Winning with TQM

For companies that have a vision to turn world-class, it is important to adopt a world-class management model. Japan achieved success using the Deming Prize criteria. When threatened by Japan, the US adopted the Malcolm Baldrige criteria. An United Europe, in an effort to contain and complete with global competition, graduated from the ISO 9000 to the European Quality Award criteria. In India, companies that aspire to turn world-class should adopt an appropriate model, be it the IMC Ramkrishna Bajaj National Quality Award criteria or, if internally mandated, the Malcolm Baldrige criteria or the European Quality Award criteria.

The route seems obvious. This same route helped Xerox, Motorola, Miliken and others to transform to world-class organizations. Yet, some organizations did not prosper, after going on to win the relevant awards. This information, in India, has encouraged managerial resistance towards adopting world-class criteria. The following is my official response to chairpersons and managing directors who have confronted me with remarks such as "But, Baldrige and Deming winners are going broke!"

The Malcolm Baldrige National Quality Award was established in 1988 to promote Total Quality Management, or TQM, as an increasingly important approach for improving the competitiveness of American companies. Over the past eight years, what started out as an add-on approach consisting of some statistical analyses of quality, training, and the formation of groups of employees working in teams to solve problems, has gone through some major changes. These changes require that a company integrate quality into the business strategy. In other words, include quality inputs with the financial, marketing and technology inputs. This calls for a major paradigm shift. Consequently, more than two thirds of the companies that begin a TQM initiative end up failing or dropping the initiative before it can really settle down.

In recent years, stories have surfaced about problems that Baldrige winners have faced after winning the award. The first and most serious concerns the Wallace Company, a 1990 Baldrige winner. Wallace is a Houston-based distributor of pipes, valves, and related equipment and parts for oil and chemical plants. The newspaper and business magazine stories presented dire headlines sounding like:

"Baldrige winner goes in toilet while executives make speeches about quality."

The newspaper stories explained that the company got into financial trouble because no one was minding the business. Executives travelled all over making speeches, and the employees at the factory were too busy conducting tours for companies who wanted to know how they too could win the Baldrige Award. In January 1992, the Wallace Company’s troubles becomes so bad that they filed for bankruptcy.

People at the Wallace Company, however, give a very different story than the one in the newspapers. Their side of the story is that in mid-1991, a large bank bought the bank that Wallace had done business with for many years. Consequently, Wallace was assigned a new loan officer. Wallace is in a highly leveraged business, so they had had a close relationship with their previous banker. During 1991, a couple of Wallace’s biggest competitors filed for bankruptcy because the recession had caused business to drop off so severely, that sufficient cash was not available to allow them to stay in business. On the face of it this should have been good news for Wallace. Unfortunately, Wallace’s new banker looked at what happened to those other companies and decided that Wallace might be next.

In reality Wallace was losing business because their customers were buying up inventory from the two bankrupt competitors at half the price. Observing this, Wallace’s new banker decided to withdraw their loan. By the end of 1991, Wallace had temporarily lost much of its business due to the misfortune of its competitors, and they had to simultaneously pay off a high loan. Since they didn’t have the cash to pay off the loan or the resources to keep afloat until the customers bought all of the competitors’ inventory and came back to Wallace, there was only one solution. In January 1992, Wallace filed for bankruptcy. Since then, Wallace has been purchased by a larger company who is willing to infuse the necessary cash to get the business going again.

According to Wallace officials, to suggest that their winning the Malcolm Baldrige Award, or their total quality effort more generally, had anything to do with their financial troubles is incorrect. As quoted in the January 1992 issue of the Quality Observer, former CEO Michael Spless puts it this way: "To be real blunt, winning the Malcolm Baldrige National Quality Award had absolutely nothing to do with the position that Wallace finds itself in today. In fact, had it not been for the fact that we embraced Total Quality Management, we would not be around .... to enjoy the ’91 recession".

If TQM has failed it is because of errors in implementation rather than the approach itself being flawed . Implementing TQM as a programme will doom an organization to eventual failure. A programme has a beginning and end, and does not change the basic approach to running a business. For TQM to succeed, an organization needs to integrate its philosophies and practices into its day-to-day approach of running the business.