Sample Paper-before My Edits

Quality Improvement and Organizational Change

Baker College Center for Graduate Studies

BUSN 813 Instructor Dr. Professor

Submitted by

John Doe

October 5, 2009

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While there is research that supports clear linkage between organizations that implement total quality approaches and improved financial performance (Hendricks and Singhal, 1997), there are also documented cases of failure (Chan, 2005). This conflicting body of knowledge warrants further study by researchers to strive to understand the constructs and practices they may influence the success or failure of these total quality approaches. This paper will investigate the relationship of the fundamental principles of total quality and organizational performance within two companies. The total quality principles examined include: customer and stakeholder focus, strong commitment to teamwork and employee empowerment and a systematic approach to continuous learning and improvement (Evans & Lindsay 2008). The organizations chosen for the research include Proctor and Gamble and Continental Airlines. Fortune magazine lists these organizations in the top ten best management quality companies globally (Fortune, 2007). Further both a service and product company is chosen to evaluate if quality management initiatives have correlation across industry types. Annual reports and external research will be evaluated to determine if there is exist relationships between the fundamentals of total quality, differing sectors of business and organizational performance.

The Total Quality Principles

Customer and Stakeholder Focus

A strong customer focus can be defined as the designing of new products that exceed customer expectations. This ability to innovate rapidly and respond to market demands globally is essential in acquiring market share. Further the market place is influenced by the quality of the design. Improvements in design can yield the organization to differentiate itself from its

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competitors and potentially establish a competitive advantage. A sustained competitive advantage should allow organizations to realize higher prices and increases in market share (Evans & Lindsay, 2008). A primary business driver for Procter and Gamble (P&G) is innovation. This commitment to innovation is centered on a systematic and formalized innovation process that has quality design as a key component. This process includes the utilization of cross functional teams that leverage challenging success criteria based on customer demands, consumer testing and advanced technologies. P&G has been able to establish world class expertise in eleven core technology areas. (Procter and gamble, 2008). Further P&G measures this success in quality design via organic growth. Their goal for organic growth is 4-6 percent annualized, they have achieved six percent since 2001 and in 2008 achieved five percent growth (Procter and Gamble, 2008). P&G reports that due to their innovation capability that one third of the most successful products for their industry have come from their organization, which is more than the combined top six competitors. In 2008 five of the top ten products in the consumer industry came from P&G, thus advancing significant growth in market share. (Proctor and gamble, 2008 Continental Airlines has been ranked by J.D. Powers as the highest in customer satisfaction within North American carriers from 2006 through 2008. Continental attributes this success to their focus on exceeding customer expectations. This is exhibited by Continental being one of the first carriers to offer customer driven technology that allows the customer to take control of the check-in process. This customer focused initiative allows over 85 percent of Continentals customers to utilize several self service products to check in with. This has resulted in the shortest lines waits for the airline industry. Executive leaders contribute the continual growth in market share to this focus on the design and development of customer driven

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technology (Continental, 2008). Continental has experienced a twenty-five percent increase in revenues from 2005 to 2008 a growth that exceeds most domestic carriers (Hoovers, 2009). By focusing on designing new products or services that meet or exceed customer expectations both P&G and Continental have experienced improvements in key performance indicators.

A Systematic Approach to Continuous Learning and Improvement The total quality principal of continuous improvement can be defined as increasing productivity and effectiveness in the use of all its resources (Evans & Lindsay, 2008). P&G materials and manufacturing management groups systematically design new formulations and processes that lower costs. The evidence of these initiatives can be seen in historical productivity improvement. Since 1980 productivity has increased more than threefold growing at a compound average rate of 5% a year. This growth rate is more than twice the broad-based U.S productivity rate. Net earnings per employee are up more than eight fold growing at an average of nearly 8% per year (Procter and Gamble, 2008). The annual reports present clear evidence of the success of this total quality inactive, which has been sustained and embedded for decades within the organization. Continuous improvement depends on learning, which means understanding why changes are successful. A learning cycle has four stages: planning, execution, assessment and revision (Evans & Lindsay, 2008). P&G has been recognized as one of the top organizations for continual learning. P&G was ranked as one of the three best companies for leadership capability and knowledge by the Hay Group and Chief executive magazine. The organization has also developed advanced leadership training within the four learning cycle within their graduate school for senior leadership (Procter and Gamble 2007).

