Quality Wars: The Triumphs and Defeats of American Business

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9780029166840: Quality Wars: The Triumphs and Defeats of American Business

The quality revolution in American industry, now more than a decade old, has produced an avalanche of books, but this is the first in-depth study reporting the struggles from inside the companies that have attempted large-scale improvement efforts. Jeremy Main has interviewed more than a dozen chief executives, all of whom have managed quality programs, including Charles Clough of Nashua, Robert Galvin of Motorola, James Hagen of Conrail, Roger Milliken of Milliken, Ray State of Analog Devices, and John Young of Hewlett-Packard, in addition to hundreds of other senior executives, workers, labor representatives, city officials, military officers, and hospital administrators. Through their experiences, Main reveals what works and what doesn't work when an organization attempts the transforming leap into Total Quality Management. Their message comes through loud and clear: it is a tough battle, but persistence can win priceless rewards.

The notable successes at BancOne, L.L. Bean, Ford, Hewlett-Packard, Motorola, Saturn, Solectron, and Xerox prove it. However, Main shows that Motorola and Hewlett-Packard, among the earliest and best practitioners of total quality, are still finding obstacles to overcome. And some other early converts, such as Florida Power & Light, have stumbled badly along the way. Main's vivid descriptions of these setbacks capture the difficulties inherent in implementing a total quality system. His dramatic accounts of success and failure at companies such as Milliken and Intel convey valuable knowledge that is otherwise gained only by actual experience.

The way to achieve the "new quality" of today, Main shows, is through a full commitment to TQM. He reveals through the experiences of these companies that TQM is not just a management tool, as it has often been used, but a management philosophy that is indispensable in attaining a high level of quality-- now a requisite for competing successfully. With the collaboration of the Juran Institute, Main demonstrates how TQM has transformed companies by improving quality at all levels. The accounts of these triumphs are direct evidence that world-class quality is attainable by American industry, and will inspire and point the way for executives, managers, and government officials in their timeless pursuit of total quality.

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About the Author:

Jeremy Main is a former member of Fortune magazine's board of editors. He has reported on a wide range of quality programs throughout the 1980s and into the 1990s. The Juran Institute is one of the leading quality consulting firms in the world.

Excerpt. © Reprinted by permission. All rights reserved.:

Chapter 1

The Beginning An Emotional Experience

In the beginning came disbelief. Then denial. Then terror. American executives who visited Japan came home in shock, trying to grasp the implications of what they had seen, and unable at first to get the people at home to believe their stories. Great American corporations that bestrode the world -- Chrysler, Ford, Xerox, among others -- began to think the unthinkable, that they could be driven out of business. They did not say it out loud then, but they knew it in their hearts. By the late 1970s, Japan had pulled so far ahead of them in quality, in productivity growth, in developing new products, and in understanding the market, that some American businesses were no longer competitive even in their home market. In Japan the quality movement was born out of the destruction of its economy in World War II and the island nation's absolute need to live by exporting, which forced Japan to discover new ways of working. American business, so sure of itself, so set in its ways, so successful for so long, could never have embraced total quality management without also experiencing a profound emotional experience.

Of course, America did not wake up solely because of the alarm set off by Japan. Many saw total quality as a weapon to overcome other competition, other problems. The railroads saw it as a way of beating trucks. Banks and other financial institutions which did not compete with Japan saw it as a way of winning and keeping customers. Hewlett-Packard was convinced by the discovery that it, like most U.S. companies, wasted 20% to 30% of its output because of poor quality. In the first edition of his Quality-Control Handbook in 1951, Joseph Juran called avoidable costs of quality "gold in the mine." He cited the costs of scrappage, repairs, extra inspection, the additional space and labor needed to compensate for defects, the discounts for seconds, the customer complaints, the warranty costs, and the intangible costs of lost business and good will, and the friction within a company caused by poor quality. Philip Crosby, for 14 years a vice president and director of quality at ITT, made much of the cost of defects in Quality Is Free, a well-timed book that became a best seller in 1979. Roger Milliken, chairman of Milliken & Co., took a copy of Quality Is Free to his ski chalet in Vail for the Christmas holiday in 1980 and returned to work convinced.

Motorola, recalls its retired chairman Robert W. Galvin, woke up to a clarion call from one of its most respected executives, Arthur Sundry, at a meeting of company officers in April, 1979. Sundry announced he had something more important to say than anything on the agenda -- which was, as he put it baldly, that Motorola's quality "stinks." "You can be motivated by all manner of approaches," says Galvin. But the threat from Japan lay under all the other motivations.

IN THE BEGINNING WAS INSPECTION

To put these stirrings into some perspective, we have to go back to the fledgling American Telephone & Telegraph Company in the late 1800s. AT&T realized that the huge and complex network of lines, telephones, and switchboards it was building would need to rely on systematic quality control rather than sheer craftsmanship. Therefore it created an elaborate, expensive inspection system under the inspection department of the Western Electric Company, AT&T's manufacturing arm, to make sure that the parts it received from suppliers were good, and that the equipment it sent out to the field was good. Quality control expanded to cover design and installation in addition to manufacturing as the telephone equipment grew more sophisticated.

