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Case Study

QUALITY AND PERFORMANCE EXCELLENCE

Management, Organization, and Strategy

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QUALITY AND PERFORMANCE EXCELLENCE Management, Organization, and Strategy

E IGHTH EDIT ION

± ± ± ± ± ± ± ± ± ± ± ± ± ± ± ± ± ± ± ± ±

James R. Evans University of Cincinnati

Australia • Brazil • Japan • Korea • Mexico • Singapore • Spain • United Kingdom • United States

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Quality and Performance Excellence: Management, Organization, and Strategy, Eighth Edition James R. Evans

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BRIEF CONTENTS

Preface xi

PART 1 Foundations of Quality and Performance Excellence 1 CHAPTER 1 Introduction to Quality and Performance Excellence 3

CHAPTER 2 Frameworks for Quality and Performance Excellence 47

CHAPTER 3 Tools and Techniques for Quality Design and Control 105 CHAPTER 4 Tools and Techniques for Quality Improvement 148

PART 2 Performance Excellence, Strategy, and OrganizationTheory 195 CHAPTER 5 Competitive Advantage and Strategic Management for Performance

Excellence 197 CHAPTER 6 Quality in Customer-Supplier Relationships 249

CHAPTER 7 Designing Organizations for Performance Excellence 289

PART 3 Performance Excellence and Organizational Behavior 325 CHAPTER 8 Quality Teamwork 327

CHAPTER 9 Engagement, Empowerment, and Motivation 359

v

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PART 4 Leadership and Organizational Change 391 CHAPTER 10 Leadership for Performance Excellence 393

CHAPTER 11 Performance Excellence and Organizational Change 426

Index 465

Bibliography (Available on the product website)

vi Brief Contents

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CONTENTS

Preface xi

PART 1 Foundations of Quality and Performance Excellence 1 CHAPTER 1 Introduction to Quality and Performance Excellence 3

Quality and Performance Excellence 5 / The Importance of Quality in Organizations 7 / A Brief History 9 / Quality in Organizations 15 / Principles and Practices of Total Quality and Performance Excellence 24 / TQ and Agency Theory 38 / TQ and Organizational Models 39 / Discussion Questions and Experiential Exercises 41 / Cases 42 / Bishop’s Seafood 44 / Patterson Auto Sales and Service 45 / Endnotes 45

CHAPTER 2 Frameworks for Quality and Performance Excellence 47 Foundations of Performance Excellence 49 / The Baldrige Award 61 / International Quality and Performance Excellence Award Programs 78 / Six Sigma 90 / Comparing Baldrige, ISO 9000, and Six Sigma 95 / Discussion Questions and Experiential Exercises 96 / Cases 100 / Endnotes 102

CHAPTER 3 Tools and Techniques for Quality Design and Control 105 Designing Quality Goods and Services 108 / Designing Quality Processes 120 / Process Control 125 / Statistical Thinking and Process Control Tools 128 / Process Design and Control in Action 134 / Lexus 135 / The Kroger Company 136 / Chugach School District 138 /

vii

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Discussion Questions and Experiential Exercises 141 / Cases 142 / Endnotes 146

CHAPTER 4 Tools and Techniques for Quality Improvement 148 Process Improvement 150 / Improvement Processes 154 / Tools for Continuous Improvement 160 / Breakthrough Improvement 172 / Creativity and Innovation 178 / Process Improvement in Action 182 / Discussion Questions and Experiential Exercises 186 / Cases 188 / Endnotes 193

PART 2 Performance Excellence, Strategy, and OrganizationTheory 195 CHAPTER 5 Competitive Advantage and Strategic Management for Performance

Excellence 197 Quality, Competitive Advantage, and the Bottom Line 199 / Sources of Competitive Advantage 203 / Quality and Differentiation Strategies 206 / Information and Knowledge for Competitive Advantage 216 / Strategic Planning for Performance Excellence 219 / Strategic Planning for Performance Excellence in Action 236 / TQ and Strategic Management Theory 242 / Discussion Questions and Experiential Exercises 243 / Cases 245 / Endnotes 247

