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Quality Improvement 1

Running head: QUALITY IMPROVEMENT AND ORGANIZATIONAL CHANGE

Quality Improvement and Organizational Change

John Doe

Baker College

BUSN/813

Dr. Professor Doe

October 06, 2009


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Quality Improvement and Organizational Change

Although research exists that supports a clear link between organizations that implement

total quality approaches and improved financial performance, there are also documented cases of

failure (Chan, 2005; Hendricks & Singhal, 1997). This conflicting research warrants further

study to understand the constructs and practices that may influence the success or failure of these

total quality approaches. This paper will investigate the correlation between fundamental

principles of total quality and the organizational performance within two companies. The total

quality principles examined include: customer and stakeholder focus, strong commitment to

teamwork and employee empowerment, and a systematic approach to continuous learning and

improvement (Evans & Lindsay, 2008).

The organizations the author of this paper examines are Proctor and Gamble and

Continental Airlines. The purpose of examining these organizations is based their top 10 ranking

in Fortune magazine as the best management quality companies globally (Fortune, 2007).

Furthermore, a service and product company will be chosen for evaluation if quality

management initiatives have correlation across industry types. Annual reports and external

research will be evaluated to determine if a relationship exists between the fundamentals of total

quality, differing sectors of business, and organizational performance.

Total Quality Principles

The following section introduces the total quality principles and how they apply to

customer and stakeholder focus while including a systematic approach to continuous learning

and improvement, and a commitment to teamwork and employee empowerment. The research

herein, provides the findings of the correlation between quality improvement and organizational

changes.
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Customer and stakeholder focus

A strong customer focus can be defined as designing a new product that exceeds

customer expectations. This ability to innovate rapidly and respond to market demands globally

is essential in acquiring market share. Because the marketplace is influenced by the quality of

the design, improvements allow the organization to differentiate itself from competitors and

potentially establish a competitive advantage. A sustained competitive advantage should allow

organizations to realize higher prices and increases in market share (Evans & Lindsay, 2008).

A primary business driver for Procter and Gamble (P&G) is innovation. This

commitment to innovation is centered on a systematic and formalized innovation process that has

quality design as a key component. This process includes the use of cross-functional teams that

leverage challenging success criteria based on customer demands, consumer testing, and

advanced technologies. P&G has been able to establish world class expertise in 11 core

technology areas (Procter & Gamble, 2008). Furthermore, P&G measures this success in quality

design based on organic growth with their goal for organic growth being four to six percent

annualized. In 2001, they achieved six percent and in 2008 they achieved five percent growth

(Procter & Gamble). P&G (2008), reports that due to their innovative capability, one third of the

most successful products for their industry have come from their organization which is more than

the combined top six competitors. In 2008, five of the top 10 products in the consumer industry

came from P&G, therefore advancing significant growth in market share.

Continental Airlines has been ranked by J.D. Powers as the highest in customer

satisfaction within North American carriers from 2006 through 2008. Continental attributes this

success to their focus on exceeding customer expectations. This is exhibited by Continental

being one of the first carriers to offer customer driven technology that allows the customer to
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take control of the check-in process. This customer focused initiative allows over 85% of

Continental customers to use several self service products to check in for their flights. This has

resulted in shorter wait times for the airline industry. Executive leaders contribute the continual

growth in market share to this focus on the design and development of customer driven

technology (Continental, 2008). Continental has experienced a 25% increase in revenues from

2005 to 2008, which is a growth that exceeds most domestic carriers (Hoovers, 2009). By

focusing on designing new products or services that meet or exceed customer expectations both

P&G and Continental have experienced improvements in key performance indicators.

A Systematic Approach to Continuous Learning and Improvement

The total quality principal of continuous improvement can be defined as increasing

productivity and effectiveness in the use of all resources (Evans & Lindsay, 2008). P&G

materials and manufacturing management groups systematically design new formulations and

processes that lower costs. The evidence of these initiatives can be seen in historical

productivity improvement. Since 1980, productivity has increased more than threefold growing

at a compound average rate of five percent a year. This growth rate is more than twice the broad

based U.S productivity rate. Net earnings per employee have increased to more than eight times

the growing rate at an average of nearly eight percent per year (Procter & Gamble, 2008).

The annual reports present clear evidence on the success of this total quality, which has

been sustained and embedded for decades within the organization. Continuous improvement

depends on learning, which means understanding why changes are successful. A learning cycle

has four stages: planning, execution, assessment and revision (Evans & Lindsay, 2008). P&G

has been recognized as one of the top organizations for continual learning and was ranked as one

of the three best companies for leadership capability and knowledge by the Hay Group and Chief
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executive magazine. The organization has also developed advanced leadership training

implementing the four stage learning cycle within their graduate school for senior leadership

(Procter & Gamble, 2007).

