IMPROVING QUALITY AND ORGANIZATIONAL EFFECTIVENESS Go HAND IN HAND THROUGH DEMING'S MANAGEMENT SYSTEM Dean Elmuti Eastern Illinois University Charleston, IL Taisier F. AIDiab Cameron University Lawton, OK Abstract This study was undertaken to investigate the perceived effects of Deming's management system on employee job satisfaction, productivity, quality and over- all organizational effectiveness. Three published. validated instruments on orga- nizational characteristics were used to gather data, and extensive, open-ended in- terviews were conducted with production and operation managers for each of the eight firms in the study. Survey and interview results bolster the claims of pro- ponents of Deming's quality improvement ideas that these ideas improve employee perceptions of their own job satisfaction and organizational quality. Furthermore, the results show a positive impact of Deming's management system on employee perceptions of their own productivity and overall organizational effectiveness and industrial competitiveness. Introduction W. Edwards Deming, who has been affectionately called the "Messiah of Management," has been highly critical of American corporations for their short- sightedness and for a lack of quality in their products and services. He believes that it is quality that has a major influence on market share and the ability to compete domestically and abroad. Foreign competitors have moved in and capi- talized on the United States' quality weaknesses. Deming is credited with insti- tutionalizing a system of strategic manfacturing which is responsible for the for- midable Japanese presence in the world market (Yoshida 1989). His advice to Japan made Mr. Deming the leader of a generation of specialists on product du- rability and reliability. After the application of his methods brought enormous commercial success to some Japanese companies, the Japanese created a Deming Prize, for companies that made striking advances in quality. Dr. Deming's principles were based on the premise that most product defects resulted from management shortcomings rather than careless workers, and the inspection after the fact was inferior to designing processes that would pro- Spring 1995 Elmuti & ALDiab: Improve Quality 87 duce better quality (Yates 1992). He argued that enlisting the efforts of willing workers to do things properly the first time and giving them the right tools were the real secrets of improving quality - not teams of inspectors (Holusha 1993). In spite of Deming's success in Japan, he claims that most American firms still don't really understand the concepts of improving quality through bet- ter control of the production system. He insists that American managers are still content to hang on to the "destructive" notions of "management by objectives" and "results-oriented management" (Yates 1992). Deming denounced manage- ment procedures like production quotas, performances ratings and individual bo- nuses, saying they were inherently unfair and detrimental to quality. He said customers would get better products and services when workers were encouraged to use their minds as well as their hands on the job (Persico 1990). The prevailing sentiment in American industry during the 1960's and the 1970"s was that more quality meant more cost and that consumers did not want to pay for higher-quality products. That attitude began to change when Japa- nese products with brand name Sony and Panasonic drove the American consumer - electronics industries almost out of business while reliable, fuel efficient Toyotas and Hondas gnawed away at the domestic auto industry (Holusha 1993). The United States is now engaged in an all out quality awareness alert. Xerox Corporation is but one organization that has been strongly influenced by the Deming philosophy. Xerox sees customer satisfaction and commitments to quality as their main goals. Through a total quality drive, Xerox reduced their manufacturing costs while developing equipment much faster and improving the reliability of products (Norman 1991). Ford Motor Company was also among the first to invite Deming to help transform its operations. In 1992 the media celebrated the fact that Ford Taurus outsold the Honda Accord to become the leader in domestic sales. Former CEO Donald Peterson stated: The work of Dr. Deming has definitely helped change Ford's corporate leadership ... Dr. Deming has influenced my thinking in a variety of ways. What stands out is that he helped me crystalize my ideas concerning the value of teamwork, process improvement and the pervasive power of the concept of continuous improvement (Dean and Evans 1994). As Ford's success became obvious, demand for Mr. Deming's services grew. Among the companies that turned to Mr. Deming and his disciples were Dow Chemical, Proctor & Gamble, American Telephone & Telegraph and the New York Times (Holusha 1993). There are several individuals who are also regarded as quality gurus. Each has developed a set of guidelines, principles, or philosophical statements to describe or explain the beliefs they advocate. Some of these giants in the field of total quality management/control are Joseph M. Juran, Armand V. Feigenbau, Kaoru Ishikawa, and Philip B. Crosby. The works of Deming are perhaps the most highly regarded of the total quality management systems (Brocka 1992). 