WHAT HEALTHCARE CAN LEARN FROM TQM'S PAST Common characteristics and management processes that have caused noteworthy increases in market share, customer satis- faction, and cost reduction can be attributed to TQM initia- tives. These common management characteristics and processes include: senior management leadership, strategies centered on customer judgments, strategically aligned department measurements, and an environment that fosters learning. By Chip Caldwell, FACHE [Reprinted from Healthcare Executive MAY/JUNE 1993] "Is total quality management an effective management philos- ophy and can we learn from those companies that have invested millions of dollars and several years in TQM about success factors and pitfalls?" These relevant questions are being asked in boardrooms all across America, including hospital boardrooms. One way to seek out answers to these questions is a tech- nique created by Xerox Corporation's Robert Camp called benchmarking. Benchmarking has become the buzzword in TQM circles during the past year, but its application often is misunderstood and misapplied. Simply stated, benchmarking requires the estab- lishment of an agreed upon quality measurement, followed by a widespread search for the best performance to be measured against. Upon identification of this best performer, the real work begins. That is, the process of comparing this "best prac- tices" organization against your practices and processes. Benchmarking is, therefore, a sophisticated method to learn about oneself. Failure to compare flowcharts, however, is common and perhaps one of the most important dangers to avoid. In the end, an organization that takes shortcuts must learn that short- cuts derail the logic of TQM. Therefore, to attempt to benchmark against those organizations that have effectively applied TQM, healthcare executives must identify the processes that commonly appear in those organizations. Personal observations and correlations from the Ernst & Young International Quality Study and a report from the U.S. General Accounting Office, Management Practices--U.S. Companies Improve Performance Through Quality Efforts, help to identify common characteristics and management processes that attribute noteworthy increases in market share, customer satisfaction, and cost reduction to TQM initiatives. Included in this group are the following: senior management leadership, strategies centered on customer judgments, strategically aligned department measure- ments, and an environment that fosters learning. SENIOR MANAGEMENT LEADERSHIP All companies that successfully increased market share, reduced customer complaints, and reduced defects, agreed that TQM must begin at the top. This action cannot be in name only, but must exist in every fiber of every initiative that drives the company's vision. In successful TQM initiatives, senior manage- ment was visible and helped to identify key strategic goals, expressed in terms of performance by employees in their day-to-day activities. The GAO study also concluded, in its discovery of failed applications, that the absence of senior management was uniformly evident. It is clear, therefore, that the first step in assessing an organization's readiness to embark on the TQM journey is for the CEO and senior leaders to conduct a personal self-examination regarding their willingness and discipline to alter their manage- ment behaviors. These senior leaders must ensure that the organi- zation is ever mindful of the strategic importance of TQM in its day-to-day work. When senior leaders reflect on what they are expecting from the workforce, it comes down to creating an energetic dedication to improving processes, which just yesterday were perfectly acceptable. That is, senior leaders in TQM organizations tend to create a discomfort for the way activities are currently being conducted in areas that received little, if any, notice prior to TQM introduction. It only stands to reason that to achieve widespread buy-in, employees must feel the strategic importance of these new activities. CUSTOMER JUDGMENTS According to the GAO report, 12 of 14 companies reported an increase in customer satisfaction, while five of six produced a significant reduction in customer complaints. Ernst & Young's International Quality Study also revealed that successful appli- cations uniformly drove their strategies against customer mea- sures. That is, successful companies first measured the factors most important to their customers, then organized their strategic activities around being the best, rather than set strategy solely against those activities that were most attractive. It has been argued by Paul Batalden, M.D., HCA's vice president of medical care, that Japan's success can largely be attributed to management behaviors that reward the discovery and reduction of customer complaints. How different from U.S. manage- ment behaviors that are built on the notion that we must dili- gently produce any excuse for a process failure. For example, how many millions are spent each year by hospitals to explain the variation in Medicare's mortality data, rather than seek best practices for benchmarking? In successful TQM organizations, there appears to be such common characteristics as a relentless reliance on distinct customer judgments, combined with a support- ive environment that fosters learning. DEPARTMENT MEASUREMENT Both the GAO study, the International Quality Study, and our experiences at West Paces Medical Center in Atlanta suggest that unless customer judgments can be uncovered and objectively measured at the department level, the organization may develop organizational schizophrenia. If "responsiveness and promptness" have been statistically determined to be one of the top seven process characteristics that influence customer judgments, then how might managers measure these attributes routinely at the department level? At this level of deployment, it appears from the International Quality Study to be important to focus on a few, high leverage processes and their characteristics. At West Paces, the CEO concentrates on 16 strategic measures that were derived from an analysis of customer judgments; these 16 have been cascaded to the department level, at which point each department measures its performance on no greater than six key process characteristics. Clearly, an argument can be made that each department could measure 100 items, but successful companies seem to focus on only a few. In both the GAO analysis and the International Quality Study, successful companies focused on cycle time reduction in almost every process. Reducing cycle time helped to improve customer satisfaction and reduce the cost inherent in inspection-laden processes. FOSTERING LEARNING How can healthcare executives create widespread excitement, at all levels of the organization, about achieving a strategic vision through TQM? In most organizations, this appears to be the most difficult part of the process, and yet the most important. The answer seems to be through training, empowerment, and the commitment of employees to achieve strategically aligned goals. These attributes saved Motorola, Inc., $700 million. The GAO study also reported that employee suggestions increased 15 percent per year, contributing an annual cost savings ranging from $1.3 million to $116 million. Moreover, these same companies reported greater than 10 percent annual improvement in reliabili- ty, error reduction, and market share. The International Quality Study reveals that quality teams are clearly a vital component in successful applications. In companies showing the highest re- sults, 50 percent of the workforce participated on teams; compa- nies with moderate results reported less than 25 percent employee participation on teams. SUCCESS VS. FAILURE A 1991 Conference Board survey of 192 major U.S. companies reports that over one-third of the companies that have been "working on" TQM for eight or more years are dissatisfied. Why might this be so? The answer perhaps lies in the misplacement, somewhere along the line, of the intended rationale for TQM upon implementation. That is, any significant organizational activity will fail unless it involves the serious attention of senior management; molds customer feedback into strategic initiatives; measurably expresses these initiatives at all levels of the organization; and celebrates the achievements as they take place. [Box shown at the end of the text:] ACTION STEPS ù Make a personal self-examination regarding your willingness and discipline to alter day-to-day management behaviors in such a way that the organization is ever mindful of the strategic importance of TQM. ù Establish agreed upon quality measurements, followed by a widespread search for the best performers to measure against. ù Seek out customer feedback and objectively measure their concerns. ù Work with employees to help them understand the strategic importance of new TQM activities and to buy in to the process. ù Don't go overboard. Focus on a few, high leverage processes and their characteristics. ù Create an organization that's capable of learning from itself in the quest for continuous quality improvement in its strategic processes. [The text for this file was made available to the TQM BBS (301- 585-1164) by Chip Caldwell, the author. Chip is the president and CEO at HCA West Paces Medical Center in Atlanta.]