Early in our careers, when we worked for the General Electric Co. in Schenectady, New York, there was no road map for a young manager desperately trying to find ways to lead. One had to experiment, employing various mechanisms such as motivational sessions, inventory control, budgetary control and information management. But none of those, alone or in combination, seemed to provide a comprehensive lever for leadership innovation.
At that time, the notion of managing for quality, at GE and elsewhere, was specific. It was defined as meeting technical specifications in products and services. In organizational terms, there was often a quality department whose responsibility was to make sure these specifications were met. We observed, however, that this narrowly defined emphasis on quality nonetheless had a wide ripple effect; it connected to every process and person in the organization and made them better. We came to realize that quality was not so much a matter of techniques, of which we had plenty, nor statistical control, important as that was, nor testing machines. It was a way of leading, inspiring, integrating efforts and managing for profitability and growth. It was the lever we had been seeking.
Today, companies of all types use quality as a strategic touchstone and organizing principle. A recent survey by the American Society for Quality found that more than 80% of all executives recognize total quality leadership as a systematic way of creating an effective corporate mind-set. But what does that really mean in today’s world?
Today’s highly competitive worldwide marketplace and advances in information technology have created greater customer demand for quality than ever before. The Internet, for example, has made the quality of a company’s products and services transparent to customers. As a result, new offerings not perceived as being of high quality are increasingly likely to fail or become quickly commoditized. What’s more, consumers now view quality as a fundamental measure of their total perception of the product or service as well as of the company, delivery and maintenance network that provides and supports it — a kind of unified “quality-value” metric.
The continuous product and service innovation that is required to meet such heightened customer value expectations must stem from a culture of systematic management innovation, which in turn requires systematic leadership innovation. The pursuit of total quality engenders such leadership in a number of ways. It requires passionate leaders, widely dispersed throughout all levels of the organization, who are responsible and accountable for balancing, integrating and prioritizing actions. In this way an organization builds what we call its “management capital” — the enterprise-wide discipline to recognize, develop, deploy and measure the capacity and effectiveness of the company’s total resources to accelerate profitable growth.
We find evidence in a wide range of industry sectors that the systematization of management innovation will be a critical success factor for 21st century companies. An increasing emphasis on it can be detected in companies’ gradual but nonetheless enormous shift from investment in “hard” assets — bricks and mortar, equipment, inventories — toward investment in “soft” assets — supply chain processes, human resources, technology, copyrights, brands, patents and the like.
Some companies still subscribe to the outworn management doctrine that leadership is conveying ideas from the boss’s head to the employees’ hands. Pacesetter companies, however, are actively engaged in building management capital through quality. They have developed metrics to regularly assess the economics of quality and of unified quality-value. They use those metrics — supported by processes, tools and strategies — to help each person in the company think, learn, act and make decisions about how to help provide superior value to all stakeholders. It is this building of management capital that generates profitable growth in today’s brutally competitive marketplace.