Nigel S., Chambers S., Johnson R. Operations Management
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factor according to its scores or ratings on these criteria. Figure 20.9 shows an importance–
performance matrix divided into zones of improvement priority. The first zone boundary is
the ‘lower bound of acceptability’ shown as line AB in Figure 20.9. This is the boundary
between acceptable and unacceptable performance. When a competitive factor is rated as
relatively unimportant (8 or 9 on the importance scale), this boundary will in practice be low.
Most operations are prepared to tolerate performance levels which are ‘in the same ballpark’
as their competitors (even at the bottom end of the rating) for unimportant competitive
factors. They only become concerned when performance levels are clearly below those of
their competitors. Conversely, when judging competitive factors which are rated highly (1 or
2 on the importance scale) they will be markedly less sanguine at poor or mediocre levels of
performance. Minimum levels of acceptability for these competitive factors will usually be at
the lower end of the ‘better than competitors’ class. Below this minimum bound of accept-
ability (AB) there is clearly a need for improvement; above this line there is no immediate
urgency for any improvement. However, not all competitive factors falling below the
minimum line will be seen as having the same degree of improvement priority. A boundary
approximately represented by line CD represents a distinction between an urgent priority
zone and a less urgent improvement zone. Similarly, above the line AB, not all competitive
factors are regarded as having the same priority. The line EF can be seen as the approximate
boundary between performance levels which are regarded as ‘good’ or ‘appropriate’ on one
hand and those regarded as ‘too good’ or ‘excess’ on the other. Segregating the matrix in this
way results in four zones which imply very different priorities:
● The ‘appropriate’ zone – competitive factors in this area lie above the lower bound of
acceptability and so should be considered satisfactory.
● The ‘improve’ zone – lying below the lower bound of acceptability, any factors in this zone
must be candidates for improvement.
● The ‘urgent-action’ zone – these factors are important to customers but performance
is below that of competitors. They must be considered as candidates for immediate
improvement.
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Figure 20.9 Priority zones in the importance–performance matrix
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● The ‘excess?’ zone – factors in this area are ‘high-performing’, but not important to
customers. The question must be asked, therefore, whether the resources devoted to
achieving such a performance could be used better elsewhere.
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EXL Laboratories is a subsidiary of an electronics company. It carries out research and
development as well as technical problem-solving work for a wide range of companies,
including companies in its own group. It is particularly keen to improve the level of
service which it gives to its customers. However, it needs to decide which aspect of its
performance to improve first. It has devised a list of the most important aspects of
its service:
● The quality of its technical solutions – the perceived appropriateness by customers.
● The quality of its communications with customers – the frequency and usefulness of
information.
● The quality of post-project documentation – the usefulness of the documentation which
goes with the final report.
● Delivery speed – the time between customer request and the delivery of the final
report.
● Delivery dependability – the ability to deliver on the promised date.
● Delivery flexibility – the ability to deliver the report on a revised date.
● Specification flexibility – the ability to change the nature of the investigation.
● Price – the total charge to the customer.
EXL assigns a score to each of these factors using the 1–9 scale described in Figure 20.8.
After this, EXL turned their attention to judging the laboratory’s performance against
competitor organizations. Although they have benchmarked information for some
aspects of performance, they have to make estimates for the others. Both these scores are
shown in Figure 20.10.
