My management hero is a fella called Dr W. Edwards Deming and he developed his “chain reaction” model to explain how improving the way in which an organisation works, and how improving their products and services are delivered, can have a very positive impact on efficiency, effectiveness and productivity, which ultimately filters through to the bottom line.
The model consists of four key components: quality, cost, productivity and market share, this can be seen in first four steps of the model above. Let’s take a closer look at each of these components.
Improve quality: improving quality is the foundation of the Deming Chain Reaction. Improving the quality of how a company’s work works, is essential for building customer loyalty and satisfaction. Customers are significantly more likely to return to a company that consistently delivers high-quality products and services.
Reduced costs: as quality improves, counterintuitively, costs decrease because defects, rework and waste are minimised or, ideally, eliminated.
Productivity: improving quality leads to increased productivity, as defects, scrap, rework and time (time, in most service organisations) are reduced. Time, money and resources are no longer spent on products and services that can’t be sold. This helps companies to deliver products and services more quickly and at a lower cost, which can lead to a competitive advantage in the marketplace.
Capture the market – market share: as quality and productivity improve the company has choices. It may choose to lower prices in which case it is highly likely that more work will be obtained. As more work is obtained market share is gained. All things being equal, customers will be more likely to choose a company that consistently delivers high-quality products and services at a more competitive price. This drives both increases in the customer base and revenue.
Profitability: alternatively, the company could choose to maintain prices and stabilise its market share and instead become more profitable. By reducing costs, increasing efficiency, and gaining market share, companies can improve their bottom line and achieve, the much sought after, long-term financial success.
The first four components of the chain reaction are essentially levers that ensure the company stays in business, expands and flourishes requiring more people and therefore providing more jobs.
But (sadly) you can’t just wave a magic wand and say “can we have better quality please” you need to examine your working practises and processes and think about:
- What works well?
- What works not so well?
Then set about systematically improving the way things that don’t work so well are done.
So, improving quality may require some investment but often only in time and training and the pay-off can be enormous.
So, what are the problems?
The owner managers we encounter have very often come “off the tools” they are often technically brilliant but have previously had scant exposure to all things management. This means they often face a veritable deluge of quality problems that can have serious impact on their operations and reputation. Some of which might include:
- Poor communication: often endemic in larger SME’s for instance, between sales and manufacturing or sales and construction. Alternatively, between sales and the client; sales wanting the work to start before all of the required information has been received from the client.
- Inconsistent product quality: one of the most common quality problems is inconsistent product quality. This can occur due to variability in raw materials, equipment, or processes.
- Inadequate planning: proper planning is critical to the success of any company. Smaller companies may lack the resources or expertise to create robust plans that consider all aspects of the work being undertaken.
- Workmanship standards: variable and poor workmanship is often encountered. In a construction company this might range from uneven walls and sloppy finishes through to leaky plumbing all the way up to something as serious as a lack of structural integrity. In a manufacturing company this might include: poor design, inadequate dimensioning, poorly thought-out production routes, poor finishing. All of which are costly to fix.
- Inadequate checking and testing: testing is a critical part of ensuring product quality. However, small companies may not have adequate testing procedures or resources.
- Lack of standardisation: owner managed companies sometimes lack standardised and documented processes, procedures and controls that are the bedrock of doing things consistently and repeatably. Processes are in people’s heads and different people do things differently.
- Insufficient training: insufficient product, service or even management training can lead directly to problems, errors and mistakes in a variety of processes.
Putting it into practice
The first stage is to map out the key activities that you undertake, in a logical sequence, in an ideal world, from the initial inquiry all the way through all the activities you undertake to ensure your customers and clients are satisfied. This can be done with a flow chart or simply a Word document with lower-level bullet point headings.
Armed with the above “map” of your activities the second stage is to sit down with the relevant team and brainstorm what works well and what doesn’t. At this stage it’s advisable to look at the frequency with which problems occur and how long they take to rectify. This helps to assign some kind of cost and priority to the order in which any improvement work will be undertaken.
Obviously, we don’t have time to go in to significant detail here, but in typical Blue Peter fashion, we have produced a document that provides a lot more detail and hints and tips. How to improve processes, see the link below.
Conclusion
In conclusion, owner-managed companies should spend effort, time, and money to carefully consider the way in which things are done because it drives increased customer satisfaction, improved business performance, and ultimately, greater profitability. Ultimately, owner managers adopting this approach begin to move themselves from working in the business (doing a job) to working on the business (making it better).
The Deming Chain Reaction provides a useful model for understanding how improving quality can have a positive impact on the entire organisation. While investing in quality may require some upfront investment, the long-term benefits can be significant and help companies achieve long-term success.
Related tools and ideas
Recommended references
- Dragon Slaying – a better way to manage – Mark Woods
- 4th Generation Management – Brian Joiner