Work to advance quality theory continued in the inspection department, soon to become part of the newly created Bell Telephone Laboratories. In 1924 a physicist in the department, Walter A. Shewhart, passed his boss a one-page memo that opened an entirely new phase of quality control. The memo suggested how a statistical control chart could track the variations in a manufacturing process and provide the basis for reducing those variations. Quality could be achieved not by inspection but by monitoring and improving the process. Not only did this approach reduce the need for quantities of inspectors, but it assured better quality at a lower cost by eliminating defects at the source rather than after they had been made.

It took a long time for the new concept to win acceptance. World War II helped because so many inexperienced industries and workers were assigned defense tasks that the Army and Navy procurement agencies put quality-control clauses in their contracts and encouraged a burst of quality training and research. The spectacular performance of American equipment in World War II owes some debt to statistical quality control.

The next beneficiaries of what the United States had learned were the defeated Japanese. To control the country effectively, the U.S. occupation forces needed good communications with the populace. The Civil Communications Section of allied headquarters brought in three American engineers, including Frank Polkinghorn of Bell Labs, to help the Japanese repair and improve their shattered communication systems. The three found corporations like the Nippon Electric Company (NEC) deplorably lacking in engineering and management fundamentals, not to mention buildings and equipment. They found potential, however, in a small company called Tokyo Communications, despite the fact that its executives sat at their desks with open umbrellas when the rain came through the roofs of the sheds where they worked. Tokyo Communications changed its name later to Sony. To help the Japanese improve, the Americans produced a modest textbook, CCS: Industrial Management, and started giving courses in statistical process controls.

Ranging across the world's markets with little competition, and freed of the military demand for quality control, American industry pretty well forgot about the principles that had been developed here. However, a few Americans continued, in some obscurity, to elaborate and explain their ideas. In 1950, Armand V. Feigenbaum, General Electric's chief of quality, published Total Quality Control, which argued that quality was the responsibility of everybody, not just the quality department. The next year, Joseph Juran, who had worked for years before the war at Western Electric, edited and published the Quality Control Handbook, an authoritative reference work. Both books have been revised and updated repeatedly. The late W. Edwards Deming, who also worked at Western Electric during his summer vacations in the 1920s, had already been to Japan twice to advise the occupation authorities on statistical sampling. He was invited back at the end of 1950 by the Japanese Union of Scientists and Engineers to lecture business leaders on statistical process control. Juran followed in 1954 with a series of seminars that introduced the idea of "total" quality control as a management tool. From these books and lectures a view of quality much broader than statistical controls began to emerge: that it was the responsibility of everyone, especially top management, that it should encompass not only a company's products and services but all of its activities, and that improvement should be continuous.

Deming, Juran, Feigenbaum and others wrote and consulted in the United States, in some obscurity, but the message was beginning to get through. Crosby's 1979 book Quality Is Free reached a wide audience.

An easily understood and convincing call to arms, Crosby's book unfortunately left the impression that quality is easy as well as free. It is not. But for those just beginning the journey it was perhaps just as well not to know how hard it was going to be. Many saw the 1980 NBC documentary, "If Japan Can...Why Can't We?" which explained (very roughly) how Deming, then unknown in America but famous in Japan since the 1950s, could reduce failures through statistical controls. The more cerebral might have gotten the message from the so-called PIMS studies, which gave convincing evidence that quality was the key to growth and greater market share.

But for nearly three decades Japan had had the almost exclusive use of the new theories of quality and in practice had refined them to a level that astounded the West. One industry after another -- autos, cameras, electronics, shipbuilding, office equipment, steel, construction -- delivered world-beating products.

The oil crises of the 1970s maintained the sense of urgency created in Japan by the need to rebuild after World War II. Today, with no crisis and with a surfeit of praise from foreigners, Japan may be losing its passion for quality. The crisis of quality in Japan is that there is no crisis, laments Noriaki Kano, a professor at the Science University of Tokyo and a consultant to Japanese and American firms. He even suggests slyly that Americans are trying to lull Japan with praise and deference. However, the downturn the Japanese economy experienced at the beginning of the 1990s may provide a new impetus, if not a crisis.