EXL Laboratories plotted the importance and performance ratings it had given to
each of its competitive factors on an importance–performance matrix. This is shown in
Figure 20.11. It shows that the most important aspect of competitiveness – the ability to
deliver sound technical solutions to its customers – falls comfortably within the appro-
priate zone. Specification flexibility and delivery flexibility are also in the appropriate
zone, although only just. Both delivery speed and delivery dependability seem to be in
Worked example
Figure 20.10 Rating ‘importance to customers’ and ‘performance against competitors’
on the nine-point scales for EXL Laboratories
➔
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The sandcone theory
As well as approaches that base improvement priority given on an operation’s specific
circumstances, some authorities believe that there is also a generic ‘best’ sequence of
improvement. The best-known theory is called the sandcone theory,
8
so called because the
sand is analogous to management effort and resources. Building a stable sandcone needs
a stable foundation of quality, upon which one can build layers of dependability, speed,
flexibility and cost, see Figure 20.12. Building up improvement is thus a cumulative process,
not a sequential one. Moving on to the second priority for improvement does not mean
dropping the first, and so on. According to the sandcone theory: the first priority should
be quality, since this is a precondition to all lasting improvement. Only when the operation
has reached a minimally acceptable level in quality should it then tackle the next issue, that
of internal dependability. Importantly though, moving on to include dependability in the
improvement process will actually require further improvement in quality. Once a critical
level of dependability is reached, enough to provide some stability to the operation, the
next stage is to improve the speed of internal throughput. But again only while continuing
to improve quality and dependability further. Soon it will become evident that the most
effective way to improve speed is through improvements in response flexibility, that is,
The sandcone theory
holds that objectives
should be prioritized in a
particular order
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need of improvement as each is below the minimum level of acceptability for their
respective importance positions. However, two competitive factors, communications and
cost/price, are clearly in need of immediate improvement. These two factors should there-
fore be assigned the most urgent priority for improvement. The matrix also indicates
that the company’s documentation could almost be regarded as ‘too good’.
The matrix may not reveal any total surprises. The competitive factors in the
‘urgent-action’ zone may be known to be in need of improvement already. However,
the exercise is useful for two reasons:
● It helps to discriminate between many factors which may be in need of improvement.
● The exercise gives purpose and structure to the debate on improvement priorities.
Figure 20.11 The importance–performance matrix for EXL Laboratories
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changing things within the operation faster. Again, including flexibility in the improvement
process should not divert attention from continuing to work further on quality, dependability
and speed. Only now, according to the sandcone theory, should cost be tackled head-on.
Improvement culture
It is generally held by most organizational theorists that an organization’s ability to improve
its operations performance depends to a large extent on its ‘culture’. By ‘organizational
culture’ we here mean ‘the pattern of shared basic assumptions . . . that have worked well
enough to be considered valid’,
9
or as some put it, ‘the way we do things around here’. Professor
Gerry Johnson
10
is more specific, describing the elements of organizational culture as follows.
● The organization’s mission and values
● Its control systems
● Its organizational structures, hierarchies, and processes
● Its power structures
● Its symbols, logos and designs including its symbols of power
● Its rituals, meetings and routines
● Its stories and myths that develop about people and events.
So, organizational culture and improvement are clearly related. A receptive organizational
culture that encourages a constant search for improved ways to do things nurtures improve-
ment. At the same time the organization’s view of improvement is an important indication
of its culture. But what is meant by ‘an improvement culture’? Here we look at two aspects,
first are the various elements that make up an improvement culture, second is the recurring
theme of ‘learning’ as a key element of improvement culture.
Building an improvement capability
The ability to improve, especially on a continuous basis, is not something which always
comes naturally to operations managers and staff. There are specific abilities, behaviours and
actions which need to be consciously developed if improvement is to be sustained over the
long term. Bessant and Caffyn
11
distinguish between what they call ‘organizational abilities’
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Figure 20.12 The sandcone model of improvement: cost reduction relies on a cumulative
foundation of improvement in the other performance objectives
Culture is the pattern of
shared assumption
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Table 20.2 Continuous improvement (CI) abilities and some associated behaviours
Organizational ability
Getting the CI habit
Developing the ability
to generate sustained
involvement in CI
Focusing on CI
Generating and sustaining
the ability to link CI
activities to the strategic
goals of the company
Spreading the word
Generating the ability to
move CI activity across
organizational boundaries
CI on the CI system
Generating the ability to
manage strategically the
development of CI
Walking the talk
Generating the ability
to articulate and
demonstrate CI’s values
Building the learning
organization
Generating the ability to
learn through CI activity
Constituent behaviours
