Organisations all contain some sort of organisational processes. They also all strive to maintain high levels of profit. History has come up with a number of innovative methods to maintain high performance levels. Most place this emphasis on the processes involved in the organisation. The more efficient the processes are in the organisation – the less work that has to be done down the track. One popular method revolves around improving processes is “Total Quality Management” (TQM).
“TQM is management and control activities based on the leadership of top management and based on the involvement of all employees and all departments from planning and development to sales and service. These management and control activities focus on quality assurance by which those qualities which satisfy the customer are built into products and services during the above processes and then offered to consumers.” (Mazur, 2002)
There are many arguments for TQM. From the article “Old wine in new bottles taste better: A case study of TQM implementation in the IRS” it discusses how they dealt with their fall behind in processing 180 million tax returns using TQM. (Mani, 1995, p1) One of the key arguments that the article raises for TQM is that it reduces rework. It stated that when the service provided is consumer/taxpayer driven is prompt and courteous then they “will be more likely to comply than one who does not”. (Mani, 1995, p6) This will lead to less “rework” that has to be done down the track as tax return forms would be filled out correctly the first time round. With the implementation of TQM, saw a reduction in “labor cost [in] processing these returns, fewer telephone calls from these tax payers, and a decrease in the volume notices to taxpayers who filed these returns”. (Mani, 1995, p6)
There are also great monetary benefits in adopting TQM in your organization as Mani suggests in the article. Quality Improvement Project (QPI) teams as the name suggests were introduced by the IRS as part of their TQM, to check the quality of processes involved in obtaining taxpayers’ tax returns. In doing so a total savings of $12 million was achieved in 1989 through numerous process flaws. (Mani, 1995, p7) This cost cutting flowed through to subsequent processing areas and generated additional savings. According to analysis carried out, even though there were “no statistically significant difference when one compares productivity before and after TQM implementation” (Mani, 1995, p12) at the IRS, this was seen to be the resultant cost to implementing and training employees about TQM.
Mani also raised the argument that, TQM also helps maintain productivity gains. For example “two years after instituting a continuous improvement process, the Yokogowa Hewlett-Packard plant measured a consistent 50 percent improvement rate each 5.1 months and a tenfold reduction in scrap.” (Mani, 1995, p10) After believing that the problem was solved, the company abandoned TQM. As a result gains were not held and profit margins decreased. Mani also claims that projected figures for the future suggest that savings will continue to grow if TQM remain as business practice.
The article regarding air conditioners manufacturers in Japan and America also provides numerous benefits in adopting TQM. Firstly TQM improves the quality of the product when used by the consumer. Figures show that the a US manufacturing company had Incoming Parts and Material defectives %, Assembly-Line Defect Rates per 100 units and Service call Rate per 100 Units under first year warranty of up to 16%, 160 per hundred and up to 26.5 per hundred respectively, while its Japanese counterparts had figures of only up to 0.3%, up to 3 per hundred and up to 2 per hundred. (Garvin, 1988, p200) This is a considerable difference in quality rates when TQM is used as opposed to the American company that does not implement TQM in their manufacturing processes. In being able to increase quality and doing things right the first time this results in increase in profits through subsequent procedures such as less service field calls, less consumer complaints and less returns.
The Japanese company also shows how TQM allowed for more accurate quality reports allowing for the company to target required improvements in the processes when necessary. This is a far better way to cut cost than the US manufacturing company who waited until errors arose and then searched for improvements in their air conditioners.
The main arguments for TQM is cost cutting and at the end of the day improving profit margins. By ensuring all facets of processes to be always under continuous total quality improvement, benefits will flow through to other processes of the organization and thus makes it a successful company.
Another such type of organizational process improvement is “Business Process Reengineering” (BPR). “BPR is to make radical changes in an organization from the ground up in an aim to improve performance and make more efficient use of resources. The concept of BPR generally includes the use of computers and information technology to organize data, project trends, etc.” (CopmputerUser.com, 2002)
BPR has many benefits as the readings suggests. The article “Reengineering of the Patient Flow Process at the Western Sydney Area Health Services” details how by implementing the radical redesign of the Patient Flow Process to link all the booking systems of the hospitals and clinics information regarding patient ailments and care resulted in higher quality service.
This change in process made the customers’ needs come first. In this case of the Western Sydney Area Health Service (WSAHS) their maintain objective was to reduce patient encounters with the hospital prior to admission. By radically reengineering this process this “not only reduced the number of service encounters that the patient had to have” (Khandelwal, 1999, p8), from 4 to 2 but also “improved the communication between the patient and the doctor”. (Khandelwal, 1999, p8) With resources being used efficiently this resulted in the reduction of costs that would have incurred with extra procedures that the patient and hospital would have had to have done.
