Creating a Culture of Quality PDF

HBR.ORG APRIL 2014 REPRINT F1404A IDEA WATCH Creating a Cultu...

HBR.ORG APRIL 2014 REPRINT F1404A IDEA WATCH Creating a Culture of Quality Financial incentives don’t reduce errors. Employees must be passionate about eliminating mistakes. by Ashwin Srinivasan and Bryan Kurey This document is authorized for use only in Prof. M P Ram Mohan & Prof. Viswanath Pingali's Senior Management Programme (SMP-BL13) 2024 at Indian Institute of Management - Ahmedabad from Apr 2024 to Oct 2024.  FOR ARTICLE REPRINTS CALL 800-988-0886 OR 617-783-7500, OR VISIT HBR.ORG I n most industries, quality has never mattered more. New technologies have empowered customers to seek out and compare an endless array of products from around the globe. Shop- pers can click to find objective data com- piled by experts at organizations such as Consumer Reports and J.D. Power and go online to read user-generated re- views at sites such as Amazon; together, these sources provide an early warning system that alerts the public to quality problems. And when customers are un- happy with a product or service, they can use social media to broadcast their displeasure. In surveys, 26% of consum- ers say they have used social media to air grievances about a company and its products. And this issue isn’t limited to the consumer space—75% of B2B cus- ORGANIZATIONS tomers say they rely on word of mouth, Creating a Culture including social media, when making purchase decisions. of Quality But just as companies’ margin for error has decreased, the likelihood of error has risen. In many industries, cy- ILLUSTRATION: OLIVER MUNDAY Financial incentives don’t reduce cle times are compressing. During the recovery from the Great Recession, out- errors. Employees must be passionate put gains have outpaced employment about eliminating mistakes. growth, and employees report straining by Ashwin Srinivasan and Bryan Kurey to keep up with demands. COPYRIGHT © 2014 HARVARD BUSINESS SCHOOL PUBLISHING CORPORATION. ALL RIGHTS RESERVED. April 2014 Harvard Business Review 2 This document is authorized for use only in Prof. M P Ram Mohan & Prof. Viswanath Pingali's Senior Management Programme (SMP-BL13) 2024 at Indian Institute of Management - Ahmedabad from Apr 2024 to Oct 2024.  IDEA WATCH As a result of these pressures, managers takes in their daily work than employees in the use of standard tools and the achieve- must find a new approach to quality—one bottom-quintile companies. In our surveys, ment of a culture of quality. We are not that moves beyond the traditional “total employees report that it takes two hours, on suggesting that companies abandon those quality management” tools of the past average, to correct a mistake. Assuming an tools; however, they should use them to quarter century. For two years CEB has con- hourly wage of $42.55 (the median for CEB support rules-based quality measures, not ducted research exploring how companies client companies), a bottom-quintile firm as the underpinnings of a true culture of can create a culture in which employees with 26,300 employees (the median head quality. “live” quality in all their actions—where count) spends nearly $774 million a year We pinpointed four factors that drive they are passionate about quality as a per- to resolve errors, many of them prevent- quality as a cultural value: leadership sonal value rather than simply obeying able—$350 million more than a top-quintile emphasis, message credibility, peer in- an edict from on high. We define a “true firm. Although figures will vary according volvement, and employee ownership of culture of quality” as an environment in to industry and company, here’s a broad quality issues. Our research indicates that which employees not only follow quality rule of thumb: For every 5,000 employees, companies could do much better with all guidelines but also consistently see others moving from the bottom to the top quintile four. Nearly half the employees surveyed taking quality-focused actions, hear others would save a company $67 million annually. reported insufficient leadership emphasis talking about quality, and feel quality all We also studied quality-improvement on quality, and only 10% found their com- around them. actions in eight different categories and pany’s quality messages credible. Just 38% We interviewed the quality function conducted regression analyses to under- reported high levels of peer involvement, leaders at more than 60 multinational cor- stand the relationship between those ac- while 20% said that their company has cre- porations, conducted an extensive review tions and employees’ appraisals of how rig- ated a sense of employee empowerment of academic and practitioner research, and orously their company focuses on quality. and ownership for quality outcomes. surveyed more than 850 employees in a We found little or no correlation between We have identified clear actions that range of functions and industries and at all can help companies improve in each of the levels of seniority. Some of what we learned four areas. surprised us. Most notably, many of the tra- Maintaining a leadership emphasis ditional strategies used to increase quality— on quality. Even when executives have monetary incentives, training, and sharing the best intentions, there are often gaps of best practices, for instance—have little between what they say and what they do. effect. Instead, we found, companies that As a result, employees get mixed messages take a grassroots, peer-driven approach about whether quality is truly important. develop a culture of quality, resulting in Seagate, a $14 billion provider of media employees who make fewer mistakes— storage solutions, uses a series of leader- and the companies spend far less time and ship engagement mechanisms to help ex- money correcting mistakes. ecutives identify inconsistencies between their actions or decisions and the compa- Going Beyond Rules ny’s ideal culture. Company leaders begin What embeds quality deep in a company’s A company with a highly by agreeing on what would constitute an culture? And how, precisely, does an orga- developed culture of ideal culture and what behaviors would $350 nization benefit as a result? These ques- quality spends, on average, be needed to achieve it. Next, the quality tions were at the heart of our “culture of and HR teams compared their definitions quality” survey. of “ideal culture” with employees’ obser- A minority of the employees we sur- vations, which revealed areas for improve- veyed believe their company has succeeded ment. The leaders then attended work- in making quality a core value: Roughly 60% shops that helped them spot behaviors mıllıon said they work in an environment without a that might be impeding their stated goal. culture of quality, especially when it comes Simulations made the lessons from the to having peers who go “above and beyond.” workshop concrete and memorable. Such companies are missing out on signifi- By showing leaders the gaps between cant benefits. Employees who ranked their less annually fixing mistakes the expected and the current state of their company in the top quintile in terms of than a company with a culture, Seagate created awareness and quality reported addressing 46% fewer mis- poorly developed one. buy-in. “Executive participation has been 3 Harvard Business Review April 2014 This document is authorized for use only in Prof. M P Ram Mohan & Prof. Viswanath Pingali's Senior Management Programme (SMP-BL13) 2024 at Indian Institute of Management - Ahmedabad from Apr 2024 to Oct 2024.  