People use formal problem-finding and solving cycle
People use simple tools and techniques
People use simple measurement to shape the improvement process
Individuals and/or groups initiate and carry through CI activities – they participate in the
process
Ideas are responded to in a timely fashion – either implemented or otherwise dealt with
Managers support the CI process through allocation of resources
Managers recognize in formal ways the contribution of employees to CI
Managers lead by example, becoming actively involved in design and implementation of CI
Managers support experiment by not punishing mistakes, but instead encouraging learning
from them
Individuals and groups use the organization’s strategic objectives to prioritize improvements
Everyone is able to explain what the operation’s strategy and objectives are
Individuals and groups assess their proposed changes against the operation’s objectives
Individuals and groups monitor/measure the results of their improvement activity
CI activities are an integral part of the individual’s or group’s work, not a parallel activity
People cooperate in cross-functional groups
People understand and share a holistic view (process understanding and ownership)
People are oriented towards internal and external customers in their CI activity
Specific CI projects with outside agencies (customers, suppliers, etc.) take place
Relevant CI activities involve representatives from different organizational levels
The CI system is continually monitored and developed
There is a cyclical planning process whereby the CI system is regularly reviewed and
amended
There is periodic review of the CI system in relation to the organization as a whole
Senior management make available sufficient resources (time, money, personnel) to support
the continuing development of the CI system
The CI system itself is designed to fit within the current structure and infrastructure
When a major organizational change is planned, its potential impact on the CI system is
assessed
The ‘management style’ reflects commitment to CI values
When something goes wrong, people at all levels look for reasons why, rather than blame
individuals
People at all levels demonstrate a shared belief in the value of small steps and that everyone
can contribute, by themselves being actively involved in making and recognizing incremental
improvements
Everyone learns from their experiences, both good and bad
Individuals seeks out opportunities for learning/personal development
Individuals and groups at all levels share their learning
The organization captures and shares the learning of individuals and groups
Managers accept and act on all the learning that takes place
Organizational mechanisms are used to deploy what has been learned across the organization
(the capacity or aptitude to adopt a particular approach to continuous improvement),
‘constituent behaviours’ (the routines of behaviour which staff adopt and which reinforce
the approach to continuous improvement) and ‘enablers’ (the procedural devices or tech-
niques used to progress the continuous improvement effort). They identify six generic
organizational abilities, each with its own set of constituent behaviours. These are identified
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in Table 20.2. Examples of enablers are the improvement techniques that were described in
Chapter 18.
Improvement as learning
Note that many of the abilities and behaviours describes in Table 20.2 are directly or indirectly
related to learning in some way. This is not surprising given that operations improvement
implies some kind of intervention or change to the operation, and change will be evaluated
in terms of whatever improvement occurs. This evaluation adds to our knowledge of how the
operation really works, which in turn increases the chances that future interventions will
also result in improvement. This idea of an improvement cycle was discussed in Chapter 18.
What is important is to realize that it is a learning process, and it is crucial that improvement
is organized so that it encourages, facilitates and exploits the learning that occurs during
improvement. This requires us to recognize that there is a distinction between single- and
double-loop learning.
12
Single- and double-loop learning
Single-loop learning occurs when there is a repetitive and predictable link between cause and
effect. Statistical process control (see Chapter 17), for example, measures output characteristics
from a process, such as product weight, telephone response time, etc. These can then be used
to alter input conditions, such as supplier quality, manufacturing consistency, staff training,
with the intention of ‘improving’ the output. Every time an operational error or problem
is detected, it is corrected or solved, and more is learned about the process. However, this
happens without questioning or altering the underlying values and objectives of the process,
which may, over time, create an unquestioning inertia that prevents it adapting to a changing
environment. Double-loop learning, by contrast, questions the fundamental objectives or
service or even the underlying culture of the operation. This kind of learning implies an ability
to challenge existing operating assumptions in a fundamental way. It seeks to re-frame com-
petitive assumptions and remain open to any changes in the competitive environment. But
being receptive to new opportunities sometimes requires abandoning existing operating
routines which may be difficult to achieve in practice, especially as many operations reward
experience and past achievement (rather than potential) at both an individual and a group
level. Figure 20.13 illustrates single and double-loop learning.
Chapter 20 Organizing for improvement
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Figure 20.13 Single- and double-loop learning
Single-loop learning
Double-loop learning
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Implementing improvement
Not all of the improvement initiatives which are launched by organizations, often with high
expectations, will go on to fulfil their potential of having a major impact on performance.
