Total Quality Management
Total Quality Management (TQM) is the philosophy and system that no defects are tolerable and that all employees — not just dedicated quality inspectors — are responsible for maintaining quality standards. TQM is both a mindset (quality is everyone’s job) and a toolkit (nine specific tools to achieve it). It begins not on the factory floor, but with employee satisfaction.
graph TD SE[Satisfied Employees] -->|motivated to produce| HQ[High-Quality\nGoods & Services] HQ -->|creates| SC[Satisfied Customers] SC -->|generates| SF[Firm Success\n& Profit] SF -->|enables| RE[Employee Recognition] RE -->|maintains| SE SF -->|funds| CI[Continuous\nImprovement] CI -->|refines| HQ
The Quality Wheel (Heskett, 1987) — quality is a self-reinforcing cycle starting with people.
How It Appears Per Course
ADMN 201
TQM is the operational culmination of Ch10. It ties together the productivity–quality relationship (LO5) and gives managers a concrete toolkit for pursuing continuous improvement (LO6). The chapter frames quality not as a cost centre but as a profitability driver.
The Productivity–Quality Link (LO5)
Productivity: How much is produced relative to the resources used.
Quality: A product’s fitness for use — offering the features consumers want.
The connection is direct: producing high quality from the start avoids the massive costs of poor quality. Those costs — rework, scrap, warranty claims, lawsuits, and lost customers — typically outweigh any savings from cutting corners.
| Low Quality Costs | High Quality Benefits |
|---|---|
| Rework and scrap during production | Fewer wasted resources → higher productivity |
| Refunds, recalls, and lawsuits after delivery | Repeat customers → stable revenue |
| Lost customers who won’t return | Competitive edge via lower per-unit cost |
- High productivity → lower cost per unit → can lower prices or earn higher margins.
- High quality → customer retention → higher revenue.
- Both together → sustained profitability.
The Quality Wheel (Heskett, 1987)
A causal cycle demonstrating that quality starts with people:
- Satisfied employees are better motivated to produce quality goods/services.
- Quality output creates satisfied customers.
- Satisfied customers create firm success and profit.
- Success allows the firm to recognize employees — keeping them satisfied.
- Cycle repeats continuously.
Key insight: You cannot have TQM without first attending to employee satisfaction. Quality is downstream of people.
Two Dimensions of Quality
Before applying the TQM toolkit, managers must define what “quality” means in two distinct senses:
| Dimension | Definition | Example |
|---|---|---|
| Performance Quality | How well the product’s features meet consumer needs | The taste and aroma of Godiva chocolate |
| Quality Reliability | The consistency of quality from unit to unit | Every Marriott room worldwide offering high-speed internet and 24-hour food service |
Both dimensions matter independently. A product can perform brilliantly on average but be unreliable (high variance across units). TQM targets both.
TQM Toolkit — 9 Tools (LO6)
graph TD TQM[TQM Toolkit\n9 Tools] TQM --> A[Analysis Tools] TQM --> B[Process Control\n& Improvement] TQM --> C[System-Wide\nStandards & Redesign] A --> A1[1. Competitive\nProduct Analysis] A --> A2[2. Value-Added\nAnalysis] A --> A3[3. Quality/Cost\nStudies] B --> B1[4. Statistical\nProcess Control SPC] B --> B2[5. Quality\nImprovement Teams] B --> B3[6. Benchmarking] C --> C1[7. ISO 9000 & 14000] C --> C2[8. Business Process\nRe-Engineering] C --> C3[9. Getting Closer\nto the Customer]
Category 1: Tools for Analysis
1. Competitive Product Analysis
Analyzing a competitor’s product to identify desirable improvements — “legal industrial espionage.” A company disassembles a rival’s product and tests every component against its own.
Example: Toshiba dismantles a Xerox photocopier to identify which of its own features need upgrading.
2. Value-Added Analysis
Scrutinizing every activity, material flow, and paperwork step to determine which ones add value for the customer — and eliminating those that don’t.
Goal: Reveal and eliminate wasteful steps that consume resources without improving the product.
3. Quality/Cost Studies
Identifying where quality-related money is being wasted by separating failures into two types:
- Internal Failures: Costs incurred during production (overfilling boxes, scrapping bad parts before shipping).
- External Failures: Costs incurred after the product reaches the customer (refunds, recalls, lawsuits).
External failures are the “nightmare” category — far more expensive and reputationally damaging than internal failures.
Category 2: Tools for Process Control & Improvement
4. Statistical Process Control (SPC)
Uses mathematical techniques to monitor production and detect when adjustments are needed. Two sub-tools:
- Process Variation Studies: Analyzing the normal range of variance in a process. A cereal box labeled 400g might naturally weigh 402g — that’s acceptable variation. At 390g, the process is off-centre and needs fixing.
- Control Charts: Test sample results plotted against upper and lower limit lines. Dots trending toward the edges = early warning that equipment is wearing out or needs calibration.
5. Quality Improvement (QI) Teams
Cross-departmental employee groups who meet regularly to define, analyze, and solve production and quality problems.
Example: Motorola uses team competitions to sustain a culture of continuous improvement.
6. Benchmarking
Comparing performance against a reference point to identify gaps:
- Internal Benchmarking: Compare this month’s metric against last month’s or last year’s.
- External Benchmarking: Compare your performance against an industry leader (e.g., your shipping speed vs. FedEx’s).
Category 3: Tools for System-Wide Standards & Redesign
7. ISO 9000 & ISO 14000
International certification programs from the International Organization for Standardization:
- ISO 9000: Certifies that a factory, lab, or office meets rigorous quality management requirements. Requires documenting every step so a product is identical every day.
- ISO 14000: Certifies improvements in environmental performance — requires a documented plan for managing pollution and hazardous waste.
8. Business Process Re-Engineering (BPR)
Fundamental rethinking and radical redesign of a business process from scratch — not incremental tweaks. Used when minor improvements cannot close the competitive gap.
Example: Caterpillar Finance moved entirely online, retraining all employees and connecting customers directly to their database for dramatic speed gains.
9. Getting Closer to the Customer
Staying obsessed with what customers actually want — gathering feedback and using it directly in product and service design.
Example: Coast Capital Savings created a “You’re the Boss Mortgage” after listening to customer frustrations with traditional banking.
Cross-Course Connections
OperationsPlanning — quality planning (area 4) feeds into TQM execution
OperationsManagement — TQM applies to all operations, both goods and services
SupplyChainManagement — TQM principles extend to supplier ethics and quality across the chain
CorporateSocialResponsibility — ISO 14000 connects TQM to environmental CSR obligations
Causation-RiskManagement — the Quality Wheel is a causal chain; apply PHIL252 causation tools to evaluate it
Key Points for Exam/Study
- LO5: High quality → fewer wasted resources → higher productivity → competitive edge (lower cost or higher margin); poor quality costs more than it saves
- LO5: Quality Wheel causal cycle — employees → quality → customers → success → recognition → employees
- LO6: TQM = no defects tolerable + all employees responsible + customer focus + continuous improvement
- Two dimensions: Performance Quality (features meet needs) vs. Quality Reliability (consistent unit to unit)
- Quality Ownership: the concept that every employee creates or destroys quality — not just the inspector’s job
- Know all 9 TQM tools by name and category — very likely exam target
- Internal vs. External Failures: external (lawsuits, recalls) are far more expensive — the cost of cutting corners almost always exceeds the savings
Open Questions
- At what point should a firm invest in full BPR vs. incremental TQM improvement?
- How does the Quality Wheel apply differently to high-contact vs. low-contact service firms?