Principles of Business Excellence - Term Paper Example

Introduction The nucleus of business is strategy which is aimed at achieving maximum returns for its stakeholders. Excellence is attained when these strategies and business practices produce measurable performances against benchmarked targets. This benchmarking is developed through use of various business excellence models that are acknowledged globally. These models have been formulated on basis of proven business principles tested and recognized over time. Business Excellence The ultimate goal of a company is to deliver total quality and 100 percent value to the end customer. (Zairi 1994) and this is the standard or benchmark of acceptable performance management that describes the optimum use of all resources. Business excellence is the outcome or measure of Performance which makes Performance Management a tool to achieve Business Excellence. On the way to achieving Business Excellence firms’ attempt to attain competitive advantage (Porter 1980) and organizations adopt various techniques to realize efficiency and effectiveness. Industries struggle to gain this competitiveness through shorter production cycles, improved quality and by responding with speed and efficiency to meet customer requirements (Ahmed and Abdalla 2000a, 2000b). To reach excellence it is critical to develop internal quality consciousness and the ability to respond quickly as per schedules (Clausing 1994). Usually profits and returns are considered to be a measure of accomplishment, but, in its widest sense, quality is perceived as the vital element for both national and global success (Dale 1999, Feigenbaum 1999). A number of organizations also implement Total Quality Management (TQM) practices to guide them through to becoming competent and successful as TQM is a preventive approach and not a detective approach to work (Walton, 1986). According to Zairi and Youssef (1998) in the global context today competition cannot be met with cost efficiency alone. Quality plays an equally important role in assessing competitiveness. Quality is a function of TQM is but it is focused on quality improvement alone and in the broader sense does not cover the entire activities of the organization and therefore the Business Excellence has replaced both Quality and TQM as the final measure of performance that effects all stakeholders. (Dale, Zairi, Van der Weile and Williams 2000). Amaratunga and Baldry (2003) state that it is a process of ascertaining and assessing progress and achievement of pre-determined goals and includes information on the efficiency that has been shown in conversion of resources into goods and services. The quality of these outputs and outcomes has a great bearing on the organization’s effectiveness and its objectives leading to Business Excellence. The real measure of Business Excellence or Performance according to Evans and Lindsay (1999) is found in five key categories; customer satisfaction; financial and market performance measure; human resource measure; supplier and partner performance; and company strategy measures. Each of these segments plays a vital role in determining the actual value of performance in the context of performance measurements. Benchmarking is essentially a cost reduction method (McDougall and Hinks 2000). Its exercise results in pre-determined and pre-arranged costs. Deviations are the measures that performance management seeks to locate and redress. Managers depend upon it for performance measurement in the TQM context (Camp 1989) and it is considered as the most powerful technique for gaining and maintaining competitive advantage (Codling 1992). Benchmarking has also been defined as the continuous, systematic process for evaluating the products, services and work processes of organisations for the purposes of organisations improvement (Sarkis 2001). Business Excellence Models Among the plethora of Business Excellence models three are acknowledged and used to evaluate Business Excellence on worldwide basis. They are used as guides on how to realize this goal by organizations both in the commercial and non-commercial sectors. Awards have been instituted based on these models and it has been established that beyond the setting of benchmarking standards, the economic benefit are of immense importance for the organisation. In the case of BNQA it has been estimated that the ratio of economic benefit vis-à-vis the cost of this programme, supported by the US Government, exceeds 207:1 (Link and Scott 2001) Organizations are rated annually and are given recognition under the Malcolm Baldrige National Quality Award (MBNQ), European Excellence model (EFQM) and the Deming Prize. Deming Prize. William Edwards Deming (1986) was a person of exceptional qualities. He transformed Japanese production with his management philosophy in the 1950’s and is acknowledged as a hero in Japan. In appreciation the Japanese have instituted the Deming Prize offered to organizations as a mark of Business Excellence. Today Japan is the best manufacturer in the world because it adopted his following 14 principles of management and as a result realized Total Quality Management (TQM). When applied to any given situation they offer an