TQM’s Challenge to Management Theory and Practice

The success stories of total quality management (TQM) are well known. They include such companies as Xerox, Allen-Bradley, Motorola, Marriott, Harley-Davidson, Ford, and Hewlett-Packard. These companies committed themselves wholeheartedly to TQM; they made fundamental changes in their management practices and philosophies and improved product quality and company performance.

But more often, companies that have tried to implement TQM have not achieved such dramatic benefits. They may have produced some tangible improvements in product and service quality, but the quality improvement programs ultimately fell apart. In many of these companies, the TQM programs lost momentum because disagreements over goals and implementation procedures surfaced, upper-level managers turned their attention to other priorities, and employees became increasingly skeptical about organizational commitment to the programs. In other companies, quality programs clashed resoundingly with other strategic initiatives.

Consider the case of Kodak. In 1983 and 1984, Kodak embarked on a companywide quality campaign in response to increased competition, high silver prices, and an overvalued dollar. The company’s “corporate policy quality statement” committed Kodak “to be world leader in the quality of its products and services. We will judge this quality by how well we anticipate and satisfy customer needs.”1 During the next few years, Kodak trained employees in statistical techniques, held annual worldwide quality conferences, involved top management in quality programs, disseminated reports of quality improvement experiences throughout the company, and required managers to formulate personal quality improvement projects.

Yet despite considerable improvements in operational and competitive performance, Kodak’s disappointing financial performance led to increased pressure for more drastic corporate restructuring. During the 1990s, top management became increasingly confused by the dilemma of managing continuous, incremental improvement while making radical, top-down change. A $1.6 billion restructuring in 1991 incurred massive early-retirement costs but did little to yield longer-term savings in operating costs. In January 1993, Kodak appointed Christopher Steffen from Honeywell as chief financial officer in order to enhance shareholder value through more aggressive financial controls. Conflict between Steffen and Kodak’s CEO, Kay Whitmore, led to Steffen’s departure after eleven weeks, only to be followed by Whitmore’s departure in August. Underlying the top management discord at Kodak is the conflict between two unreconcilable approaches to change management.

The recent histories of Alcoa and McDonnell Douglas point to similar conflicts.

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References

1. Kodak Annual Report, 1984.

2. For an account of the origins and development of quality management, see:

D.A. Garvin, Managing Quality: The Strategic and Competitive Edge (New York: Free Press, 1988).

3. M. Walton, The Deming Management Method (New York: Dodd, Mead, 1986), pp. 140–144.

4. Ibid.

5. G. Bushe and A.B. Shani, Parallel Learning Structures (Reading, Massachusetts: Addison-Wesley, 1991).

6. Annual Report, 1988, Texaco, Inc. (White Plains, New York, 1989), p. 24.

7. B. Rayner, “Trial-by-Fire Transformation: An Interview with Globe Metallurgical’s Arden C. Sims,” Harvard Business Review, May–June 1992, pp. 117–129.

8. E.E. Lawler, S.A. Mohrman, and G.E. Ledford, Employee Involvement and Total Quality Management (San Francisco, Jossey-Bass, 1992), p. 96.

9. J.M. Juran, Quality Control Handbook (New York: McGraw Hill, 1974).

10. HP Measures of Marketing Excellence, Hewlett-Packard, January 1989.

11. G. Taguchi and D. Clausing, “Robust Quality,” Harvard Business Review, January–February 1990, pp. 65–75.

12. W. Lazer, S. Murata, and H. Kosaka, “Japanese Marketing: Toward a Better Understanding,” Journal of Marketing 49 (1985): 69–81.

13. P.F. Drucker, “The Emerging Theory of Manufacturing,” Harvard Business Review, May–June 1990, pp. 94–102.

14. The best exposition of the economic model of the firm can be found in:

P. Milgrom and J. Roberts, Economics, Organization, and Management (Englewood Cliffs, New Jersey: Prentice-Hall, 1992).

15. A. Rappaport, Creating Shareholder Value: The New Standard for Performance (New York: Free Press, 1986); and

T. Copeland, T. Koller, and J. Murrin, Valuation: Measuring and Managing the Value of Companies (New York: John Wiley, 1990).

16. See Walton (1986), p. 55.

17. Ibid.

18. H. Simon, “Organizations and Markets,” Journal of Economic Perspectives 5 (1991): 35.

19. R. Hayes, S. Wheelwright, and K. Clark, Dynamic Manufacturing: Creating the Learning Organization (New York: Free Press, 1988).

20. M.C. Jensen, “The Eclipse of the Public Corporation,” Harvard Business Review, September–October 1989, pp. 61–75.

21. See R.M. Grant, Strategic Change and Restructuring within the Oil Industry (Milan: Franco Angeli, 1993), pp. 128–150; and

D. Quinn Mills, Rebirth of the Corporation (New York: Free Press, 1991), pp. 91–107.

22. T. Burns and G.M. Stalker, The Management of Innovation (London: Tavistock, 1961); and

H. Mintzberg, The Structuring of Organizations (Englewood Cliffs, New Jersey: Prentice-Hall, 1979).

23. Juran (1974), pp. 203–204.

24. M. Hammer and J. Champy, Reengineering the Corporation: A Manifesto for Business Revolution (New York: HarperBusiness, 1993).

25. A. Alchian and H. Demsetz, “Production, Information Costs, and Economic Organization,” American Economic Review 62 (1972), pp. 777–795.

26. J.F. Rockart and J.E. Short, “IT in the 1990s: Managing Organizational Interdependence,” Sloan Management Review, Winter 1989, pp. 7–17.

27. J.M. Juran, Managerial Breakthrough (New York: McGraw-Hill, 1964).

28. K. Clark, R. Hayes, and S. Wheelwright, Dynamic Manufacturing (New York: Free Press, 1988).

29. R.M. Grant, “The Resource-Based Theory of Competitive Advantage: Implications for Strategy Formulation,” California Management Review, Spring 1991, pp. 114–135.

30. R. Coase, “The Nature of the Firm,” Economica 4 (1937): 386–405.

Acknowledgments

We acknowledge financial support for our research from Northern Telecom’s University Interaction Program.