclusive. Many organizations use Baldrige in preference to other BE models to develop an overall performance map to identify areas that need improvement, and then they use Six Sigma, Lean, or both tools to design operations or improve processes within the organization.
The criteria elements of some of the BE models are shown in Table 1.1.
FIGURE 1.1
Excellence pyramid.
The Criteria Elements of Some of the BE Models
Criteria No. |
Baldrige Model Called MBNQA (Malcolm Baldrige National Quality Award) |
Japan Quality Award |
European and India Model Called the EFQM (Formerly Known as the European Foundation for Quality Management) Model |
1 |
Leadership |
Leadership |
Leadership |
2 |
Strategic planning |
Strategic planning |
Strategy |
3 |
Customer focus |
Customer focus |
People, partnerships |
4 |
Measurement, analysis, and knowledge management |
Information management |
Resources |
5 |
Workforce focus |
Individual and organizational; ability to improve |
People |
6 |
Operations focus |
Value creation process |
Process, products, and services |
7 |
Results |
Activity results |
Results |
Note: India has four national quality/BE awards: (1) CII-EXIM Bank Award for Business Excellence (EFQM Excellence Model), (2) Rajiv Gandhi National Quality Award (Rajiv Gandhi National Quality Award criteria), (3) IMC Ramkrishna Bajaj National Quality Award (IMC Ramkrishna Bajaj National Quality Award criteria), and (4) Golden Peacock National Quality Award (Golden Peacock National Quality Award criteria).
The Baldrige model creates the framework for BE for organizations to think strategically as shown in Figure 1.2.
The framework connecting and integrating the seven categories has three basic elements.
Strategy and Action Plans (roof of the figure) yield the set of customer-and market-focused performance requirements, derived from short- and long-term strategic planning, that must be met and exceeded for the organization’s strategy to succeed. Strategy and Action Plans guide overall resource decisions and drive the alignment of measures for the organization’s work units to ensure customer satisfaction and market success. Preparing an organizational profile detailing the strategy and action plans is a key requirement described later in the chapter.
The System is composed of the six BE categories in the center of the figure that define the organization, its operations, and its results.
FIGURE 1.2
Baldrige Business Excellence Framework. (Used with permission of the Baldrige Performance Excellence Program. 2015. 2015–2016 Framework for Performance Excellence.)
BUSINESS EXCELLENCE CATEGORIES
Leadership (Category 1), Strategic Planning (Category 2), and Customer and Market Focus (Category 3) represent the leadership triad. These categories are placed together to emphasize the importance of a leadership focus on strategy and customers. Senior leaders must set organizational direction and seek future opportunities for the organization. If the leadership is not focused on customers, the organization as a whole will lack that focus.
Human Resource Focus (Category 5), Process Management (Category 6), and Business Results (Category 7) represent the results triad. An organization’s employees and its key processes accomplish the work of the organization that yields its business results.
Category 4: Measurement, Analysis, and Knowledge Management has two main sections:
4.1 Measurement and Analysis, and Review of Organizational Performance
4.2 Information and Knowledge Management
All actions point toward Business Results. The results encompass customer, finance, and operational performance results, including human resource results and public responsibility.
The horizontal arrow in the center of the framework links the leadership triad to the results triad, a linkage critical to organizational success. Furthermore, the arrow indicates the central relationship between Leadership (Category 1) and Business Results (Category 7). Leadership must keep its eyes on Business Results and must learn from them to drive improvement.
Information and Analysis (Category 4) is critical to the effective management of the organization and to a fact-based system for improving company performance and competitiveness. Information and Analysis serve as a foundation for the performance management system.
As the excellence pyramid illustrates to attain BE, organizations use a variety of improvement methodologies, such as those shown in the pyramid and so far covered in The Global Quality Management System: Improvement through Systems Thinking, Lean Transformation: Cultural Enablers and Enterprise Alignment, and the Tactical Guide to Six Sigma Implementation. The BE model does not replace these methodologies, but instead integrates these tools and methods to help companies achieve excellence.
ROADBLOCKS TO BE TRANSFORMATION
Most organizations want quick fixes and immediate results. If they do not get the immediate reward they seek, they may abandon the program and the team or go in search of the next best thing. This need for immediate results has caused the total abandoning, or limited success, of many improvement programs such as the BE strategy.
Generally, leaders do not understand what it takes to build BE skills and shift mind-sets and behaviors. To think that anyone can come out of a four- to five-day training and have any kind of proficiency is just a mockery. Of course, once they have obtained a label as a BE expert, they are placed in impossible situations and given responsibility to make changes that they are not capable of making. It is possible to gain awareness and understanding of the why behind things—and possibly even the what—in short training, but not the how.