88 Journal ofBusiness Strategies Vol. 12, No.1 As indicated earlier a wide range of quality implementation strategies exist, many of which have serious pitfalls. For example, at Florida Power and Light, John L. Hudiburg drove hard to win the Deming Prize in Japan, but cre- ated a large bureaucracy in which morale fell as workers and managers had to compile hundreds of pages of analysis. The new CEO reduced the scope of the quality effort. Alcoa's CEO scrapped the company's decade-long continuous im- provement strategy, calling it a "major mistake" and focused instead on "quan- tum" improvements (Dean and Evans 1994). Patten (1992), believes that Total Quality Management systems require a new set of skills and learning, including interpersonal awareness and competence, team building, empowerment and continuous improvement as a way of life, The process must begin by creating a set of feelings and attitudes that lead to lasting values. Deming's management system has been credited with helping to improve morale, reduce costs, improve quality, increase productivity, and improve organi- zational effectiveness and competitiveness (Moen 1989; Munroe 1991; Walton 1990; Whitlen 1989; Yates 1992). The claims by proponents of Deming's man- agement system and Total Quality Management principles suggest the following research questions that might be very useful to pursue in these early stages of investigation of the relationships between Deming's management system and or- ganizational effectiveness - satisfaction, productivity and quality: 1. Does Deming's management system achieve its stated objectives of influencing and enhancing employees' of job satisfaction? 2. Does Deming's management system seem to contribute in any mea- surable extent to perceptions of higher levels of organizational pro- ductivity? 3. Does Deming's management system achieve its stated objectives of improving quality of products and services? This study investigates these three research questions and evaluates the impact of implementing Deming's Management System on organizational effectiveness. Research Methodology A survey was used, with open-ended interviews, to examine the rela- tionships between Deming's management system and organizational effectiveness. Survey respondents were general managers (operations), production, middle man- agers and lower level r6anagers employed by large and medium- sized organiza- tions presently operating in the mid-western United States. The sample consisted of eight corporations presently engaged in manu- facturing and production of consumer products. The sample of finns were cho- Spring 1995 Elmuti & AlDiab: Improve Quality 89 sen from the United States Chamber of Commerce, the U.S. Department of Com- merce, and the Department of Commerce and Community Affairs in Illinois. Most of the selected firms were large and medium-sized corporations with 500 or more employees which had been in business for at least four years. All eight firms in this study had been adopting Deming's quality improvement ideas for at least three years. The total number of general managers, production, middle level manag- ers, and lower level managers in the eight selected organizations was 720. A representative sample of twenty percent was chosen, based upon recognized tables (Krajcie and Morgan 1970) for a total of 144 managers. Due to cost limitations, and being an exploratory study in nature, only 144 managers were chosen among the total population in this study. Ninety-two managers returned questionnaires, resulting in a 64 percent response rate. Twenty-two questionnaires were not acceptably completed, thus reducing the response rate to 49 percent (70 managers). Demographic character- istics of the respondent, and surveyed organizations are shown in Table I. Interviews were also conducted with at least one general manager and production manager in each of the eight organizations in the study to obtain a deeper understanding the company executives perceptions of Deming's manage- ment system effectiveness. During the interviews, the questionnaires were used initially as a guide. Three instruments used for this study were Likert's (1967), Profile of Organizational Characteristics, Mott's (1972), Characteristics of Effec- tive Organizations, and a third instrument designed to tap a wide range of Deming's management system facets with measures derived from Deming's 14 points (Deming 1986). Likert's questionnaire was used because it emphasized