An interview with H. James Harrington

Transcription

1 An interview with H. James Harrington Interview by Sarah Powell Dr H. James Harrington is International Quality Advisor for Ernst & Young, and Chairman of the Board of Emergence Technology Ltd., a high-tech US software manufacturer and developer. He is an 'A' level member of ISO's T.C. 176 which wrote the ISO 9000 quality system standards and T.C. 207 which wrote the ISO environmental standards. James Harrington is also a member of the Board of Directors of the Environmental Management Foundation. Since joining Ernst & Young, Dr Harrington has divided his time between working with executives to develop and implement performance improvement plans, and developing new approaches to performance improvement. As a member of the US national office, he has been directing his efforts at using new, creative approaches to keep Ernst & Young at the leading edge in the quality consulting field. What does your role as International Quality Advisor for Ernst & Young involve? I develop quality methodologies that are applied throughout Ernst & Young, both nationally and internationally, focusing on what are the latest trends and client needs related to quality performance improvement. We are currently in the process of installing ISO throughout the US Consulting Services and I am leading that effort. In addition I work with clients according to their needs. Our clients come from all sectors of industry, ranging from government to entire nations. For example, I have a contract at the moment with Trinidad to address quality needs across the whole country, within government and across practically all industry sectors. With over forty years involvement in the field of quality internationally, what have been the most significant changes you have noted in terms of attitudes and practices? Towards the end of the 1970s and beginning of the 1980s a revolution in thinking took place. Prior to that time, quality and cost had appeared to go hand in hand as quality went up, cost went up. Then, quite suddenly, management began to realize that quality is associated with lower cost because much of the waste is eliminated, and management recognition grew that high-quality products do not have to cost a vast amount, and that quality is an important part of an organization's survival factor. There then came a period when almost any programme could be 'sold' as long as it was called a 'quality programme'. The 1980s embraced quality improvement with a 'blind leap of faith' for quality. As we moved into the 1990s, it became clear that many of the quality initiatives were not really paying off. They might have improved quality but that in itself did not necessarily enhance the bottom line. Consequently there was a rethink about quality and management began to question the value added of many quality programmes. By the mid-1990s, the view arose that quality programmes could no longer be based on nebulous concepts such as improving employee morale or customer satisfaction - to justify the investment in them, they needed to be tied in with organizational performance, i.e. they had to be backed up with a strong value proposition that improved total organizational performance as measured by ROA, VAE, profits, and customer satisfaction. ISO 9000 remains a focus of considerable debate. Given your 'A' level membership of ISO's T.C. 176 which designed ISO 9000, what do you see as the major benefits and shortcomings of this standard? Certainly the major benefit of ISO 9000 is that it makes people stop and think about the nature of the system used to ensure that quality initiatives 1

2 and processes will stay in place. ISO 9000 takes you through a considerable thought pattern. This is one of the important elements of a quality system that, once installed, allows you to maintain the gains achieved with your improvement activity. Prior to this emphasis on the system, there were countless quality initiatives - they would be introduced, would be successful for a while, but then would lose momentum and be lost. ISO has allowed such initiatives to be integrated into the total system and documented, enabling the gains made to be maintained. Imagine pushing a boulder, a quality boulder, up a hill but, when we stop pushing and turn our backs and relax for a minute, that boulder rolls back over us and we have to start all over again. ISO can be seen as the block that we put under the boulder, so when we move it two or three feet ahead, the block ensures we don't lose the gain. The disadvantage is the lack of understanding of the concepts behind the standard and the apparent refusal of many of the registrars to consider the real purpose of the standard and to explore new, creative ways of accomplishing its purpose. We have focused far too much on following the letter of the law of ISO 9000, i.e. what we do and what we document. That is hardly ideal if we are doing the wrong thing. What we need is to understand what is really required in a business. For example, ISO 9001 requires that we purchase all products and services from an approved supplier list. However, we do not need to have all the airlines that E&Y consultants fly on the list, nor all the restaurants at which they eat. Once we understand that, then we can apply the 9000 standard much more effectively. What this comes down to is interpretation and understanding of the procedures and the standards themselves. If we examine these standards, we see that they're written to be very broad. Businesses have a great deal of latitude in the way they implement them. This is necessary as the standards were designed to cover all types of companies, both large and small. There is a new level of ISO 9000, called ISO , coming out. How is this an improvement on the old version? Well, I consider it to be a major breakthrough. The old ISO 9000 was very focused on what we were doing. It defined twenty elements that served as the foundation of our Quality Management System. ISO meanwhile really focuses on our process and allows us to examine our quality systems based upon the processes that are going on within our organization. This makes a great deal more sense. ISO also incorporates a number of new features such as continuous improvement and understanding of customer expectations. This marks a step forward. The 1994 version of the ISO 9000 standard was really designed to identify minimum requirements, i.e. the minimum that had to be achieved. It did not identify best practice or even good practice. This may be sufficient in some underdeveloped markets but in developed markets we need to focus on being better than meets requirements. Our organizations need to be much better than average. Hence the new version will lead to improved benefits. It will be harder though because it requires more discipline; there are a number of new requirements. But some of the existing requirements have been relaxed. Is the argument that environmental standards contribute to the bottom line generally accepted and, if so, is this leading to widespread adoption of such standards? I believe that, emotionally, they have been accepted, but actually they are very hard to justify. Most of the companies adopting the standard are major companies smaller companies are not really espousing it. Admittedly, in some of these large companies, we can see results that indicate cost savings. Theoretically it sounds very good, but practically it is very, very hard to make a reasonable ROI in all companies, in fact in the majority. My experience is that the standard is being adopted very cautiously, being frequently used as a guide rather than in preparing the organization for registration. In my view, the only way that ISO will really 'take off' and prove effective is if the government supports it and offers incentives to businesses for adopting it, e.g. offers to relax some of the environmental costs or controls currently imposed. At the moment, if a company pays for a third party to come in and audit the organization with a view to attaining ISO registration, government agencies will nevertheless check it all over again. That's a total waste of a company's money. That said, I don't consider that the standard is lacking I think it is good, and I don't consider it an expensive process to implement. I just think that it is very difficult to develop a value proposition in this field. Basically, while it may be 2