Leaders believe that they can delegate BE, and there is nothing they have to do. The group where the most development needs to be done is leadership. The largest paradigm shift is needed there.
Generally, leaders have the following beliefs:
1. Belief that “the only way to significantly reduce costs is to have layoffs because 80% of the cost structure is labor.”
2. Financially oriented people often think that BE is all about cost reductions versus building a flexible and adaptive organization for the future.
As soon as anyone says, “I will use any process improvement method as long as it works,” they have limited BE to a process improvement method. BE is about a holistic Business System (BS) and gets to the very purpose of the organization. It includes both the technical and social—it applies to all.
Successful transformation to a BE culture is full of hardships. It requires an enterprise-wide approach that engages the entire organization and challenges its norms and existing practices. It requires knowledge of new tools and methodologies and a level of internal discipline beyond that in which most organizations operate. The BE journey is where the performance indicators continually go up and up. The journey itself is not only exciting but also very rewarding.
Why does the BE strategy work in some organizations and not in others? In short, the difference between success and failure is in cultural acceptance and the ability of an organization to accept change, not just change to the BE strategy, but change in general.
Understanding the mind-set of business is crucial to the success of implementing the BE strategy.
Let us first understand the BS. As we discussed earlier in Lean Transformation: Cultural Enablers and Enterprise Alignment, a system is “a group of interacting, interrelated, or interdependent elements forming a complex whole.” No system element can function on its own. It has to rely on other elements and has to maintain its relationship with other elements.
The human body is a system where the hands, feet, stomach, heart, and so on are the elements that enable the body to function as a whole. No element can function on its own. Dr. Ackoff once joked; “try cutting off your hand and put it on the table—it won’t work!”
Now, let us apply the system concept to business, and as stated in the beginning, how does this translate into implementing BE strategy for a business?
Let us consider a business having the following core functions:
• Sales
• Marketing
• Engineering
• Production
• Customer Service
Figure 1.3 shows the core business functions.
FIGURE 1.3
Core functions.
CORE FUNCTIONS HAVE THEIR OWN PROCESSES
Each one of these core functions has its own set of defined processes, and it uses its processes to accomplish its goals (Figure 1.4).
FIGURE 1.4
Core function processes.
CORE BUSINESS SUPPORT FUNCTIONS
Now, apart from the main core functions, business is also supported by support functions such as the following:
• Human Resources
• Finance
• Information Technology (IT)
• Warehousing
Called support functions (Figure 1.5).
At this point, the analysis of the BS looks vertical. Individuals inside a particular functional area have full view of their own process but have difficulty seeing outside of these “silos.” They intersect with another functional area only when they need to use a common resource. For example, an intersection between sales and production functional areas occurs when a tracking system managed by the IT support function is used by the production function to deliver a product to a customer. In short, each individual part of the BS is trying to work on its own. Another example of this “silo” mentality can be commonly seen with engineering when engineering changes are carried out without changing production processes.
FIGURE 1.5
Support functions for core functions.
This limited perspective is why it is crucial to understand the business processes that cut across these functional process areas.
A business process is a collection of related activities that produce a product or service of value to the organization, its stakeholders, or its customers.
Let us look at the following examples of main business processes:
• Quote-to-cash
• Procure-to-pay
• New product/service development
• Order fulfillment
Becoming familiar with cross-functional business processes described in Figure 1.6 greatly increases the understanding of the interrelationships between the core functions and clarifies how a quality project in one area of the company will affect other areas (Figure 1.6). This interaction and interdependence among core functions are the key to removing the roadblocks in implementing a BE strategy. However, we must consider another aspect of the business process: Its Purpose.
FIGURE 1.6
Typical business processes pass through all core functions.
No business process can be effective unless the purpose is properly communicated to all stakeholders. Figure 1.7 shows the main purpose of the organization. Executive leadership should drive management on the business purpose and impress upon all members of the organization the importance of understanding and fulfilling that purpose. The purpose is to improve continuously through set goals, metrics, and rewards (Figure 1.7). In addition, the leadership must govern, manage, adjust, and reset the purpose based on customer needs and other factors.
PROCESS IMPACT ON THE ORGANIZATION
A BE strategy recognizes that there are many input, output, and feedback sources for an organization. Each output may have its own process dependent on the input from other processes. All inputs and outputs of a particular process should be measurable so that quality can be controlled (Figure 1.8).
FIGURE 1.7
The purpose of an organization is to meet goals.