insight into the problems and offer practical solutions to the management. i) Create constancy of purpose for improvement of products and service. It is desirable that the company has set goals and visions about where it wants to go and what it wishes to achieve. The message that needs to go out to the employees requires conviction for motivation. ii) Adopt a new philosophy: we are in a new economic age. Higher productivity and Better Quality are the benchmarks that need to be set to get and retain clients. Prices are important but will have no impact if the products are not delivered on time with assured quality. iii) Cease dependence upon inspection as a way to achieve quality. Quality does not mean mass inspection of all activities. This way of looking at finding out defects and correcting them is not useful in IMPROVING quality and it only helps to detect quality. What is required is to build in quality in the work itself. iv) End the practice of awarding business based on price tag. Normally in industry the practice is to pay for supplies that are the lowest quoted. This is a sure recipe for disaster. Price does matter, but only after quality and delivery schedules have been met. v) Constantly improve the process of planning, production, and service- this system includes people. Managements are always looking for problems and shortcoming. This objective is fine as long as it is positive. When problems are found, it must never engage in the blame game or to find scapegoats. The idea should be to find solutions and to see that these solutions are accepted and followed and giving the benefits they were designed for. vi) Institute training on the job. There are two methods of training; internal and external. Internal involves senior people from within the organising training the juniors and in case of external training consultants are hired to train for existing or new work processes. In both cases it is necessary that the management is involved in planning and supervising the training sessions. vii) Institute improved supervision (leadership) Most production problems occur on the shop floor and the best person to give hands on description is the supervisor. The supervisors should be told to come forward with their problems, and further encouraged to offer solutions as they are closely involved in production. viii) Drive out fear. The main reason for not participation or non-involvement of all employees and management in improving conditions stems from the absence of a vision statement. There is need for taking the employees into confidence for improved results. ix) Break down barriers between departments. Teamwork is the essence of any activity and a recipe for success. Teambuilding efforts demand open and uncluttered communications. x) Eliminate slogans/targets asking for increased productivity without providing methods When there is a vision statement, there is no need to send out frantic messages or slogans or raise posters, asking the workforce to fulfil targets in time. These activities are depressing, as they indicate absence of planning, short term burst of energies that die as quickly as they are raised and show that the situation is out of control. xi) Eliminate numerical quotas. It must be noted that a number only indicated quantity but quality, productivity, wastages saved or incurred and costs are all equally important. The figures must necessarily include all these elements to become meaningful quantities but timely delivery and agreed quality standards of importance. xii) Remove barriers that stand between workers and their pride of workmanship. All workers take pride in their work. Basically they work for money but lately it has been understood that the worker is different from a machine. Unlike a machine it has emotions and emotional satisfaction leads to greater out put as well as better quality. Therefore appreciation of the work is equally important to improve productivity and quality. xiii) Institute programs for education and retraining. New venues of expanding knowledge are being discovered daily and there is constant need by all types of employees to upgrade themselves. This is not only for financial rewards but for self satisfaction as well. The greatest motivator is raising one’s esteem in the eyes of the superior. Malcolm Baldrige National Quality Award Unfortunately Deming never got the kind of recognition or reception that he received in Japan. He was considered one just among many theoreticians. Quality was not so much on the minds of the American industry which was carried away by Taylorism and later Fordism that advocated division of labour as the ultimate mass production practice. This was refined to such an extent that work was fragmented and deskilled for the working class that made it more manageable by the employing class (Braverman, 1974, Moody, 1997). This caused costs to be controlled leading to higher profits and that was the benchmark of Excellence. Lane (1995) argues that the Fordism came to be related to rigidity and was obviously unable to respond to the new problems and challenges created by new market demands and the competitive challenges facing managements. This created a crisis of sorts in the Fordist’s