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LINKING QUALITY TO PERFORMANCE APPRAISALS

by Rene T. Domingo

One of the biggest stumbling blocks to the successful implementation of Total Quality Management (TQM) is management’s failure to integrate the company’s quality mission and goals into corporate policies. For instance most middle managers are indifferent to TQM simply because quality

· is not a Key Result Area (KRA)
· is not a Management by Objective (MBO) target
· is not part of their performance evaluation or appraisal.

If middle managers behave this way, then they are not to blame. Top management cannot expect quality to happen if it is introduced and promoted only through speeches, slogans, and seminars. Unless quality is deployed clearly into corporate policies, especially those that affect one’s pay and promotion, then the manger’s behavior will not change. Quality will remain a vision. If middle management is not supportive of TQM, then it cannot provide the necessary leadership to the supervisory and rank-and-file levels. Including quality as one of the many KRAs means no KRA, second to none, ahead of profits, market share, sales, production, and costs.

When asked to undertake, support, or participate in quality improvement projects, the typical response and attitude of middle managers are:

Marketing manager—“We are busy meeting the sales target. My sales people cannot afford to spend (waste) time on quality improvement projects; they are better off selling and trying to hit or exceed their sales quota.”

Production manager – “We have a tight production schedule to follow. Actually we are behind schedule. We have no time for quality programs. We have to rush deliveries….”

Finance manager – “We are busy balancing the budget and managing the tight cash flows. Quality? That’s for the production and marketing people. We have no time for that, we have to cut cost.”

Other managers would show similar indifference to quality. They all seem to think that quality is an additional burden to their normal work, and they would do it if they have the time and people to spare – if ever. Marketing managers will always run after sales quotas, production managers after production schedules, and finance managers after the budget. They will never stop this fire-fighting and will therefore have no time to do anything else, much less quality. They will always use these “legitimate” excuses not to do any improvement.

Ironically, what they all missed is the fact that quality will reduce if not eliminate most of the problems and fire-fighting in the course of their normal work. Quality is the solution to their problems, and not a hindrance to their work. Quality leading to improvement in customer service will make it much easier for marketing to increase sales and market share. Quality that cuts lead times, wastes, unnecessary inventories, rework, and inspection will increase productivity and help production boost its output and cut delays. Quality improvement will cut the cost of quality – the cost of not doing the right things right the first time – up to 20% of sales. These significant savings through quality will surely aid the finance manager balance his budget and maintain the financial health of the company.

While it is difficult in theory to dispute the favorable effects of quality on any corporate activity, in practice, it is hard, though not impossible, to convince experienced middle managers that quality can be the panacea for almost all their problems and firefighting nightmares. Correct beliefs and attitudes may take time to develop among managers, especially among those with experience. To accelerate the TQM process, it may be necessary and practical to just modify manager’s behaviors, regardless of their current attitudes—right or wrong about quality. This behavior modification is done by integrating quality goals into their KRAs and/or annual performance appraisals.

Large multinational companies have started to link quality with their performance appraisal systems and realized improvements in quality and management behavior. For example, one car company based 65% of bonuses to executives on their quality performance. One computer firm used external as well as internal customer satisfaction to determine a significant part of executive incentives. Common among these measures are the adverse consequences of failure to meet quality goals on the part of the manager. These companies have achieved significant quality improvement and dramatic business turnaround through their thorough no-nonsense quality programs. The message of these policies is that managers should take quality very seriously and make it an integral part of their work. Note that quality is no longer an appeal nor a battle cry. It has become the rule of the game called executive survival. Disobedience or non-quality acts and decisions – both commission and omission – is simply punishable.

Managers take very seriously their performance appraisal and whatever goes into it. Unfortunately, traditional items in performance appraisals do not indicate nor encourage the manager’s contribution to quality or service improvement. Achieving sales, production, or costs targets does not mean that quality goals have been achieved. In most cases, these are mutually exclusive goals or have cause-effect relationships in one direction. High quality eventually leads to high sales, high productivity, low costs, and high profits. But high sales, high productivity, low costs, and high profits do not necessarily come from or lead to high quality or quality improvement efforts of the manager. There are very few quality improvement activities that do not lead to higher sales and lower costs. But there are numerous activities that lead to higher sales and lower costs by compromising quality and customer service. To name a few:

· pushing products to customers to meet sales quota
· selling inferior or substandard products due to material substitution to cut costs
· reducing manpower that results in poor customer service, longer waiting times, uncaring and demoralized employees.

Other general attitudes included in typical performance appraisals like leadership, teamwork, creativity, and responsiveness are too gross or inaccurate as indicators of quality behavior and work. Unless these attitudes are redefined to include a customer-focus and quality-orientation, they may fail in motivating managers to embark on quality and service improvement programs.

Quality should be measured separate from and in addition to financial and attitudinal indicators. Failure in quality and customer service cannot be compensated by superior sales or profit performance. Rewarding sales performance in spite of bad service that accompanied it is courting disaster and is counterproductive. It sends the wrong signals to the manager. Such bad service will be repeated and eventually result in more lost customers and lost sales in the future.

By linking quality to the managers’ performance appraisals and KRA’s, they will ultimately develop the desirable working habit of putting quality in their work—whether it is selling, producing, and administering. Doing things right the first time should become second nature.


 

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