THE UNBELIEVABLE DATA

Thomas J. Murrin remembers how the tenor of his visits to Japan changed on many trips made he for Westinghouse over the decades. Murrin, who played tackle for Vince Lombardi at Fordham University, spent some frustrating years pushing for quality at Westinghouse and then more of the same in the government as deputy secretary of Commerce. Now, as dean of the business school at Duquesne, he has taken on the task of bringing quality to academe. Talking of his dealings with Japan when he was at Westinghouse, he says,

"I started going there about 30 years ago on technical exchange agreements. They'd almost bow to the floor. You'd say hello and they'd write it down. Well, when I go now, shit, they just nod at you and immediately start lecturing you. 'What are you dumb lazy people doing?' It's been an incredible transformation. One of the things I was doing in the 1970s was studying their financial reports and we couldn't believe the data because it seemed to say that their big companies, which were similar to ours, had an annual real productivity gain of 8% or 10%. It was unbelievable. It was embarrassing. First of all, you know, we kind of looked at each other and we said, 'Well, so what?' 'What do you mean, so what?' 'Well, we must be doing the same thing.' We didn't know what the hell we were doing. We never ran those numbers. So we got our comptroller guys and they ran the numbers and they said, 'Hell, you know, you've got a couple of small units that do maybe 6% or 7% but your average is like 1% or 2% or 3%. And the country was like 0%. So we said there has to be something wrong with the Japanese numbers...."

Like others confronted with what the Japanese were achieving, Westinghouse managers tried to deny the facts at first. But the evidence held up. An entirely different persuader helped motivate the senior managers. After hours, over drinks, the Westinghouse brass used to brood over the difference between them and the GE brass. It seemed to them that many of the GE brass retired rich with stock options, but that didn't happen to them. Westinghouse had to change. Murrin represented a small group of convinced executives who went to the chairman, Robert Kirby, an unnerving experience.

"He was so goddamed smart, he didn't have to grind these things out. He'd have the radio playing and he'd be making the most intricate geometric pattern and you might have worked for six months on this Goddamned thing and you'd say, 'Bob, this is really important.' 'Huh,' he'd say. 'Go on, go on.' The son of a bitch would understand everything you said and he'd ask a few of the most penetrating questions and if you gave him the right answer, he'd say go ahead."

If he wasn't carded away by Murrin's concepts, Kirby did at least approve. The annual management council meeting at the Tamarron in Durango, Colorado in 1979 recognized the importance of raising productivity and gave Murrin $2 million to start. As Murrin tells it,

"We doled out several hundred thousand here, several hundred thousand there, to any part of Westinghouse. No formality, no calculation, but we quizzed them. The fellow said, 'I'm the one who's going to spend this and this is what I'm going to do.' And we kind of said, 'Buddy, if you squander this we're going to shoot your nuts off.' I mean this is the way we talk in Pittsburgh."

Murrin grew up on New York's East Side and he remembers his father, a structural steelworker, telling him what a "dumb ass" his foreman was. So Murrin liked the idea of quality circles, of using the brains as well as the brawn of workers. The construction group, one of the units under Murrin's supervision, started to work with quality circles in 1980. Westinghouse established a productivity center to lend a hand to anyone in the company who wanted to improve productivity. The quality circles failed (see Chapter 3) and it turned out that what Westinghouse needed was not so much higher productivity as better quality, so the center's name and aim were changed. It became the Westinghouse Center for Quality and Productivity. That is how Westinghouse stumbled into the era of quality. The company is still stumbling and its executives still have good reason to be envious of GE, but it did well enough so that its Commercial Nuclear Fuel Division won a Baldrige prize in 1988, the first year of the award.

"YOU CAN'T BE THAT BAD": XEROX AND HP WAKE UP

Xerox, like Westinghouse, woke up with a start to what it also perceived as a productivity crisis. The decade of the 1970s opened with Xerox owning 90% of the U.S. market for photocopiers, which it had invented. By 1976, Xerox's share was down to 85%, and it kept dropping, bottoming out at 13% in 1982. In 1979, as Xerox began to see its mortal danger, Peter McColough, the chairman, called Frank Pipp home from Rank Xerox in Europe to be chief of manufacturing. Unlike many modern manufacturing executives, Pipp knew the inside of a factory. He had been a foreman in a GM plant and had worked in Ford and Xerox plants. He also spoke his mind. He came home about when Xerox introduced the 3300 small copier, an unreliable machine that stank, scorched documents, and jammed the paper. It was another in a long line of terrible copiers made by Xerox. The faults of one would be repeated in the next model, for Xerox relied on a huge field force to fix the machines rather than fixing the causes of the problems before the copiers left the factory. Juran recalls being invited to talk to the company's senior managers at the time that "sales began to hemorrhage." He found that Xerox had plenty of information about why its copiers were failing but was not acting on it. When he asked for a list of the ten most common causes of failure of one popular model, in order of importance, Xerox provided it promptly. Then he asked for the same list for an earlier model. He put the two lists side by side and they were identical. In other words, Xerox had learned nothing from its failures. Product managers required their design engineers to focus on new product features and gave no priority to fixing old features known to be failure-prone, although they "posed a threat to the very survival of the company."

Pipp discovered from Yotaro (Tony) Kobayashi, head of the Fuji-Xerox joint venture in Japan, that it already had experienced its productivity and quality crisis. In response ...

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