In their haste to improve bottom-line performance, companies often forget to integrate two important planning activities—strategic and quality planning. This is often due to a lack of understanding of the cause and effect relationships among strategy, quality, productivity, profitability and competitiveness. To maximize profits, organizations should align business objectives and priorities, at all levels of the organization, with the quality improvement process.
Organizations need to select quality improvement projects that link the strategic business objectives to their goals. If the strategy is to increase market share, focus projects on areas that have the greatest impact on future customers. However, if the business strategy is to increase profit on a specific product or service, projects should focus on reducing quality costs by reducing or eliminating errors and eliminating non-value-added activities or waste.
Another challenge to understanding this relationship is the definition of quality. Basically, quality is meeting customer requirements, error free, at the lowest possible cost. It might seem strange to say but quality can be too good. (Let that soak in a minute.) This is usually the case of a product exceeding customer requirements or providing something for which customers aren’t willing to pay. Therefore, quality exceeding requirements can be considered a form of waste to an organization.
One by-product of a quality initiative is improvement in productivity. By eliminating errors, non-value-added activities and waste, resources become available. However, this presents another challenge to management. If these ‘freed-up’ resources aren’t deployed to meaningful work there is no real impact to the bottom line. Management has learned through bitter experience that if employees are let go then the improvement process can be utterly destroyed. Successful organizations find ways to use freed-up employees, due to improvement projects, as valuable resources to address priority outcomes.
Increased quality reduces the overall production cycle time and increases the availability of machinery and equipment due to less rework. This results in an increase in capacity with no capital outlay. Less work in process (WIP) material is required because of less scrap, rework and waste. This results in less cost of carrying excess WIP and flows directly to the bottom line.
White collar resources which have been made available through quality and productivity improvements are valuable assets to utilize helping the organization think more strategically for future improvements. Additionally, these freed-up resources are excellent sources for leaders of projects with significant return.
Quality improvements have been shown to improve the operating environment and employee satisfaction as organizations increase organizational competitiveness. Customer satisfaction increases when conformance to requirements improves, on-time delivery is better and costs are lowered. Sales and market share will increase as customer satisfaction improves and perceived value increases. The organization may also become more competitive because profitability is increased per unit of sales allowing for price stabilization or reduction in price, thus being more attractive to the market.
Historically, organizations have treated strategic planning and quality improvement planning as separate activities. Strategic planning typically is done on a regular basis, usually annually, using a formal approach. However, quality improvement planning has been treated as ad hoc. Most organizations do not schedule quality improvement planning regularly. When organizations finish their current improvement projects they may identify new ones but generally they wait until a crisis surfaces.
In most cases, improvement projects are added to the regular work schedules of the individuals involved with the projects and tend to get worked on only when these individuals have time. This approach ultimately results in projects not being completed in a timely manner, when or if they are ever satisfactorily resolved.
While strategic planning is conducted on a regular and formal basis, many organizations do not communicate these plans because they consider the output as confidential. However, the organization is expected to achieve these plans, even though they have not been communicated. This is not a recipe for success!
Improvement projects should focus on the needs of current and future customers, and support the strategic and business goals of the organization. These projects should be scheduled (including formal gate reviews) and resourced appropriately so they can be completed before the next planning cycle.
Organizations that link their strategic and business planning process with quality improvement planning have a sustainable, strategic competitive advantage because they positively affect their bottom line profitability. In the business climate today any competitive advantage can mean the difference between just surviving and thriving.