Quality Management Tools – including TQM, Six Sigma, Cost of Quality and EFQM

What are they?

Frameworks

According to the UK’s Chartered Quality Institute, the only true measure of acceptable quality is customer satisfaction, which takes into account both objective and subjective interpretations of the needs and expectations of customers.

Quality management involves planning and controlling activities to ensure that the product or service is fit for purpose, and meets design specifications and the needs of customers, according to a CIMA Official Study Text.

Traditionally, quality management focused on quality control, where finished goods were inspected and tested, and substandard ‘waste’ product disposed of or sold at a lower price. However, contemporary thinking rejects this approach as inefficient and profit-draining. As a result, several tools and philosophies have been developed that aim to focus on and eliminate waste entirely.

Cost of Quality (CoQ)

According to CIMA Official Terminology, CoQ is the difference between the actual cost of producing, selling and supporting products or services and the equivalent costs if there were no failures during production or usage. The cost of quality can be analysed into:

• cost of conformance – cost of achieving specified quality standards
• cost of prevention – costs incurred prior to or during production in order to prevent substandard or defective products or services from being produced
• cost of appraisal – costs incurred in order to ensure that outputs produced meet required quality standards
• cost of non-conformance – cost of failure to deliver the required standard of quality
• cost of internal failure – costs arising from inadequate quality which are identified before the transfer of ownership from supplier to purchaser
• cost of external failure – costs arising from inadequate quality discovered after the transfer of ownership from supplier to purchaser.

Total Quality Management (TQM)

CIMA Official Terminology describes TQM as the integrated and comprehensive system of planning and controlling all business functions so that products or services are produced which meet or exceed customer expectations. TQM is a philosophy of business behaviour, embracing principles such as employee involvement, continuous improvement at all levels and customer focus. It is also a collection of related techniques aimed at improving quality – such as full documentation of activities, clear goal-setting and performance measures from the customer perspective.

Originally developed in Japan in the 1950s, the aim of TQM is to get things ‘right first time’, an approach that increases prevention costs, such as system design, but helps to prevent internal and external failure costs. There is an emphasis on participation throughout the value chain, and a commitment to continuous improvement through constant reassessment of processes.

Kaizen

CIMA Official Terminology describes Kaizen as a Japanese term for continuous improvement in all aspects of an entity’s performance, at every level.

The philosophy of Kaizen seeks to involve all levels of employees, encouraging suggestions for small incremental improvements across all areas of the business which over time have a major impact. In a manufacturing context, processes are standardised, assessed and then improved, with the ultimate result being decreased waste and increased productivity.

Six Sigma

CIMA Official Terminology describes Six Sigma as a methodology based on TQM to achieve very low defect rates. The ‘sigma’ refers to the Greek letter used to denote standard deviation, so ‘six sigma’ means that the error rate lies beyond six standard deviations from the mean. To achieve six sigma, an organisation must therefore produce not more than 3.4 defects per million products.
In practice, businesses use techniques such as statistical process control to monitor and chart processes, identifying exceptions to the upper and lower limits and aiming to reduce the number of faults.

EFQM Excellence Model

The EFQM model is a framework for management systems, developed by the European Foundation for Quality Management. It aims to assess performance; integrate and align existing tools, procedures and processes; introduce a way of thinking that encourages reflection and stimulates continuous improvement; and identify the key actions that are driving results.

A key feature of the model is a diagnostic framework that allows organisations to grade themselves against nine key criteria. These focus on the cause and effect relationship between how an organisation carries out its actions (enablers), and what these achieve (results).

Enablers
Results

Leadership 

Strategy 

People 

Partnerships and resources 

Processes, products and services

Customer results 

People results 

Society results 

Business results

What benefits do Quality Management Tools provide?

An effective quality management programme leads to higher quality processes and outputs. These in turn lead to greater customer satisfaction and improved profitability. Quality management encourages a culture of team working at all levels of the organisation, which in turn improves productivity. Human resources are recognised as a key organisational asset. Lower costs of failure, combined with shorter processing times, will result in cost savings.

Questions to consider when implementing Quality Management Tools

• How do we measure quality?
• Are senior management fully committed to the quality concept?
• Can we ensure buy-in across the organisation?
• What training will staff require?

Actions to take / Dos

Actions to Avoid / Don’ts

• Communicate the benefits of quality management across the organisation. Quality management techniques require buy-in and engagement at all levels in order to work effectively
• Encourage a culture of teamwork, ensuring that managers work as part of their teams, rather than as overseers
• Encourage a culture of ownership and responsibility among employees
• Be aware that existing rewards may conflict with quality management by encouraging individualism over teamwork

• Don’t be complacent – quality management is a long-term process seeking to make continual, small improvements over time
• Avoid the use of too many quality measures – be selective and recognise that some may conflict with others

In practice:
Quality Management Tool

Addressing quality problems at Toyota

Download the full case study

Toyota encountered significant quality problems in 2009–10 when it had to recall 5.3 million vehicles in the US, in relation to five separate issues relating to braking, acceleration and power steering, affecting various models. US regulators linked the problems to 51 deaths.

How could this happen in an organisation with a supposed quality-oriented philosophy and an investigative approach which advocated going to the source of any issue? How did defective parts enter the supply chain? Why were quality problems not identified or dealt with more promptly?

Toyota’s own assessment of where it went wrong was ‘the pace at which we have grown may have been too quick… Toyota’s priority has traditionally been first safety; second quality; and third volume. These priorities became confused… We pursued growth over the speed at which we were able to develop our products and our organisation.’

The company also felt it could have handled its response to the safety issues more effectively. ‘We must think more from a customer first perspective rather than a technical perspective when investigating complaints… we must communicate faster, better and more effectively with customers and regulators.’

Toyota’s solutions include new regional quality officers to give regions more autonomy and decision-making with regard to recalls and other safety issues. It also established a new special committee for global quality, and teams to investigate quickly reports of unintended acceleration. It reinforced its design capability by transferring one thousand engineers to focus on design of components and other quality issues.

Toyota lengthened product lifecycles by four weeks to give more time to address safety/quality issues and improved monitoring systems to better capture intelligence on quality/safety concerns from various sources, including web mentions, customer calls and government databases. It intends to equip more vehicles with the technology to diagnose problems and report faults (‘black boxes’) and has allowed external parties to review its technology.

Related and similar practices

• Quality circles
• 5-S
• ISO 9000