world. Malcolm Baldrige was the US Secretary of State from 1981 through 1987 and was a key proponent of quality management as key to the country’s prosperity and long-term strength (Balridge FAQ). His ideas change the Fordist thinking to neo-Fordist idea and in recognition of his services to the cause 1n 1987 the US congress instituted the Malcolm Baldrige Award to induce industry to compete with the Japanese which had stormed the world scene with Deming’s teachings. The salient features of this Model are; Visionary leadership, Customer-driven excellence. Organisational and personal learning, Valuing employees and partners, Agility, Focus on the future, Managing for innovation, Management by fact, Social responsibility, Focus on results and creating value, and Systems perspective. The EFQM model In 1992 the EFQM model was introduced as a framework for assessing the Business Excellence of organisations and it instituted a European Quality Award. This is the most prestigious and widely recognised Award of its kind across Europe and is the leader Joe Goasdoué states that the EFQM Excellence model works on the belief that the rudiments of all flourishing organisations, whether in the government, commercial or no-profit sectors are the same, irrespective of their type or size. The EFQM model is based on the underlying principle that there are two main elements for of Business Excellence, the Enablers and the Results. There are several criteria that contribute to this standard The five enablers cover all the areas of organisational activities, while the results show the achievements of the organisation. There is a direct relationship between the two as results are the consequence of the enablers and the results also provide the inputs that become the basis of improvement in the enablers through feedback and learning. It can be observed above that the leadership plays a vital role as perceived in self-assessment and that the end objective is customer satisfaction. In between is the role play of TQM, supply chain and worker management. Comparison of the Models The foundation of all the three models is similar and that is making quality the central issue in Business Excellence and having a strong leadership role for stressing on the organisation to value this as a basic step towards achieving this object. Customer satisfaction is the hallmark of all models. The main difference lies in the details. Deming’s was the first recognised model of this kind and it concentrated more on the quality consciousness, quality programmes, supplier partnerships and ultimate consumer satisfaction. The Baldrige Model took it a step further by incorporating service to the community at large as a necessary feature. This was because trade and industry were largely internationalized by this time and with diversity of cultures, communities were affected differently as consumers and workers from dissimilar nations. It was recognised that exploitation of one for the benefit of others was against the basic tenets of Business Excellence, hence an all round enrichment of both classes of stakeholders was a necessary part of an organisation’s image of excellence. The latest model, EFQM, is similar to both Deming and Baldrige models but encourages continuous improvements and does not consider the achievement of excellence as a static. It uses the key performance results as feedback as a dynamic feature for future improvements. References 1. Ahmed, A.M., and H.S. Abdalla (2000a), Supertative Strategy as a portfolio for the next millennium, International Journal of Human Factors and Ergonomics in Manufacturing 10, No 2, pp 1-22 2. Ahmed, A.M., and H.S. 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Deming, W. E. (1986). Out of the crisis. Cambridge, MA: MIT Institute for Advanced Engineering Study. 11. Evans, J R and Lindsay, MW (1999), The management and control of quality, South-Western College Publishing, Cincinnati, Ohio 12. Feigenbaum, A.V., (1999), The New Quality for the 21st Century, The TQM Magazine, 11, no 6, pp 376-383 13. Goasdoué, J. (2001), Is Quality Taken for Granted? The British Journal of Administrative Management. Vol. 23. pp. 10 14. McDougall, G and Hinks, J (2000), Identifying priority issues in facilities management benchmarking, Facilities, Vol. 18, No. 10/11/12, pp. 427-434. 15. Lane, C., (1995). Industry and society in Europe. Aldershot/U.K, Elger, 16. Moody, K. 1997.Workers in a Lean World. London: Verso, 17. Link, A.N. and J.T. Scott (2001). Economic Evaluation of the Baldrige National Quality Program. National Institute of Science and Technology, US Department of Commerce. 18. Porter, M. E., (1980)Competitive Advantage. New York: Free Press: 19. Sarkis, J (2001), Benchmarking for agility, Benchmarking: An International Journal, Vol. 8, No. 2, pp. 88-107. 20. Walton, M. (1986). The Deming management method. New York: Putnam. 21. Zairi, M (1994), Benchmarking: the best tool for measuring competitiveness, Benchmarking for Quality Management & Technology, Vol. 1, No.1, pp. 11-24. 22. Zairi, Mohamed., and Mohamed A. Youssef (1998), Competing through modern quality principles: a forward management approach, International Journal of Technology Management(IJTM),Vol.16,4/5/6, Read More