Estimates of failure in improvement efforts range from half to 80 per cent of programmes,
resulting in the companies implementing them becoming disillusioned with the results. Yet,
although there are many examples of improvement efforts that have failed, there are also
examples of successful implementations. So why do some improvement efforts disappoint?
Some reasons we have already identified – an organizational culture that discourages any
change for example. But there are some more tangible causes of implementation failure. The
remainder of this chapter will be devoted to some of these.
Top-management support
The importance of top-management support goes far beyond the allocation of resources to
the programme; it sets the priorities for the whole organization. If the organization’s senior
managers do not understand and show commitment to the programme, it is only under-
standable that others will ask why they should do so. Usually this is taken to mean that top
management must:
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The improvement approach of Heineken’s Zoeterwoude
facility was described in Chapter 18. Although this
description emphasized issues such as target setting
and the use of techniques, of equal or more importance
in making a success of the initiative was the way
improvement teams were empowered, organized and
motivated. In fact, before this improvement initiative, the
company had started a ‘cultural change’ programme.
‘Its aim’, according to Wilbert Raaijmakers, the Brewery
Director, ‘was to move away from a command-and-
control situation and evolve towards a more team-oriented
organization.’ Fundamental to this was a programme to
improve the skills and knowledge of individual operators
through special training programmes. Nevertheless, the
improvement initiative exposed a number of challenges.
For example, the improvement team discovered that it
was easier to motivate people to work on improvements
when the demand on the plant clearly exceeded its
capacity. What was more difficult was to keep them
focused when the pressures of keeping up production
levels were lower, such as during the winter season.
In an attempt to overcome this, communication was
improved so that staff were kept fully informed of future
production levels and the upcoming schedule of training
and maintenance activities that were planned during
Short case
Improvement at Heineken –
Part II
13
slumps in demand. The lesson that the improvement
team learnt was that it is difficult to convince people of
the necessity for change if they are not aware of the
underlying reason for it. Notwithstanding these efforts it
soon became evident that some groups were more ready
to make changes than others. Some staff much preferred
to stick with their traditional methods rather than explore
how these could be improved. Similarly, some team
leaders were more skilled at encouraging change than
others. Many staff needed coaching and reassurance as
well as more formal training on how to take ownership
of problems and focus on achieving results in line with
targets. Also, it was found that setting improvement
targets in a step-by-step series of milestones could
help to maintain the momentum of motivation.
During the improvement initiative, Heineken staff
worked closely with a group of consultants (Celerant
Consulting). Towards the end of the initiative, as is
common in such improvement projects, the consultants
gradually reduced their involvement to allow Heineken
staff to take over control of the initiative. At this point
there was a dip in the momentum of the improvement
project. It needed the appointment of a special
coordinator within the company to ‘monitor, secure and
audit’ the various activities included in the project before
it regained its momentum. Yet it did regain its momentum
and, looking back over the experience, Heineken see one
of the most significant outcomes from the initiative as its
success in bringing home to every person in the company
the realization that improvement is an ongoing process.
Top-management
support
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● understand and believe in the benefits of the improvement approach
● communicate the principles and techniques of improvement
● participate in the improvement process
● formulate and maintain a clear ‘improvement strategy’.
This last point is particularly important. Without thinking through the overall purpose and
long-term goals of improvement it is difficult for any organization to know where it is going.
An improvement strategy is necessary to provide the goals and guidelines which help to
keep improvement efforts in line with strategic aims. Specifically, the improvement strategy
should have something to say about the competitive priorities of the organization, the roles
and improvement responsibilities of all parts of the organization, the resources available for
improvement, and its overall improvement philosophy.
Senior managers may not fully understand the improvement
approach
In Chapter 18, we described how there were several (related) improvement approaches.
Each of these approaches is the subject of several books that describe them in great detail.
There is no shortage of advice from consultants and academics as to how they should be
used. Yet it is not difficult to find examples of where senior management have used one or
more of these approaches without fully understanding them. The details of Six Sigma or lean,
for example, are not simply technical matters. They are fundamental to how appropriate the
approach could be in different contexts. Not every approach fits every set of circumstances.
So understanding in detail what each approach means must be the first step in deciding
whether it is appropriate.