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Continental Airlines demonstrates increases in effectiveness of if its resources by utilizing one the world most efficient fleets. By standardizing (removing variation) on just three fleet types the company is able to achieve greater efficiencies in pilot training, crew flexibility, simplified maintenance and savings on spare parts (Continental, 2008). This efficiency in managing the companies most capital intensive assets demonstrates its commitment improving the effectiveness of its major resources. Continental reported gross profits increasing almost 75 percent from nine hundred and seventy six million in 2005 to One thousand six hundred and ninety eight million in 2007 (Hoovers, 2009). Strong Commitment to Teamwork and Employee Empowerment A Total quality organization must demonstrate commitment to employees, provide opportunities for development and growth, recognition beyond normal compensation and encourage risk taking (Evans and Lindsay, 2008). P&G’s culture embraces the use of employee improvement teams within both product and process innovation. In addition the organization is recognized as one of the industry leaders in internal employee development and advancement (proctor and Gamble 2005). The organization is continually redesigning its organizational structure striving to eliminate layers of management in turn empowering associates to take ownership of their areas of responsibility. This empowering of both multifunctional and process orientated teams leads to faster and more innovative change within an organization. Continental airlines pride itself on a culture that empowers and rewards employees when the organization achieves certain performance targets. Employees participate in bonuses on a monthly basis in the areas of on time arrivals. Continental continues to be first among the six network carriers for on time performance. Employees are empowered to adapt procedures as

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necessary in the interest of customer satisfaction, which weighs heavily in continental customer satisfaction ranking which are first in the nation (Continental 2008). In analyzing these two organizations the principles of total quality appear to have been embedded into all levels of their organization for several decades and have become part of their culture. They have leveraged these total quality principles as a foundation of their competitive advantage and have built upon them to become industry leaders in new product development, the speed of innovation and excelling in customer service. This synopsis review of these two organizations reinforces the research by Hendricks and Singhal, (1997), which states that when implemented effectively, total quality management approaches improve financial performance. This is seen specifically in the two case studies presented within the performance measures of organic growth, profit, sales per employee and market share. Further, research of these organizations reveal a balanced and integrated approach focusing on all three of the total quality principles versus focusing on just one of the principles. An integrated approach is one of the key reasons for the translation of total quality initiatives into organizational performance. Research by Cua, McKone and Shroeder (2006), indicate that improved organizational performance is directly related to the integration of the major total quality principles into a systematic approach. Organizations that fail to gain performance improvements may initiate quality approaches that are independent of the other fundamental principles or are not part of a systematic approach enforced by management systems. The two organizations examined also support that total quality principles are applicable to both service and manufacturing business sectors.

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References: Continetal Airlines, 2008, Annual report, Retrieved October 2, 2009 www.continental.com/web/en-US/.../reports.aspx

Procter and Gamble, 2008 Annual report, retrieved October 2nd, 2009 www.pg.com/investors/sectionmain.shtml

Procter and Gamble, 2007 Annual report, retrieved October 2nd, 2009 www.pg.com/investors/sectionmain.shtml

Procter and Gamble, 2005 Annual report, retrieved October 2nd, 2009 www.pg.com/investors/sectionmain.shtml

Hoovers 2009, Retreived October 2nd,2009 http://invreports.galegroup.combakerezproxy.palnet/reuters/financialreport/continental

Evans & Linsay 2008 James Evans and William Lindsay. Managing for quality and Performance excellence seventh edition 2008 South Western

Fortune 2007 Most admired companies 2007 Retreived Oct 2 2009 http://money.cnn.com/magazines/fortune/globalmostadmired

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Cua, Mckone Shroder 2006 Improving Performance through an Integrated Manufacturing Program Kristy O Cua; Kathleen E McKone-Sweet; Roger G Schroeder The Quality Management Journal; 2006; 13, 3; ABI/INFORM Global pg. 45

Chan 2005 Implementation of total productive maintenance: A case study. International Journal of Production Economics 95:71