This was also the case for the reengineering of the “Billing Process” at the WSAHS. Before BPR was introduced, “it was not possible to produce a single account for a patient on discharge. The patient would get up to ten separate accounts for up to six months after treatment”. (Khandelwal, 1999, p9) This was due to the lack of discipline in the process involved when it came time to forward individual department charges to a central billing service. Once BPR was accomplished, there was a dramatic “reduction in patients’ concern over accounts and improved relationship between the hospital and patients”. (Khandelwal, 1999, p9) The result of BPR in this particular case was a “single account for the patient for a single episode of care”. (Khandelwal, 1999, p10) Reengineering the billing process also “decreased bad debts and improved cash flow” (Khandelwal, 1999, p9) as patients were no longer left in the dark as to the final cost of their visit to the hospital. This served greatly to enhance the cash management of the entire WSAHS system and thus making it “the leading site for a federal government initiative of simplified billing”. (Khandelwal, 1999, p10)
The new radical design of the billing process also made it easier for communication between employees and affiliates to the hospital. For example liaising between Visiting Medical Officers who came to assist patients and hospital doctors were much more straight forward and simple as opposed to the old system where there was just confusion.
It is clear that efficient processes are one of the key to the organizational success as processes are the core of how a business operates. When initial structures of what must be done is efficient and all resources are used then subsequent processes will reap efficient outcomes. “Successful organization must of course both offer quality products or services and employ effective, efficient processes for producing and selling them”. (Davenport, 1993, p6) The way in which work is carried out is the fundamental groundwork in building a business’ operations. Success is when all processes are working optimally and efficiently.
America spends twice as much as researching and developing new products as new processes while Japans proportion are reversed. (Davenport, 1993, p6) Japan has recognised the importance of developing processes as the key to success which is clearly evident in their world wide economic success. (Davenport, 1993, p2) But the US is now changing its views. American companies such as “Ford, GTE, Delco, Chrysler, Shell Chemical, Ingersoll-Rand and Levi Strauss just to name a few are all now concentrating on their processes” (Hammer, 1996, p8) as a means to gain competitive advantage and become more successful.
In the cases of the WSAHS, if they were to continue using the processes they had before reengineering then their problems of long waiting lines for patients, high cost, and bad cash flows would continue and thus result in and inevitable demise. This is the same with the TQM case for the IRS in America and the US air conditioner manufacturer. If they didn’t improve their processes then they would also find themselves spending more then they receive. But as these organizations use process improvement methods – BPR and TQM, they are able to become more cost effective and become more successful.
Companies such as IBM, reduced the time to prepare a quote for buying or leasing a computer from seven days to one, while increasing the number of quotes tenfold. The US Internal Revenue Service achieved successful process innovations, collecting 33% more dollars from delinquent taxpayers with half of its former staff and a third fewer branch offices. (Hammer, 1996, p2)
Processes set the ground work for how the organization is run. Without well-organized and structured procedures in place then the organization will not be working at its optimum level of output and not utilizing all its resources. When processes and resources are exhausted to its most beneficial potential then the organization will reap the rewards in being more competitively advantageous over rival firms.
Davenport, T.H., The Nature of Process Innovation, Ch1, Process Innovation, Reengineering Work through Information Technology, Boston: Havard Business School Press, 1993, pp 1 -21
Garvin, D.A, “Contribution to Japanese Quality”, Chapter 11, Managing Quality: A strategic and Competitive Edge, New York: The Free Press, 1988, pp200-215
Hammer, M,. “The Triumph of Process”, Ch 1, Beyond Reengineering, London, Harper Collins Buisness, 1996, pp 3-17
Khandelwal, V.K. and Lynch, T. (1999). Reengineering of the Patient Flow Process at Western Sydney Area Health Services. In: Proceedings of the 32nd Annual Hawaii International Conference on Systems Science, 1999(Ed, Sprague, R.H., Jr.), Maui, HI, USA, (10 pages)
Mani, Bonnie G. (1995). Old wine in new wine bottles taste better: A case study of TQM implementation In the IRS, Public Administration Review, Vol. 55, Iss. 2; pp. 147-158
Mazur, G. (2002), Dictionary of TQM Terms, Total Quality Management ENG / MFG401, http://www.mazur.net/tqm/tqmterms.htm
Definition for BPR, ComputerUser.com, 2002, http://www.computeruser.com/resources/dictionary/definition.html?lookup=1658