FOR ARTICLE REPRINTS CALL 800-988-0886 OR 617-783-7500, OR VISIT HBR.ORG THE FOUR ESSENTIALS OF QUALITY In our research, we examined tools commonly used to make employees care about quality, including training, best-practices sharing, and monetary incentives. We concluded that only four attributes actually predict a culture of quality: Leadership Message Peer Employee Emphasis Credibility Involvement Ownership Managers are told that quality Messages are delivered by Most employees have a strong Workers clearly understand is a leadership priority. respected sources. network of peers for guidance. how quality fits with the job. Managers “walk the talk” Workers find that Peers routinely raise quality as Workers are empowered to on quality. communications appeal a topic for team discussion. make quality decisions. When evaluating employees, to them personally. Like members of a sports Workers are comfortable raising bosses emphasize the Messages are consistent and team, peers hold one concerns about quality viola- importance of quality. easy to understand. another accountable. tions and challenging directives that detract from quality. the most important factor driving culture Encouraging peer involvement. Fos- Wrigley, best known for manufactur- change,” a senior development executive tering peer engagement is a delicate balanc- ing chewing gum, writes “quality in action” told us. “Leadership has shown enthu- ing act. If leaders become overly involved guidelines to help employees understand siasm and commitment that has trickled in orchestration, then impact and authen- the company’s expectations. It takes great down through the organization.” Although ticity suffer—but if they show too little sup- care to apply the guidelines only to a short the company does not share its data, it says port, they miss important opportunities. but critical list of improvement opportu- that quality metrics have risen since the One organization that has created ef- nities—the dozen or so “quality account- program began—and it expects the gains fective peer networks is HGST (formerly abilities” that each function is responsible to continue. Hitachi Global Storage Technologies), a for on a daily basis—and to strive for clarity Ensuring message credibility. Most Western Digital company. It uses positive while avoiding micromanagement. In addi- companies energetically promote mes- social pressure to encourage employees to tion, Wrigley creates opportunities for em- sages about the importance of quality—but generate quality initiatives. The company ployees to observe and recognize quality their efforts are wasted if the messages are displays employees’ ideas on posters in a actions that fall outside the guidelines, and not believed. One company that has been busy hallway, providing a reminder that it conducts group brainstorming sessions successful with credible messaging is the everyone at the company should work on to determine the root causes of mistakes beverage firm Diageo, whose brands in- quality. Managers publicly evaluate em- and identify corrective actions. clude Johnnie Walker, Crown Royal, and ployees’ quality-improvement projects, The specific actions needed to help an Tanqueray. Confronted with the challenge highlighting not only business impact but organization shift from a rules-based qual- of having 21,000 employees in disparate lo- also softer criteria, such as participant en- ity environment to a true culture of qual- cations, Diageo identified four distinct seg- thusiasm. HGST also organizes friendly ity will differ from company to company, ments of employees in terms of what drives “quality competitions” that capitalize on but the first step in the process will always hard work and created quality messages collective pride, not simply financial re- be the same: Managers must decide that a tailored to each one. It recognized that wards, to spark ideas. “When I first joined culture of quality is worth pursuing. Our some workers respond best to messages the company, I was skeptical of the whole research unambiguously demonstrates emphasizing the reduced cost and hassle of thing,” a quality and customer support ex- that it is. A culture of quality requires producing defect-free goods, for example, ecutive told us. “But there’s a real sense of employees to apply skills and make de- while others are inspired by an emphasis pride in work that people have developed cisions in highly ambiguous but critical on customer satisfaction. Local site man- as a result.” areas while leading them toward deeper agers chose the campaign they thought Increasing employee ownership reflection about the risks and payoffs of would most appeal at their site, and this and empowerment. One of the defining their actions. In an environment where customization helped the company’s mes- traits of an organization with a true culture customers’ tolerance for quality problems sages resonate. of quality is that employees are free to ap- is declining, a workforce that embraces Smart leaders realize that quality mes- ply judgment to situations that fall outside quality as a core value is a significant com- saging, like any campaign, needs to be the rules. Providing the right level of guid- petitive advantage. refreshed over time. Managers should ance is key. Too much stifles creativity and HBR Reprint F1404A regularly test messages with their employ- discretionary action, while too little leaves ees and use the feedback to ensure sus- employees unclear about their authority to Ashwin Srinivasan is a managing director, tained relevance. make decisions and carry them out. and Bryan Kurey is a senior director, at CEB. April 2014 Harvard Business Review 4 This document is authorized for use only in Prof. M P Ram Mohan & Prof. Viswanath Pingali's Senior Management Programme (SMP-BL13) 2024 at Indian Institute of Management - Ahmedabad from Apr 2024 to Oct 2024.