Avoid excessive ‘hype’
Operations improvement has, to some extent, become a fashion industry with new ideas
and concepts continually being introduced as offering a novel way to improve business
performance. There is nothing intrinsically wrong with this. Fashion stimulates and refreshes,
through introducing novel ideas. Without it, things would stagnate. The problem lies not
with new improvement ideas, but rather with some managers becoming victims of the pro-
cess, where some new idea will entirely displace whatever went before. Most new ideas have
something to say, but jumping from one fad to another will not only generate a backlash
against any new idea, but also destroy the ability to accumulate the experience that comes
from experimenting with each one. Avoiding becoming an improvement fashion victim is
not easy. It requires that those directing the strategy process take responsibility for a number
of issues.
(a) They must take responsibility for improvement as an ongoing activity, rather than
becoming champions for only one specific improvement initiative.
(b) They must take responsibility for understanding the underlying ideas behind each new
concept. Improvement is not ‘following a recipe’ or ‘painting by numbers’. Unless one
understands why improvement ideas are supposed to work, it is difficult to understand
how they can be made to work properly.
(c) They must take responsibility for understanding the antecedents to a ‘new’ improvement
idea, because it helps to understand it better and to judge how appropriate it may be for
one’s own operation.
(d) They must be prepared to adapt new ideas so that they make sense within the context of
their own operation. ‘One size’ rarely fits all.
(e) They must take responsibility for the (often significant) education and learning effort
that will be needed if new ideas are to be intelligently exploited.
(f) Above all they must avoid the over-exaggeration and hype that many new ideas attract.
Although it is sometimes tempting to exploit the motivational ‘pull’ of new ideas
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through slogans, posters and exhortations, carefully thought-out plans will always
be superior in the long run, and will help avoid the inevitable backlash that follows
‘over-selling’ a single approach.
Improvement or quality awards
Various bodies have sought to stimulate improvement through establishing improvement
(sometimes called ‘quality’) awards. The three best-known awards are the Deming Prize, the
Malcolm Baldrige National Quality Award and the European Quality Award.
Deming Prize
Malcolm Baldrige
National Quality Award
European Quality Award
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The idea of including all staff in the process of
improvement has formed the core of many improvement
approaches. One of the best-known ways of this is
the ‘Work-Out’ approach that originated in the US
conglomerate GE. Jack Welch, the then boss of GE,
reputedly developed the approach to recognize that
employees were an important source of brainpower for
new and creative ideas, and as a mechanism for ‘creating
an environment that pushes towards a relentless, endless
companywide search for a better way to do everything
we do’. The Work-Out programme was seen as a
way to reduce the bureaucracy often associated with
improvement and ‘giving every employee, from managers
to factory workers, an opportunity to influence and
improve GE’s day-to-day operations’. According to Welch,
Work-Out was meant to help people stop ‘wrestling
with the boundaries, the absurdities that grow in large
organizations. We’re all familiar with those absurdities: too
many approvals, duplication, pomposity, waste. Work-Out
in essence turned the company upside down, so that the
workers told the bosses what to do. That forever changed
the way people behaved at the company. Work-Out is
also designed to reduce, and ultimately eliminate all
of the waste hours and energy that organizations like GE
typically expend in performing day-to-day operations.’ GE
also used what it called ‘town meetings’ of employees.
And although proponents of Work-Out emphasize the
need to modify the specifics of the approach to fit the
context in which it is applied, there is a broad sequence
of activities implied within the approach:
● Staff, other key stakeholders and their manager
hold a meeting away from the operation (a so-called
‘off-siter’).
● At this meeting the manager gives the group the
responsibility to solve a problem or set of problems
shared by the group but which are ultimately the
manager’s responsibility.
● The manager then leaves and the group spend time
(maybe two or three days) working on developing
Short case
Work-Out at GE
14
solutions to the problems, sometimes using outside
facilitators.
● At the end of the meeting, the responsible manager
(and sometimes the manager’s boss) rejoins the group
to be presented with its recommendations.
● The manager can respond in three ways to each
recommendation; ‘yes’, ‘no’ or ‘I have to consider
it more’. If it is the last response the manager must
clarify what further issues must be considered and
how and when the decision will be made.