Suppliers, Inputs, Process, Outputs, and Customers (SIPOC) is a tool that can be used to help identify these processes in an organization. Here, it is important to know that improvements in one area may create errors in another.
In the Global Quality Management book, we have seen that there are many input, output, and feedback processes for an organization. All inputs and outputs of a particular process should be measurable so that quality can be controlled (Figure 1.8).
FIGURE 1.8
Process inputs and outputs with feedback and measurement points.
To truly grasp the system, however, we must avoid the following traps:
• Not approaching BS as a system—and deploying the elements and tools separately.
• Approaching BE assessments as ways to demonstrate compliance rather than as ways to demonstrate meaningful improvement in processes and results within your businesses and functions.
• Seeing BS elements as obligations in addition to your jobs instead of better ways to do your jobs.
• Here are important thoughts:
• If we continue to fail to capitalize on the synergies between and among the elements and tools of BS…
• If we continue to approach assessments as demonstrations of compliance and fail to insist that our improvement efforts lead to meaningful improvement in performance…
• If we continue to see BS deployment as an obligation that is tacked on to our real jobs … we will continue to be part of a company that can taste greatness, but just can’t quite pull off greatness.
• We can’t expect to take apart a system and have it achieve its greatest potential. If we focus our attention on some components while ignoring or just going through the motions with others, we get a system that is out of balance. We get a system that can’t achieve its true potential.
Having warned ourselves against the possible pitfalls, let us now chart out a BS framework on the basis of the main criteria of the BE models.
The functions of the BE are as follows:
• Leadership (Foundation)
• Strategic Planning
• Growth
• Operational Excellence
• Functional Excellence
• Assessment
• Training and Learning
Table 1.2 shows the BS framework.
BS Framework
Note: T, training and learning for each functional aspect should be planned through courses, self-study, councils, on-the-job training, and Kaizen.
PLAN FOR CHANGE, INTRODUCTION OF THE BE STRATEGY IN THE ORGANIZATION
Here, we need to consider two parallel complementary organizations. One is the existing organization and the second is an internal BE promotional organization called an organization for change. It may be headed by an Operational Excellence (OpEx) manager or an equivalent person fully supported by necessary resources and the top management. He or she will be assisted by a Kaizen committee charged with learning, training, educating, and initiating the implementation of each of the functional aspects described in Table 1.2 for the BS framework.
The Kaizen committee (team) formation and its work are described in great detail in Lean Transformation: Cultural Enablers and Enterprise Alignment, a sister to this book.
The important tasks of the committee are as follows:
1. The committee will be a homogeneous group committed to change. It will consist of line managers who can use examples from their fields of work and expertise.
2. A gap analysis tool is used to identify a performance difference between a current state and a desired or future state. Buy the criteria published by the BE model, for example, the 2015–2016 criteria of the Malcolm Baldrige National Quality Award (MBNQA) model. Find the gaps in each functional aspect by comparing the existing function with the desired function as laid down in the BE model. The desired or future state may be set by recognizing the potential performance determined through such activities as benchmarking or through organizational strategic planning. For example, the annual goal may turn into an intermediate goal next year and an intermediate goal may turn into a noble or ultimate goal the year after the next.
3. The committee will unite learning with implementation by following the learn, apply, and learn (LAL) process.
4. The main steps of the LAL process are as follows:
• Approach
• Deployment
• Learning
• Integration
• Define and identify the methods used to accomplish the process.
• Methods are appropriated to the BE criteria requirements and are effective.
• Describe the process of a function through documentation or by using a SIPOC diagram (The Global Quality Management System: Improvement through Systems Thinking) to address the process requirements.
• The approach includes the appropriateness of the methods to the process requirements and the effectiveness of their use.
• Approach includes study of all multiple requirements of the process and it is fully responsive to these requirements.
• This approach will be repeatable and systematic and will be based on reliable data.
• Through this approach, it becomes easy to train all levels of employees who use this process.
• Utilization of Kaizen teams that drive action plans.
• Heavy reliance on the BS, especially in the area of Lean, Six Sigma, and Global Quality System.
• The approach is applied consistently, meaning it is reviewed and improved as necessary based on changed customer requirements, customer complaints, or employee suggestions. The modified procedure (new revision) is communicated to all concerned using an “I have read it and understood it” procedure.
• This approach is used by all work units through an intranet-based quality system documentation and engineering documentation.
• The approach is redefined through regular cycles of improvement twice per year. The improvements come through corrective actions on the basis of customer complaints, employee inputs for improvement, and Lean Kaizen efforts.