the relationship between management systems and organizational effectiveness. Mott's questionnaire was used to assess overall productivity and as a reinforce- ment for the data gathered from Likert's instrument. Response scales ranged from one (to a very little extent) to five (to a very great extent) for all measures. Although Likert's indices of management systems and organizational ef- fectiveness have been tested for validity and reliability by Taylor and Blowers (1972), a reliability test was conducted for these indices to enhance their cred- ibility. Cronbach's alpha (1951), was calculated for each index in these instru- ments. The results of this test indicated that all indices were above 0.78 (alpha) criterion for adequate scale reliability. Several variables were identified as being significant for the purpose of this study. First, there were the elements used to measure the independent vari- able - Deming's management system - which include Deming's quality improve- ment dimensions; second, there were the elements used to measure the depen- dent variable - organizational effectiveness - which include job satisfaction, pro- ductivity, and quality. The definition of the variables used in this study are ex- plained in the Appendix. 90 Journal of Business Strategies Vol. 12, No.1 Table 1 Demographic Characteristics of the Respondents and their Organizations* Demo&raphic Characteristics Percent Respondent Sample Sex M~e m ~m~ W A&e Under 30 40 31 - 40 38 41 - 50 16 over 50 6 Education High schoool or less 8 Two years college 30 Baccalaureate degree 46 Graduate degree 16 Job Status General manager (operations) 6 Production manager 24 Finance manager 12 Marketing manager 14 Human resource manager 8 Training and development manager 16 Lower level managers & supervisors 20 Years Experience at Firm 1004 8 5007 ~ 8 to 10 38 over 10 5 Number of Employees at Firm 500 to less than 1,000 employees 48 1,000 to less than 1,500 employees 36 over 1,500 employees 16 ~ $10 to less than $20 million 25 $20 to less than $30 million 12 $30 to less .than $40 million 14.. $40 to less than $50 million 20 $50 to less than $100 million 18 over $100 million 11 * Number of respondents 70 managers at 8 firms Spring 1995 Elmuti & AIDiab: Improve Quality 91 This study employs Likert's (1967) Model of Human Organizational Di- mension known as system four as its major conceptual framework. Likert's, conceptualization of the management system and his advocacy of the participa- tive management approach are based on his research efforts over many years. Likert believes in the importance of the interaction - influence process, work group communication participation in decision making and the team approach to management. Likert's thinking is easily recognized in many articles ( Persico 1990; Wren 1987) dealing with Deming's management philosophy and Japanese management techniques such as quality circles and participative management. Hypothesis The following major hypothesis guided the study: A positive relationship exists between Deming s management system and organizational effectiveness in some of the firms investigated. This hypothesis was stated to reflect the claims made by Deming's management system proponents. It was also stated in a way that seeks to determine linear relationships. Results Data Analysis One major objective of this study was to examine the relationships be- tween Deming's management system and organizational effectiveness as perceived by respondents in the firms studied. The Pearson Product-moment Correlation (r) was calculated for Deming's management system dimensions and effectiveness dimensions - job satisfaction, productivity and quality - to measure the strength, direction and statistical signifi- cance of relationship between the independent and dependent variables with groups, each company represented a group in this study as a unit of analysis. Table 2, presents the result of this analysis, which clearly indicates a positive relationship between all measures. It is therefore, appropriate to accept the main hypothesis, and to state, with more than 95 percent confidence that a positive relationship was found between Deming's management system and organizational effectiveness. The results of this analysis also indicate that the highest relationships are found between measures of organizational effectiveness and employee participa- tion in problem solving and decision making, extensive communication among management and lower level employees, extensive education and training, and support from leadership in that order. Further analysis and evaluation of the relationship between Deming's management system and organizational effectiveness were done with the use of multiple regression analysis. This analysis determine the proportion of variance in organizational effectiveness scores explained by the scores of the Deming's management system. 