Work-Out programmes are expensive; outside
facilitators, off-site facilities and the payroll costs of a
sizeable group of people meeting away from work can
be substantial, even without considering the potential
disruption to everyday activities. But arguably the most
important implications of adopting Work-Out are cultural.
In its purest form Work-Out reinforces an underlying
culture of fast (and some would claim, superficial)
problem-solving. It also relies on full and near universal
employee involvement and empowerment together with
direct dialogue between managers and their subordinates.
What distinguishes the Work-Out approach from the
many other types of group-based problem-solving is
fast decision-making and the idea that managers must
respond immediately and decisively to team suggestions.
But some claim that it is intolerant of staff and managers
who are not committed to its values. In fact, it is
acknowledged in GE that resistance to the process or
outcome is not tolerated and that obstructing the efforts
of the Work-Out process is ‘a career-limiting move’.
Source: Getty Images
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The Deming Prize
The Deming Prize was instituted by the Union of Japanese Scientists and Engineers in 1951
and is awarded to those companies, initially in Japan, but more recently opened to overseas
companies, which have successfully applied ‘company-wide quality control’ based upon
statistical quality control. There are 10 major assessment categories: policy and objectives,
organization and its operation, education and its extension, assembling and disseminating of
information, analysis, standardization, control, quality assurance, effects and future plans.
The applicants are required to submit a detailed description of quality practices. This is a
significant activity in itself and some companies claim a great deal of benefit from having
done so.
The Malcolm Baldrige National Quality Award
In the early 1980s the American Productivity and Quality Center recommended that an
annual prize, similar to the Deming Prize, should be awarded in America. The purpose of
the awards was to stimulate American companies to improve quality and productivity, to
recognize achievements, to establish criteria for a wider quality effort and to provide guid-
ance on quality improvement. The main examination categories are: leadership, information
and analysis, strategic quality planning, human resource utilization, quality assurance of
products and services, quality results and customer satisfaction. The process, like that of the
Deming Prize, includes a detailed application and site visits.
The EFQM Excellence Model
In 1988, 14 leading Western European companies formed the European Foundation for
Quality Management (EFQM). An important objective of the EFQM is to recognize quality
achievement. Because of this, it launched the European Quality Award (EQA), awarded to
the most successful exponent of total quality management in Europe each year. To receive a
prize, companies must demonstrate that their approach to total quality management has
contributed significantly to satisfying the expectations of customers, employees and others
with an interest in the company for the past few years. In 1999, the model on which the
European Quality Award was based was modified and renamed The EFQM Excellence Model
or Business Excellence Model. The changes made were not fundamental but did attempt to
reflect some new areas of management and quality thinking (for example, partnerships and
innovation) and placed more emphasis on customer and market focus. It is based on the idea
that the outcomes of quality management in terms of what it calls ‘people results’, ‘customer
results’, ‘society results’ and ‘key performance results’ are achieved through a number of
‘enablers’. These enablers are leadership and constancy of purpose, policy and strategy, how
the organization develops its people, partnerships and resources, and the way it organizes
its processes. These ideas are incorporated in the EFQM Excellence Model as shown in
Figure 20.14. The five enablers are concerned with how results are being achieved, while the
four ‘results’ are concerned with what the company has achieved and is achieving.
Self-assessment
The European Foundation for Quality Management (EFQM) defines self-assessment as
‘a comprehensive, systematic, and regular review of an organization’s activities and results refer-
enced against a model of business excellence’, in its case the model shown in Figure 20.14. The
main advantage of using such models for self-assessment seems to be that companies find it
easier to understand some of the more philosophical concepts of TQM when they are trans-
lated into specific areas, questions and percentages. Self-assessment also allows organizations
to measure their progress in changing their organization and in achieving the benefits of
TQM. An important aspect of self-assessment is an organization’s ability to judge the relative
importance of the assessment categories to its own circumstances. The EFQM Excellence
Model originally placed emphasis on a generic set of weighting for each of its nine categories.
With the increasing importance of self-assessment, the EFQM moved to encourage organiza-
tions using its model to allocate their own weightings in a rational and systematic manner.
The EFQM Excellence
Model, or Business
Excellence Model
Self-assessment
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