• Breakthrough change to the approach is encouraged through LEAN Kaizen and innovation in product design to serve customers’ anticipated needs, for example, introducing alternative material in a product, one-piece design combining two separate parts, reducing transaction cost through automation.
• All these changes are documented and communicated to all concerned through changed Value Stream Maps, Process Failure Mode Effects Analyses, work instructions, and tooling changes as required.
• The refined processes and innovations (as applicable) are shared with other organization partners.
• This process approach is aligned with other organizational requirements like strategic planning by defining process metrics and monitoring their effectiveness and efficiency.
• The approach is aligned with the stakeholder’s needs.
• Forms the backbone of the plan–do–check–act (PDCA) for overall plant leadership system.
• Integrates with Global Quality Management System (GQMS) and Measurement/Analysis systems as the execution arm “to drive” the organization to the next year’s goals.
• Synchronizes with reward and recognition systems to drive passionate work culture.
• Heavily integrated into goal setting for a visual and organized approach to the HR Performance Management System.
The last two important activities of this committee are as follows:
1. Promotion: Publish activities of training and education through brochures and fliers as part of the BE implementation project.
2. Such success stories lead to a snowball effect. Hence, combine celebration and fun during the presentation of the success stories.
b. Introduction of the BE Strategy in the Organization
• A good starting point will be to prepare and publish an organization chart with the names and position descriptions of the current holders. The next important task will be to prepare an organizational profile set out in the BE model criteria.
• It sets the context for the way the organization operates.
• It summarizes the organization’s environment, key working relationships, and strategic challenges.
• It provides the basis for evaluation of the organization.
The profile includes the following:
• Organizational environment
• Organizational relationships
• Competitive environment
• Strategic challenges
• Performance improvement system
Here is an example of a typical organizational profile of an imaginary organization called “Speedy Electronics Limited” (Speedy in short form).
Speedy is a manufacturer of printed electronic circuit boards. 2013 sales of $100-million positions it as the second largest Small and Medium Enterprises (SME) operation within the state of Gujarat, India. Its chairman and managing director, Mr. Racer, started the company as a small-scale supplier to the Indian Space Research Organization in Ahmedabad and went public in 2007. Double-sided circuit boards with surface-mount components were started in 2008, resulting in global scope position.
Channels to market include direct (75%) and distribution (25%). Larger original equipment manufacturers (OEMs) are typically sold direct with distributors handling midsized and small-sized OEMs.
Distributors also serve the aftermarket “user” segment on a retail basis and in some cases offer catalog and Internet sales.
Speedy has a diverse workforce hailing from various states in India with various religious beliefs and practices. The common purpose, vision, mission, values, and global processes act as uniting common threads across the organization. Employee development opportunities, including functional training, are offered within the company.
The tuition reimbursement program funds higher education for employees through accredited technical institutes.
Annual employee surveys measure employee engagement and satisfaction. Survey results help the management select areas of improvement across the organization to enhance the work environment and drive retention.
Speedy core competencies are as follows:
1. Innovative product design using 3D Auto Cad, CNC high-speed drilling, and fully automatic mounting machine for surface-mounted components (SMCs) with inbuilt component quality checking feature
2. Multilayer printed circuit boards for mobile phones
Speedy takes compliance with governmental and corporate requirements very seriously. It actively pursues certifications per ISO-9001: 2016 and ISO/TS16949:2002. Its manufacturing plant is ISO 14001 certified. SCM, Human Resources, IT, and Finance are organized in a traditional reporting structure (organization chart not given here).
Key strategic issues include the following:
• Within India—redistribute the product mix
• Africa and Middle East—speed up the growth
• Global—differentiated new product development
Process improvement is increasingly becoming a part of the Speedy culture.
Primary process improvement tools include Business Process Improvement and Lean Six Sigma. Regular internal assessments help Speedy stay on the path of continuous improvement.
Profile example is complete.
IMPORTANCE OF PREPARING AN ORGANIZATIONAL PROFILE
The purpose of such profile is to determine Key Business Factors (KBFs) for an organization
• KBFs describe significant facts or aspects about the organization
• A quick snapshot of the organization
• The operating environment
• Significant working relationships
• Key challenges
• Help focus the criteria in terms of its relevance to the organization
KBFs for Speedy may be extracted from the profile as shown in Table 1.3.
KBF Examples
Each factor is related to more than one criterion of the BE categories. This way, when a criterion of the BE model is studied by the Kaizen team, this kind of a snapshot summary keeps the team focused on the particular business factor, and through SWOT analysis and goal-based gap analysis, it steers the team toward achieving excellence.