92 Journal ofBusiness Strategies Vol. 12, No.1 Table 2: Pearson Correlation Coefficients for Demings Mangements System Dimensions and Effectiveness Dimensions Effectiveness Dimensions Deming's Management Satisfaction Productivity Quality Effectiveness Dimensions* (A) (B) (C) (A+B+C) Corporate Strategy Point I Create constancy of purpose for the organization "clear mission" 0.45 0.42 0.38 0.43 Point 2 Adopt the new philosophy the never-ending improvement 0.50 0.52 0.40 0.58 Point 14 Involve everybody in the organization "employee participation" 0.62 0.45 0.45 0.68 Human Resource Management Point 8 Drive out fear among employee "motivation" 0.46 0.39 0.57 0.48 Point 9 Break down organizational barriers "communication" 0.57 0.69 0.49 0.66 Point 12 Facilitate and promote pride of workmanship "promote excellence"0.69 0.44 0.69 0.58 Measurement of Results Point 10 Eliminate arbitrary numerical =goals - "quality vs. quantity" 0.54 0.39 0.32 0.46 Point 11 Use statistical methods for improvement- "SPC..." 0.43 0.24 0.56 0.44 Training and Supervision Point 6 Institute modem methods of training "on the job training" 0.48 0.39 0.50 0.43 Point 7 Focus more on supervision "Supportive leadership" 0.58 0.69 0.57 0.64 Point 13 Institute extensive education and training for all 0.59 0.54 0.62 0.65 Quality Assurance Point 3 Replace mass inspection with statistical monitoring at all phases 0.46 0.47 0.42 0.50 Point 5 Constant improvement through "team building" 0.36 0.54 0.59 0.55 Purchasing Policies Point 4 Stop awarding business on basis of price - quality vs. price 0.47 0.35 0.43 0.56 *All P<.05 Some of these statements and design of the company quality profile based upon Deming's fourteen points and were adapted from Motwani, Sower and Rosenfeldt (1989). 'Operationalizing the Process of Quality Improvement: An Exploratory Field Study of A Company Quality Profile," Southern Management Association Proceedings, pp. 385. Spring 1995 Elmuti & AlDiab: Improve Quality 93 Table 3 presents the results of the multiple regression analysis which in- dicates a positive relation ship exists between the measures of Deming's man- agement system and organizational effectiveness. The results indicate that 44 per- cent of the variation in job satisfaction, 60 percent of the variation in productivi- ty and 62 percent of the variation in quality were explained by Linear regression on Deming's management system dimensions. The F-ratios of 8.50, 5.25, 6.45, and 12.25 for satisfaction, productivity, quality and effectiveness respectively in- dicate that these linear relationships are statistically significant at the .05 level. Table 3 Multiple Regression Analysis For Evaluating The Dependence Of Measures Of Effectiveness On Deming's Management System Dimensions Dependent Variable Multiple Regression (Effecti veness) Regression Square R2 F-ratio Satisfaction (A) 0.68 0.44 8.50 Productivity (B) 0.74 0.60 5.25 Quality (C) 0.78 0.62 6.45 Effectiveness (A+B+C) 0.76 0.72 12.25 Findings from Interviews The purpose of this section is to obtain a deeper understanding of Deming's management system effectiveness as perceived by general managers and other management representatives in the eight selected firms, and report the in- terview findings. Corporate Strategy. Ten out of the sixteen general and production man- agers interviewed in this study expressed strong support for Deming's manage- ment system, and they claimed that the Deming's quality improvement ideas were making a great contribution to their organizational effectiveness. They also indi- cated that the dollar savings and indirect benefits generated by the Deming's qual- ity improvement ideas were greater than the costs of implementing these ideas. Deming's management principles were believed to help enhance morale and job satisfaction; to contribute to organizational goals of increased productivity, reduced costs; and to improve the quality of the operation and the products. The inter- views and discussion with operation managers within the eight firms indicated a sincere desire to improve the quality of their operations and the products. They also stressed the point of creating constancy of purpose for improvement of prod- uct and service with the aim to become competitive. The remaining six general and production managers indicated that Deming's management system failed to achieve its stated objectives of improv- ing quality and productivity in their organizations. They also indicated that fail- ure was due to the fact that little real empowerment was given and what was given was not supported in actions. Another reason for failure was that senior 94 Journal ofBusiness Strategies Vol. 12, No.1 management were not personally and visibly committed and were not actively par- ticipating. Human Resource Management. Exchange of information and openness to employee suggestions seemed to be the dominant characteristics of the major- ity