Pipe Dreams: Pursuit Of The Right Quality Metric

Quality can mean different things, often many things, to any individual. The term “quality”, by itself doesn’t necessarily clearly spell out what you mean. Identifying what quality means (in the context of a specific project) is vital to any improvement effort. It’s very important to move away from the term “better” because better doesn’t mean that the qualities you are improving are necessarily the ones that you would pay for. Certainly, there are “better” hotels that I wouldn’t necessarily visit. For example, I would agree that if two hotels were essentially identical, but one had a larger pool, that hotel could legitimately call itself better; but if I did not swim, it wouldn’t be better for me. I wouldn’t go out of my way to visit the better hotel and I certainly wouldn’t pay a premium to stay there. In providing corporate services your clients probably have a similarly “me-centric” view of quality.

For more than 20 years the U.S. Department of Commerce has sponsored the Baldridge Award for Excellence. This award was created to increase the focus on Quality in U.S. produced goods. At that time Japan and other countries were perceived as producing products of higher quality, resulting in more and more foreign products being purchased by Americans. Ironically, foreign competitors (especially in electronics, automobiles and complex goods) were outpacing the U.S. in quality because they were faster in adopting measurement and quality techniques developed by US corporations and universities.  The Baldridge Award was intended to raise the visibility, and the number, of quality initiatives in the U.S. When the award was created in 1987 it almost immediately caught the attention of the Wallace Company, a Houston Texas based pipe and valve supplier for the oil industry.

The leadership of the Wallace Company wanted to make their firm a beacon of quality. Cutting edge Quality Control techniques would provide the improvements, and the Baldridge Award would both validate and publicize their progress towards perfection. In 1990, they won the Baldridge Award. In 1992, The Wallace Company filed for bankruptcy and was acquired a short time later. Needless to say this is not the reward that Baldridge winners expected! Many pieces have been written on what went wrong, and many mistakes can be found. Some writers found the enthusiasm of Wallace’s executives to win the award resulted in inappropriate gifts and perks offered to Baldridge evaluators (which are no longer permitted under “improved” Baldridge Award rules). Others thought the bankruptcy resulted from macro changes in the economy. For me, the most convincing argument is that “quality” was not correctly defined. What do I mean? From what I’ve seen and read, the Wallace Company had an overly broad interpretation of quality. They wanted to produce a product that was better in every way compared to their competitors. Wallace anticipated a coming tightening of the market, and therefore wanted to be the “best” to avoid a shrinking market in the future.  That’s a worthy goal, but by simultaneously raising a large number of quality indicators other factors might also change, such as cost. Somewhere along the line, there was a misalignment between what the executives and what the clients valued. The additional quality created by their improvements did seem to be acknowledge by their clients, but the specific value that clients saw in Wallace being “better” did not align with their product pricing.  The wrong targets were put in place. The targeted level of metrics was achieved, but these wrong targets led to the wrong decisions, and the wrong results.

From this I think we have one very important takeaway… quality can’t just be a “make it better” exercise; a quality improvement project needs to be more than quantifiable, the change you’re creating must be a change that is valued by your clients. The tools and techniques that are available to you today will unquestionably drive change. It will move your product from where it is to somewhere else. You have to be sure that these changes move you towards the right goal. In the case of the Wallace company it appears that the quality change efforts were never aligned with client expectations, or they began with alignment and either the direction of the improvements changed or the needs of the clients changed and the improvement program did not make appropriate adjustments. By incorrectly identifying and tracking the client’s definition of quality the Wallace Company learned a very painful lesson. However, Wallace’s pain is our gain. It created a very power case study about how even effective change, can be dangerous. Remember, tools like Six Sigma are REAL! They will change the way that your operations work. Powerful tools can build or destroy value, depending on which changes you bring about. Choose carefully, and keep checking with the client! And that’s my Niccolls worth for today.

This entry was posted in Best Practices, Decision Making, Delivering Services, Improvement, Continuous or Not, Learning and Development and tagged , , , , , , , , . Bookmark the permalink.

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