CHAPTER 6 Quality in Customer-Supplier Relationships 249 Customer-Supplier Relationships and Performance Excellence 251 / Principles for Customer-Supplier Relationships 255 / Practices for Dealing with Customers 258 / Managing Customer Relationships 266 / Practices for Dealing with Suppliers 270 / Quality Customer-Supplier Relationships in Action 274 / Customer-Supplier Relationships in Organization Theory 276 / Discussion Questions and Experiential Exercises 281 / Cases 282 / Endnotes 286

CHAPTER 7 Designing Organizations for Performance Excellence 289 Organizational Structure 291 / The Functional Structure 292 / Redesigning Organizations for Performance Excellence 294 / Organizational Design for Quality in Action 311 / Comparison to Organizational Design Theory 314 / Discussion Questions and Experiential Exercises 318 / Cases 319 / Endnotes 322

PART 3 Performance Excellence and Organizational Behavior 325 CHAPTER 8 Quality Teamwork 327

The Importance of Teams 329 / Types of Teams 330 / Cross-Functional Teamwork 337 / Effective Teamwork 339 / Teamwork in Action 348 /

viii Contents

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Comparison to Organizational Behavior Theories 351 / Discussion Questions and Experiential Exercises 353 / Cases 354 / Endnotes 357

CHAPTER 9 Engagement, Empowerment, and Motivation 359 Workforce Engagement 361 / Empowerment 366 / Employee Engagement in Action 374 / Motivation 377 / Employee Engagement and Theories of Motivation 381 / Discussion Questions and Experiential Exercises 385 / Cases 386 / Endnotes 388

PART 4 Leadership and Organizational Change 391 CHAPTER 10 Leadership for Performance Excellence 393

Perspectives on Leadership 395 / The Roles of a Quality Leader 398 / Leadership for Performance Excellence in Action 402 / Leadership Systems 408 / Performance Excellence and Leadership Theory 409 / Leadership, Governance, and Societal Responsibilities 415 / Discussion Questions and Experiential Exercises 419 / Cases 420 / Endnotes 423

CHAPTER 11 Performance Excellence and Organizational Change 426 The Importance of Change 428 / Cultural Change 430 / Sustaining Quality and Performance Excellence 439 / Organizational Change in Action 451 / Organizational Change and Organization Theory 453 / Discussion Questions and Experiential Exercises 457 / Cases 458 / Endnotes 462

Index 465

Bibliography (Available on the product website)

Contents ix

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PREFACE

The American Society for Quality (ASQ) monitors news items reported in the press. What types of stories do we find? Food safety and toy recalls, health care, the automo- tive industry, and various product glitches dominate. Indeed, quality—or lack of quality—is a vital issue in everyone’s life. That’s why this book is relevant and important for today’s students and future business leaders, as well as those already in the work- force. Understanding the principles of quality and performance excellence is absolutely essential for new graduates to succeed in today’s highly competitive business world.

It is difficult for students to learn about these principles on their own, because there are so many different approaches to the topic. Although these approaches are similar, each has its own jargon and acronyms, which makes trying to pene- trate the subject for the first time a difficult experience. Furthermore, most books about quality are not written with the needs and experiences of students in mind.

This book has three objectives:

• to familiarize students with the basic principles and methods associated with total quality and performance excellence;

• to show students how these principles and methods have been put into effect in a variety of organizations; and

• to illustrate the relationship between basic principles and the popular theories and models studied in management courses.

The book presents the basic principles and tools associated with quality and per- formance excellence and provides many illustrations and end-of-chapter cases that can be used as the basis for class discussion. Many cases focus on large and small companies in manufacturing and service industries in North and South America, Europe, and Asia–Pacific.

This book is organized so that it can be used as a supplement to textbooks for courses in management, organization theory, organizational behavior, strategic

xi

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management and/or operations. The book also can be used as a free-standing introduction to quality and performance excellence in an elective course. Students who have had the basic courses in management and organizational theory and behavior will be familiar with most of the various management theories used to place quality and performance excellence principles in perspective.

CHANGES IN THE EIGHTH EDITION

This edition has made numerous changes to maintain currency of content and the student-friendly style of past editions. Discussions of the Baldrige criteria have been updated to conform with the 2015–16 criteria, and many other minor updates have been integrated throughout. New or additional boxed examples have been added, discussion questions and new experiential exercises have been added, and several new cases have been included.