of the eight firms in this study. Most of the managers interviewed (eleven managers) expressed strong support for participatory activities such as employee participation in problem solving. In five of the eight firms, participatory pro- grams such as quality circles, autonomous work groups, and employee-manage- ment forums had already been formed and very active in solving organizational problems. By breaking down organizational barriers between management and lower level, employees fear of informing superiors of any problems in their or- ganizations was eliminated according to a majority of interview respondents. Concurrently, participatory activities and communication contribute to the organi- zational goals of increased productivity and improved quality. Measurement of Results. Twelve of the sixteen interviewed manag- ers considered control charts, statistical methods, progress reports and encourage- ment programs superior to setting numerical goals and using posters and slogans in an effort to motivate workers to increase productivity and improve quality. One production manager remarked that his company was able to save $1.5 million in reject-related costs in one year alone due largely to the statical process control program that it had implemented. Additionally, he stated that his company had reduced its reject rate from 24 percent to less than 12 percent by implementing Deming's quality improvement ideas. Training and Supervision. Eleven of the interviewed managers indi- cated that almost all training within their organizations was on-the-job. They also indicated all employees from top management to lower level employees were trained in the same manner, and continuing education is always a means of im- provement. This education should consist of new skills, the corporation's goals and methods of achieving these goals. Training in statistical methods and prob- lem-solving techniques was provided to both top management as well as lower level employees according to twelve managers interviewed in this study. Only five of the interviewed managers indicated that no training in statistical methods was provided to top managers and line managers. Engineering and quality con- trol staff were relied upon to handle most of quality problems in their organiza- tions. Most of the interviewed respondents (sixteen managers) indicated that ef- fective and supportive leadership would help eliminate many of the barriers be- tween management and lower level employees. Quality Assurance. Catch phrases like "Total Quality Management," "Quality Is Job One," "Smarter, Not Harder," "Quality Means Jobs," "Quality - Is Way of Life," are being implemented by most of the eight firms in this study. Ten out of the sixteen managers interviewed also reported that quality of prod- ucts and services had improved dramatically since their organizations incorporated Deming's quality control methods. They also indicated that their suppliers and vendors used the same processes and controls. At the same time eight manag- Spring 1995 Elmuti & ALDiab: Improve Quality 95 ers- indicated that some statistical control techniques were used to monitor the production processes. However, most of the interviewed respondents (twelve) indicated that more emphasis should be placed on improving the process and manufacturing products correctly the first time. Purchasing Policies. Eleven managers also indicated that quality of raw materials was the foremost criteria for selecting suppliers. Most of these respon- dents also reported that standards were set when selecting a vendor. These stan- dards were based on the quality of raw materials and not solely on price. Fur- thermore, they indicated that only a small number of suppliers were selected to provide raw materials in order to have good relationships with their suppliers and vendors. Conclusions The findings of this study support the conclusion that Deming's quality improvement principles such as team-building, employee participation in prob- lem-solving and decision making, sharing information, providing extensive edu- cation and training at every level in the· organization and supportive leadership often increase job satisfaction, productivity, quality, and over all organizational effectiveness. The attitudinal results presented here provide support for the claims of Deming's management system proponents that the system improves, participates' morale, job satisfaction, productivity as well as the quality of their operations and the products they produce. Furthermore, the results document a positive impact of Deming's quality improvement ideas on overall organizational effectiveness. Statistical analysis of the sample data also indicates that a positive association exists between Deming's management system and organizational effectiveness in most of the firms investigated in this study. A majority of operation and pro- duction managers who