Malcolm Baldrige Criteria for Performance Excellence - Case Study Example

Quality Management  Task Select and research two different quality models. Compare and contrast them in terms of their: Structure and emphasis Reported impact on business performance Potential application to your own organisation.  Assessment criteria (a) Demonstrate an appreciation of alternative approaches to quality assurance. (b) Analyse the requirement for quality policies and standards within your own organisation. (c) Carry out a critical analysis of two quality models with reference to their impact and potential application to your organisation. To compare and contrast two different quality models in terms of their application to your organisation. Introduction: Quality may be defined as the feature of any product, service or even behaviour that conforms to the end users’ requirements and expectations. Quality assurance is the mechanism by which an organisation demonstrates to the end users, of providing the desired services or results. This mechanism enables the organisations to sustain a continuously improving service or product along with usability and performance of the services rendered by continually reducing rates of faulty services or products. According to the present Malcolm Baldrige Criteria for Performance Excellence, ‘results should be used to create and manage value for your key stakeholders: customers, employees, stockholders, suppliers and partners, and the public and the community. By creating value for your key stakeholders, your organisation builds loyalty and contributes to growing the economy’ (Conti, 2003; p.1). An Overview of Quality Management Systems: Various researchers, including manufacturers and academic scholars, have proposed different standards that define quality and its specifics with respect to organisational and customer requirements. A few significant contributors in this sphere are by Ishikawa (1976), Juran and Gryna (1980), Deming (1982), Kano (1984), Taguchi (1986) and Scherkenback (1988). For instance, in the UK, different quality management models beginning with BS5750, ISO9000 series, Investors in People Standards, Business Excellence Model (BEM) to the latest Six Sigma methodologies have been extensively employed in order to meet and exceed the quality standards set by the organisations and increasing and changing customer expectations (Dahlgaard et al., 2005). In short, BS5750 implies adhering to quality standards, in terms of processes and stages of operations, as defined in the manuals and standard instructions of the individual organisations. These principles enabled strong control mechanisms in terms of administrative procedures and documentation. ISO9000 refers to the international standards for organisations, a quality management system, similar to BS5750 with respect to its orientation towards documentation of specific procedures and bureaucratic approach in addition to independent inspection and accreditation systems with a widespread applicability to all types of businesses and organisations. Thirdly, BEM, initially developed by the European Quality Foundation, a form of enhanced ISO9000, entails inclusion of a commercial dimension, applicability in small businesses and integral use of benchmarking. This is a more comprehensive model encompassing translation of tangible benefits and organisational performance in terms of operational efficiency. Lastly, the latest trend points to shifting quality focus towards Six Sigma point of view. With the increasing demands, changing markets and affects of globalization, organisations are attempting to transform the way quality was being viewed. As a business tool, Six Sigma can be applied to any specific function of the organisation in order to enhance the respective function’s performance in terms of returns by reducing or achieving zero defects. Background: The organisation in discussion, National Health Services (NHS) UK, provides health services to the public through various functions, such as various trusts, suppliers and vendors, health care professionals and administrative functions working together to accomplish this task through well-established ISO9000 Quality Standards. Although the core businesses involving health care services are not affected by globalization and increased market competitiveness, their cost-centered administrative functions incurred higher costs than expected. The administrative function operates from 10 different locations within the country, and has approximately 3000 employees; its core activities include supply chain management, finance, hospital operations management, family and health insurance operations etc. Hence, in an effort to improve their efficiency and quality, thereby profits, this organisation decided to focus on strategic management of administrative functions through specialized approaches. Strategic implementation of Quality Management models Approaches zeroed in for this task included strategic implementation of two specific quality management models, a) Business Excellence Model and b) Six Sigma Methodology. According to Shetty and Buehler (1991; p.6), ‘Quality is concerned with both the outputs and inputs of the production process. Deterioration in the quality of the products and services can disrupt schedules, delay deliveries, increase rework and scrap, waste manpower, materials and machine time, and increase warranty costs. These contribute to lesser productivity and lower profits too.’ This research attempts to assess extent of applicability of these two models towards improving quality including productivity of the administrative function of NHS. Business Excellence Model: The Business Excellence Model is a structural conceptualization of TQM incorporating its prime principles and core concepts, thereby measuring and monitoring the organisational Critical Success Factors (Kanji, 2002). The basic BEM construct is footed upon nine criteria divided into two categories, enablers and results. This construct is based on key categories of organisations that have a significant impact on the organisational performance in terms of stakeholder satisfaction, sustainable competitive edge, operational efficiency and learning and development of employees and the organisation. The criteria are a) Enablers: leadership, people, policy and strategy, partnerships and resources. b) Results: People results, customer results, society results and key performance results. BEM is, in true sense, an integration of TQM with different perspectives. BEM is considered to enable business owners to focus on all stakeholders unlike TQM which focuses only on end-users of products or services. Different BEMs have been proposed, like Kanji’s BEM, Deming Prize, EFQM Excellence Model, MBNQA, Ericsson BEM, Balanced Score Card, Lynch and Cross’ Performance Pyramid, ISO 9000, Capability Maturity Model (Kanji, 2002). Although these models are based on TQM, they differ in scope and approach; moreover, these models provide appropriate tools for measuring and evaluating organisational performance and guide organisations to focus their improvement efforts on the right areas. As stated by Khera (2002; 241) ‘knowledge helps us to reach our destination-provided we know what the destination is.’ This statement is particularly true for organisations to achieve their goals, which can be accomplished in a strategic manner with the help of measurable objectives. These measurable objectives form the metrics that guide organisations to track their purposes through determining the strengths and areas of development. These metrics form a source of direction, dedication, determination, discipline and deadline (Khera, 2002). In addition, improvement and control are the key essentials for the growth of any business (Kaydos, 1999). Based on these premises, we attempt to apply the Balanced Score Card (BSC) method of BEM as proposed by Kaplan and Norton (1996) to measure NHS’s administrative functions’ performance in four distinct areas, finance, customer satisfaction, operational efficiency, learning and growth, at various levels based on benchmarked standards. In a broader sense, BSC can be an effective tool for translating strategy into action through measurable objectives at any level and function of an organisation. The Six-Sigma Methodology: Six Sigma Methodology of quality measurement focuses on assessment and measurement of probabilities of single error or defect in a million opportunities, reflecting capability of an organisation or a process. Through this process, it provides a uniform metric for measuring performance in any organisation. Secondly, it brings about a paradigm change in everything it does. Stamatis (2001; p.5) states, ‘Six Sigma is the methodology that will harvest and uncover potential improvements in the organisation, by (i) focussing on specific items and (ii) bringing all the resources together to identify, measure, analyze, improve and control the process. This methodology requires transformation in approach and systems at all levels of an organisation in order to promote and implement continual improvement of procedures, processes, products and services. However, this methodology is impacted by factors such as organisation’s unique product or service, culture, customers, employees, level of both corporate and employee knowledge and experience. Overall, it requires innovation every time. Proposal of this discussion: Implementation of Quality Management System is specific and distinct, and should depend upon the situation or kind of desired results for services or products. Evolution and development of different quality management models have always indicated one common goal, i.e. providing valued services and/or products to the stakeholders of an organisation. Different models have emerged due to the differences in stakeholders’ expectations, changing demands of customers and organisational efforts to attain sustainable competitive edge. Implementation Plan: Implementation potential of BSC The BSC system, as proposed by Kaplan and Norton (1996) provides a framework to illustrate how strategy links intangible assets to value creating processes. Besides retaining the financial measurement of an organisation at a critical point, the BSC highlights more general and integrated set of measurements that link current customer, internal process, employee and system performance to long-term financial success (Kaplan and Norton, 1996; p.21). In order to implement BEM through the BSC system, the objectives of the NHS’s administrative functions need to be defined and aligned to each of these four aspects of the BSC. These objectives need to be further translated to measurable outcomes by using unique outcome indicators which can be measured accurately and understood by all members involved in the performance measurement process. The outcome indicators should be able to identify specific numerical measurement that indicates progress towards an outcome. Integrating Hatry’s (2006; p.62) criteria for selecting outcome indicators/criteria for each of these objectives of the four aspects of the BSC can yield an apt and comprehensive measurement system. Kozak (2004) has strongly advocated the effectiveness of benchmarking in achieving organisational goals and enhance competitiveness by systematic comparison of performance and practices with other organisations, and implement improvement practices. Each of the four significant areas, finance, customer satisfaction, operational efficiency and learning and growth has to be assigned targets according to NHS’s strategic benchmark objectives. Through appropriate measurement, the BSC system helps in identifying the high and low performing areas, and thus reduces time and effort required to identify the gaps or implement appropriate measures for improvement. Based on different deliverables within the administrative function at different locations, such as those related to people (employees), process (operations) and customers (suppliers, trusts, vendors, insured and the insuring candidates etc), appropriate responsibilities allocated to supervisors, managers, senior managers, and departmental heads need to be measured. This may be done through conversion of their responsibilities to measurable objectives. For example, meeting operational efficiency targets through productivity and quality measurements; enhancing employee motivation through effective feedback sessions, appraisals, learning and growth opportunities etc; exceeding customer satisfaction based on CSAT scores measurements. Likewise, all the four core areas on the BSC can be aligned to all objectives that may, directly or indirectly, impact overall performance of the function or department. Advantages: BSC system enables identification of gaps/areas of improvement in the early stages thereby gaining an opportunity to implement improvement programs; helps the organisation become more competitive, provides high quality customer service; motivates employees towards high performance and increases loyalty and commitment; inculcates creativity and innovation; rewards and recognizes good performance; enables clear goal-setting and expectations thereby minimizing employee resistance; and helps in transforming the organisation towards learning and development culture. Disadvantages: BSC requires more effort and time in its acceptance and implementation; requires careful selection of objectives and outcome indicators; internal politics and people issues may hinder the purpose of BSC (Cannon, 2008). Implementation potential of Six Sigma: The Six Sigma methodology is based on measurement of variation of a process or activity from perfection and is measured on the number of defects per million opportunities. This methodology is statistically dependent and is more commonly used as a business tool for specific functions rather than an overall quality management programme. In general, this method of quality assessment involves five stages, defining the issue, measuring the extent of deviation, analyzing the causes of deviation through different approaches and tools, improving the situation using different tools and controlling/sustaining the improved achievement or results. Zidel (2006) explains that, as this is statistically driven, the measurement system analysis is extremely important to ensure validity and reliability of the statistical data. This method may be implemented to measure productivity, quality, customer satisfaction, employee turnover, financial performance etc; however, it requires historical data for at least a period of 1-2 years. This process does not measure performance but measures deviation from expected performance. Further, analyzing the data requires usage of specific tools like the Paretto analysis, hypothesis tests, correlation and regression analysis, analysis of variance; these tools will help in analyzing the impact of process input on the process output. For example, the Paretto principle can be used to identify the reasons for maximum deviations of performance or conformity. This principle may be used extensively and with ease to identify the underlying causes; such as causes for low productivity, quality, low employee motivation, low customer satisfaction etc. Hypothesis testing will help in confirming the relationship between causes that were earlier identified through statistical analysis of data and the effects (results). By analyzing the causes of deviation or defects, improvement solutions can be proposed. For example, design of experiment (DOE) allows the team to determine the effect of different proposed solutions on the process output. Finally, the best or optimum improvement achieved is then documented and controls designed to ensure that process changes and improvements are adhered to and maintained. To quote one practical applicability of DOE in the administrative function, procurement system which was earlier being operated by calling vendors, manual bills and estimates, printing, postage etc can be transformed to online procurement by using online catalogues designed by external vendors; these catalogues can be made available for the purchasing department for online placement of orders, thus eliminating the manual procedures. This will help in eliminating costs incurred due to employment, postage, printing, telecommunications and time; and the new costs incurred would be a one-time investment for training the existing employees on the new system and external costs towards accessing the external websites in the form of service charges. Advantages: A promising perfection as it aims at achieving 99.9996% of adherence to expected quality. It specifically focuses on individual functions or processes, making measurement and analysis of causes