ORGANIZATION OF THE BOOK

Considerable flexibility is built into the book to meet the individual needs of instructors. After the first two chapters, all others can be sequenced in almost any order. Unlike most books on quality, this one is organized according to traditional management topics. This organization helps students to see the parallels between quality principles and management theories in areas such as organizational design and leadership. In many traditional management books, quality is often presented as new or different, which it clearly is not.

Many quality principles are based on management theories that are familiar to teachers and students. The organization of this book enables students to appreciate the ways in which quality and performance excellence really are different from those theories.

The book has four parts. Part 1, Foundations of Quality and Performance Excellence, presents the core principles of total quality and performance excellence, and begins to explain how they relate to familiar management concepts. It also positions quality thinking within general business management frameworks and strat- egy, and it introduces tools used in process management. Each chapter begins with a “Performance Excellence Profile,” highlighting a Malcolm Baldrige Award-winning organization whose practices have particular relevance to the material in that chapter.

Chapter 1 introduces the concepts of total quality and performance excellence and their applicability to manufacturing, services, health care, education, and not- for-profits; the evolution of quality principles; and the modern principles of total quality and its relationship with agency theory.

Chapter 2 describes three major frameworks for pursuing performance excellence in organizations: the Baldrige Framework for Performance Excellence, ISO 9000:2000, and Six Sigma, focusing on the value of these approaches in build- ing performance excellence and evaluating their similarities and differences. The philosophies of Deming, Juran, and Crosby serve to motivate and provide a foun- dation for these frameworks.

Chapter 3 introduces process management and summarizes the most important tools and techniques for designing quality goods and services and for controlling

xii Preface

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quality in manufacturing and service operations. These include topics such as qual- ity function deployment, failure mode and effects analysis, poka-yoke, statistical thinking, and statistical process control. It also discusses the role of creativity and innovation in quality, statistical thinking, and the effective use of such tools as sta- tistical process control.

Chapter 4 focuses on tools for quality and process improvement, including kaizen, the Deming Cycle, Six Sigma DMAIC, lean thinking, the Seven QC Tools, benchmarking and reengineering, and creativity and innovation concepts. The chapter presents several examples of process management in action.

Part 2, Performance Excellence, Strategy, and Organization Theory, introduces the importance of quality and performance excellence from a strategic perspective, the idea of customer-supplier relationships, and the role of organizational design.

Chapter 5 addresses the role of quality and performance excellence in organi- zational strategy for achieving competitive advantage, the value of differentiating organizations from their competitors, and approaches for doing so. It also dis- cusses quality-based strategic-planning processes and strategic work-design activi- ties. An important aspect of strategic management is the use of a “balanced scorecard” of metrics and information for data-driven decisions. This topic is also addressed.

Chapter 6 discusses the importance of customers and suppliers in a high- performing organization. It presents principles of customer-supplier relationships, practices for dealing with customers and suppliers, and examples of customer- supplier relationships in action and how they relate to organization theory.

Chapter 7 focuses on designing organizations to support a focus on perfor- mance excellence. It explains how high-performing organizations must differ from traditional functional organizations, approaches to organizational design, examples of organizations that have successfully redesigned themselves with a quality focus, and comparisons with organizational design theory.

Part 3, Performance Excellence and Organizational Behavior, discusses the themes of teamwork and empowerment, and relates quality to the topics of groups and motivation.

Chapter 8 focuses on teamwork. It highlights the importance of teams in a high- performance environment and describes the various types of teams commonly found in such organizations, including Six Sigma project teams. It also discusses what teams must do to work effectively from an organizational viewpoint, presents some examples of teamwork in action, and compares quality-based team concepts to orga- nizational behavior theories.

Chapter 9 develops the important concepts of employee engagement, empow- erment, and motivation. This chapter describes the scope and benefits of employee engagement, why empowerment is important in organizations, principles for suc- cessfully introducing and sustaining engagement and empowerment, and examples of organizations that have done so successfully. Motivation is discussed in the con- text of organizational practices that support quality efforts. These concepts also are discussed in the context of popular organizational theories of motivation.

Part 4, Leadership and Organizational Change, deals with practices for mak- ing performance excellence a part of today’s modern organizations, focusing on leadership and the journey to performance excellence.