were interviewed in this study expressed strong support for Deming's management system, and they believed that the Deming's quality improvement ideas in their firms were making a great contribution to their orga- nizational effectiveness. They also indicated that the dollar savings and indirect benefits generated by the Deming's ideas in their firms were greater than the costs of implementing these ideas. However, almost one-third of operation and pro- duction managers indicated that Deming's management system failed to achieve its stated objectives of improving quality and productivity in their organizations. A major reason for such a failure was due to implementation of Deming's man- agement system without a full grasp of its nature. Certain mistakes were made during the implementation of Deming's management system in some of the firms investigated, such as the processes were not driven by a focus on the customer, strategic business issues, and senior management. 96 Journal of Business Strategies Implications Vol. 12, NO.1 One major implication of this study is that, to show positive results, pro- ductivity and quality improvement have to be planned, structured and carefully monitored. Lasting producl:ivity and quality gains will be realized only through effective utilization of people and the system within which they operate. Deming's concept of "hands on management," extends to many areas of production. In- cluded in a company's quality overhaul involves not only top management, but all level employees, customers, suppliers and investors. It must be understood that quality is a never-ending process of continuous improvement. In the past decade, a great emphasis have been put on quality. American man'ufacturers have finally taken notice and have begun implementation of total quality control. This process is long and tedious because quality needs to be not only taught, but ab- sorbed, tested, and refined. A second implication of this study is that the Deming's principles must be perceived and applied in their entirety, as a whole new way of thinking. His philosophy does not consist of separate techniques, but an organized way of life. In order to strengthen America's competitive position, education and training con- cerning quality must be evident not only in corporate America but also in schools. Deming puts a share of the blame on American business schools (Yates 1992). The United States has been forced to reassess the procedures of management. It is necessary therefore, for business schools to see that the students are armed with the necessary knowledge and communication skills in order regain industrial com- petitiveness. Japan has been very successful in implementing Deming's philoso- phy. This should inspire U.S. corporations to concentrate on a national move- ment to promote total quality management to improve this country's global com- petitive position. Although many more issues remain to be investigated, this study con- solidates much of the previous work into a base from which additional studies can spring. This study represents a beginning rather than an end of more re- search on the impact of Deming's management principles. Broader measurement of the quality of work life facets and performance outcomes claimed to be influ- enced by the Deming's management doctrine is needed. References Brocka, Bruce and Susanne Brocka. Quality Management Implementing the Best Idea of the Masters. Chicago, IL: Richard D. 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Communica- tion is extensive, decision making is widely dispersed throughout the organization. Team work is encouraged in this atmosphere. Extensive education and training provided at every level in the organization. This system mandates that a firm incorporate statistical process control and that its suppliers and vendors use the same processes and controls in order to achieve never-ending quality improvement to meet customer satisfaction (Deming 1986). Satisfaction Employees' satisfaction with fellow workers, jobs, superi- ors, their organization compared with others, pay, progress in the organization so far and chances for advancement in the future (Lickert 1973). Productivity Employees' perception of the quantity and quality of work done in their divisions or departments as well as the effi- ciency with which the work is done (Mott 1972). Quality Employees' perception of work done in their organization according to the requriements set to meet customer needs, and satisfaction. Quality as conformance to specifications (Crosby 1979). Effectiveness Effective organizations are those that produce more and higher quality products and adapt more effectively to envi- ronmental changes, at the same time maintaining a high level of satisfaction of individual members (Likert 1973). Improving Quality and Organizational Effectiveness Go Hand in Hand Through Deming's Management System