Continental Airlines demonstrates an increase in effectiveness with its resources by using

one the world’s most efficient fleets. By standardizing (removing variation) on just three fleet

types the company is able to achieve greater efficiencies in pilot training, crew flexibility,

simplified maintenance, and savings on spare parts (Continental, 2008). This efficiency in

managing the company’s capital intensive assets, demonstrates its commitment to improving the

effectiveness of major resources. In 2005, Continental reported gross profits at an increased rate

of almost 75% from 900.76 million to 100.698 million in 2007 (Hoover, 2009).

Strong Commitment to Teamwork and Employee Empowerment

A Total quality organization must demonstrate commitment to employees, provide

opportunities for development and growth, recognition beyond normal compensation, and

encourage risk taking (Evans & Lindsay, 2008). P&G’s culture embraces the use of employee

improvement teams within the product and process innovation. In addition, the organization is

recognized as one of the industry leaders in internal employee development and advancement

(Proctor & Gamble, 2005). The organization is continually re-designing its structure, striving to

eliminate layers of management while empowering associates to take ownership of his or her

areas of responsibility. This empowerment of both multifunctional and process orientated teams,

leads to faster and more innovative change within an organization.

Continental airlines pride itself on a culture that empowers and rewards employees when

the organization achieves certain performance targets. Employees participate in bonuses on a

monthly basis in the areas of on time arrivals. Continental continues to be first among six
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network carriers for on time performance. Employees are empowered to adapt to procedures as

necessary in the interest of customer satisfaction, which weighs heavily in continental customer

satisfaction ranking which are first in the nation (Continental, 2008).

Conclusion

In analyzing these two organizations, the principles of total quality appear to have been

embedded into all levels of their organization for several decades and have become part of their

culture. These organizations have implemented total quality principles as a foundation of their

competitive advantage. They have also enhanced those principles further to become industry

leaders in new product development, the speed of innovation, and excelling in customer service.

This synopsis review of these two organizations reinforces the research by Hendricks and

Singhal (1997), which states that when implemented effectively, total quality management

approaches improve financial performance. This is evident specifically in the two case studies

presented within the performance measures of organic growth, profit, sales per employee, and

market share.

Furthermore, research of these organizations reveals a balanced and integrated approach

focusing on all three of the total quality principles versus focusing on just one of the principles.

An integrated approach is one of the key reasons for the translation of total quality initiatives into

organizational performance. Research by Cua, McKone, and Shroeder (2006), indicate that

improved organizational performance is directly related to the integration of major total quality

principles into a systematic approach. Organizations that fail to gain performance improvements

may initiate quality approaches independent of the other fundamental principles, or are not part

of a systematic approach enforced by management systems. The two organizations examined


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also support that total quality principles are applicable to both service and manufacturing

business sectors.
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References

Chan, H.K. (2005). Implementation of total productive maintenance: A case study. International

Journal of Production Economics, 95(71).

Cua, K., McKone, K., & Shroeder, R. (2006). Improving Performance through an Integrated

Manufacturing Program. The Quality Management Journal, 13(3). 45.

Continental Airlines. (2008) Annual report. Retrieved Friday October 2, 2009 from the World

Wide Web at: www.continental.com/web/en-US/.../reports.aspx

Evans, J., & Linsay, W. (2008). Managing for quality and Performance excellence. 7th ed. Chula

Vista, CA: South- Western College Pub.

Fortune Magazine. (2007). Most admired companies 2007. Retrieved Friday Oct. 2, 2009 from

the World Wide Web at: http://money.cnn.com/magazines/fortune/globalmostadmired

Hoovers. (2009). Financial Reports. Retrieved Friday October 2, 2009 from the World Wide

Web at:

http://invreports.galegroup.combakerezproxy.palnet/reuters/financialreport/continental

Procter and Gamble. (2008). Annual report. Retrieved Friday October 2, 2009 from the World

Wide Web at: www.pg.com/investors/sectionmain.shtml

Procter and Gamble. (2007). Annual report. Retrieved Friday October 2, 2009 from the

World Wide Web at: www.pg.com/investors/sectionmain.shtml

Procter and Gamble. (2005). Annual report. Retrieved Friday October 2, 2009 from the

World Wide Web at: www.pg.com/investors/sectionmain.shtml