Preface xiii

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Chapter 10 is devoted to leadership, the roles of a quality leader, examples of leadership in action, and relationships with traditional theories of leadership.

Chapter 11 concludes the book with a discussion of organizational change and learning, organizational culture, and approaches for sustaining performance excel- lence initiatives for the long run. It also illustrates some examples of organizational change in action and how quality-focused change relates to organization theory.

The bibliography, available on the book’s website, provides a number of refer- ences for students who wish to deepen their understanding of various aspects of these topics.

INSTRUCTOR RESOURCES

Instructors’ resources can be found online at www.cengage.com/decisionsciences /evans. Here you will find instructional tools, including the instructor’s notes, PowerPoint slides, and the Test Bank.

Additionally, this book comes with a Cognero digital test bank. Cengage Learning Testing Powered by Cognero® is a flexible, online system that allows you to: import, edit, and manipulate content from the text’s test bank or elsewhere, including your own favorite test questions; create multiple test versions in an instant; and deliver tests from your LMS, your classroom, or wherever you want.

Access this book’s Cognero test bank through your SSO account at www. cengage.com/sso.

ACKNOWLEDGMENTS

I wish to acknowledge my friend and colleague, Dr. James W. Dean, Jr., who was my coauthor of this book in its early editions and who was instrumental in defin- ing its design and character, and integrating the concepts of quality with tradi- tional theories of management and organizations.

For previous editions, we are especially grateful to the many reviewers who provided comments and suggestions for improvement. They are:

Phyllis Alderdice, Jefferson Community College Mohsen Attaran, California State University—Bakersfield Victor Berardi, Kent State University George Bertish, University of Central Florida Dr. Joseph D. Bono, Barry University Gary Bragar, Bloomfield College Frank Carothers, Somerset Community College Robert Carver, Stonehill College Elia Chepaitis, Fairfield University Tim Davis, Cleveland State University Kevin Van Dewark, Humphreys College Dean Elmuti, Eastern Illinois University Elizabeth Evans, Concordia College Lou Firenze, Northwood University Mark Goudreau, Johnson & Wales University

xiv Preface

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Marjorie Hance, College of St. Catherine Jodi Harrison, Northwood University John Hironaka, California State University Sacramento Jane Humble, Arizona State University Santiago Ibarreche, University of Texas—El Paso Yunus Kathawala, Eastern Illinois University Kathleen Kerstetter, Davenport University Dan Kipley, Azusa Pacific University Dr. Kees Rietsema, Devry Malcolm Keif, Cal Poly State University Patrick Lee, Fairfield University Roger McHaney, Kansas State University Jalane Meloun, Barry University Ellen Mink, Kentuckt Community and Technical College System Connie Morrow, Somerset Community College David Murphy, Madisonville Community College Judi Neal, University of New Haven Ken Paetsch, Cleveland State University Dr. Michael Provitera, Barry University Stanley Ross, Bridgewater State College Mark Schuver, Purdue University Kris Sperstad, Chippewa Valley Technical College Matthew P. Stephens, Purdue University Scott Stevens, Eastern Illinois University Walter Tucker, Eastern Michigan University Oya Tukel, Cleveland State University Ryan Underdown, Lamar University Thomas Velasco, Southern Illinois University Larry Williamson, Pittsburgh State University Nesa Wu, Eastern Michigan University

Finally, I greatly appreciate the help of our editors at Cengage Learning, Aaron Arnsparger, and Conor Allen, as well as our former editors at Cengage Learning, West Publishing Company, and South-Western Publishing, Charles McCormick Jr., Richard Fenton, Esther Craig, and Alice Denny.

I believe, like many business and academic leaders, that quality is an absolute essential not only for competitive success in business but also for meaningful work and integrity in many aspects of life. If this book helps students to contribute to the quality of their organizations’ products and services and to understand the im- portance of quality in all their endeavors, then our efforts will have been worthwhile.

If you have any suggestions for improvement or perhaps a good story or case to contribute to the next edition, I would love to hear from you and acknowledge your contribution in the next edition. Please feel free to contact me via e-mail at James.Evans@UC.edu.

James R. Evans

Preface xv

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