highly accurate, thereby leading to promising improvements in the existing situation. This approach helps in achieving transformation of business units to a richer, more sustainable reality with incremental improvements in performance, and measurability is absolute. Disadvantages: It is a time-consuming and a very complex process. Requires training and expertise; involvement of management groups at all levels and functions including Senior Management Teams, Human Resources Management, Finance and Information-Technology; involves high costs; and, possibility of deviation from purpose is high owing to inadequate training, time, workload and other priorities. Implementation of Six Sigma in public service sectors is particularly difficult due to its complexities. Recommendations: Integration of the Six Sigma Methodology into BSC or other BEM Based on the above discussion pertaining to two quality management models, it is evident that both the models have their own advantages and disadvantages. Based on these findings, it would be appropriate to recommend integration of these two models into the ISO9000 Quality Management System, and implementation of these models depending on the situation and purpose. For instance, as the six sigma methodology focuses on specifics of quality and productivity of a process and is statistically dependent, its implementation in processes or areas that can gather valid and reliable data would be more appropriate. However, in processes or situations containing concealed facts such as unseen interactions, people, emotions, motivation etc, application of BSC would be highly beneficial. In short, Six Sigma and BSC have to be together integrated into the broader BEM in order to derive maximum benefits from both the models. The BSC system also acts as a tool that provides direction and purpose to the organization and its employees at all levels, and Six Sigma acts as a tool to measure deviation from respective directions and deliverables. A simple example of this recommendation is illustrated below: Below is an example of objective benchmarking based on outcome indicators at a departmental level. Based on this example, the six sigma methodology and its tools may be used to improve performance of a product or service with respect to efficiency, timeline adherence, productivity improvement, meeting service levels and continuous improvement initiatives. Through this integration, the six sigma methodology may be particularly useful in healthcare sectors which demand highest possible accuracy owing to the nature of services provided. This has been effectively implemented in various functions and industries, including healthcare sectors in the United States (Zidel, 2006). Conclusion Quality is a holistic principle aimed at bringing about steadiness and sustainability, fitness for purpose and perfection or conformity with respect to stakeholders’ expectations. Choice and implementation of quality management model plays a significant role in achieving the desired, accurate and sustainable results. Therefore, implementation of Quality Management System has to be specific and distinct according to the situation or kind of desired services or products. The BEM focus on business results and the assessment tries to identify the organisation’s performance in four broad functions such as financial results, customer satisfaction, operational excellence and learning and development. On the other hand, the six sigma methodology can help in assessing the probability of deviation, measurement in terms of metrics and thereby build a performance dashboard to track and monitor these performances on a regular basis. In other words, while the BSC system of the BEM model helps in translation of organisational goals into strategic objectives and provides goal clarity to the organisation and its people, six sigma framework ensures that processes are streamlined to the absolute degree that match with customers’ expectations in a systematic manner. References Cannon, D.L. (2008).CISA Certified Information Systems Auditor Study Guide. Edition 2. Canada: John Wiley and Sons. Conti, T. (2003). A Strategic View of Organisational Stakeholders. In Watson, G.H, Conti, T and Kondo, Y’s (Eds.) Quality into the 21st century: perspectives on quality and competitiveness for sustained performance. U.S.A: American Society for Quality. Dahlgaard, J.J, Kristensen, K and Khanji, G. K. (2005). Fundamentals of Total Quality Management: Process Analysis and Improvement. London: Routledge. Hatry, P.H. (2006). Performance measurement: getting results. Edition 2. Washington D.C: Urban Institute Press. Kanji, G.K. (2002). Measuring business excellence. London: Routledge. Kaplan, R.S and Norton, D.P. (1996). The balanced scorecard: translating strategy into action. U.S.A: Harvard Business Press. Kaydos, W.J. (1999). Operational performance measurement: increasing total productivity. U.S.A: CRC Press. Khera, S. (2002). You Can Win: a step by step tool for top achievers. New Delhi: MacMillan Publishers. Kozak, M. (2004).Destination benchmarking: concepts, practices and operations. UK: CABI. Shetty, K.Y and Buehler, V.M. (1991). The Quest for competitiveness: lessons from Americas productivity and quality leaders. U.S.A: Greenwood Publishing Group. Stamatis, D.H. (2001). Six Sigma and Beyond: Foundations of excellent performance. U.S.A: CRC Press. Zidel, T. (2006). A lean guide to transforming healthcare: how to implement lean principles in hospitals, medical offices, clinics and other healthcare organisations. U.S.A: American Society for Quality. Read More