3 the right thing to do for humanity, to expect an executive who is struggling to stay in business to focus on humanity is rather unrealistic. The problem is to get companies large and small to accept their responsibilities vis-à-vis the communities in which they live. What happens at present is that companies do what is required of them by law and do not see any pressing reason to do more. In your view, what is upper management's attitude about quality improvement today? Well, I think it is very simple. Executives are asking how improvement will impact on key measurements, i.e. return on investment, value added per employee, process and customer satisfaction. When we discuss quality improvement with top management, we need to show how it is going to impact on two, three or four of these key measurements. If we cannot do that, they will not pursue it. We have to identify the impact of any quality initiative on these four performance improvement measures. It has been estimated that up to 60 per cent of TQM processes fail. Why is there such a high failure rate? We went through a period when we really didn't focus on what we were trying to accomplish, didn't step back and define what we wanted to change in our companies. We focused on using a set of popular tools such as teams, self-managed work teams, statistical process control, poorquality costs, and quality function deployment. In effect, we failed because we were focusing on the tools rather than on what we needed to achieve. What we needed to do was to define what we wanted to change. Then, selecting the right tools, that would bring about the desired behavioural patterns. There are over 1,000 different performance improvement tools available today. Supplier certification is one, statistical process control another. So how do we select the right combination? All these tools are good but often they are applied poorly. In adition, we completely ignored a key process: the organizational change management process. There are three factors required to bring about change in an organization: processes, technology and people. TQM was very, very good at focusing on processes and it was very strong on technology, i.e. the tools that we use. However, it was not so effective in terms of the preparation of people and modification of behavioural patterns. This resulted in real problems arising from a lack of good, clear direction as to how we wanted to change, and we did not develop a deep conviction among all our employees in support of the change. I believe that business has an obligation to investors, to customers, to the management team, to employees, to suppliers, to employees' families and to the community. When business just focuses on one of these groups, e.g. the customer, it loses touch with reality. We used vision statements which didn't mean anything to the person sweeping the floors whose response, understandably, was 'why should I change? What's in it for me?' The whole focus of performance improvement is to change behavioural patterns across the board. If the need for change is not clearly communicated and does not take root, change will be resisted. Yet, look at the books published on TQM you'll find nothing in any of them on organizational change management. The organizational change management methodology was completely ignored although it is one of the most crucial factors in making behavioural changes which is what TQM is all about. Why is re-engineering losing favour? That's an excellent question. If you look at any of the data you will see that the use of reengineering is falling off very rapidly. What has happened is that some consultants have been advocating the re-engineering of everything and that is absolutely wrong. Basically there are three breakthrough methodologies, i.e. things that bring about rapid and significant performance improvement in individual processes. If, for example, you want to focus on an individual process and achieve an improvement of somewhere between a 40 per cent and 90 per cent reduction in costs and cycle time, and a per cent improvement in quality, there are three approaches: re-engineering, re-design and 3

4 benchmarking. Yet many people have just assumed that they have to re-engineer all their processes. This means they have to go back and challenge all their paradigms and start over again and this is a big mistake. I would estimate that only about 10 per cent of the processes are even candidates for reengineering. Re-engineering is, of course, appropriate when what you have is totally obsolete. Typically re-engineering should be used if, say, you have 100 people involved in a process and you want to reduce this number down to 20. If, however, you have a process with 100 people involved and you want to reduce this to 50, you should be opting for process re-design. Process re-design does not challenge basic beliefs and basic culture. What it does is to explore how to eliminate bureaucracy and the noadded value operation, how to streamline the process to make it flow more evenly. Typically, with process re-design you can achieve this far more quickly, expecting reductions of per cent in cost, cycle time and error rating. Process re-design is the solution that I believe should be used about 80 per cent of the time, with reengineering used about 10 per cent of the time. The last solution, benchmarking, is probably appropriate about 10 per cent of the time. The problem with benchmarking is that you are copying somebody else and you are going to lag behind them. It is very, very hard to get ahead of them. The pattern of use of these three solutions has been very different, however. The failures that have arisen have come about when reengineering was applied rather than process redesign. Re-engineering has probably been the choice in some 40 per cent of cases, i.e. far too frequently. You cannot simultaneously change all the basic cultures and paradigms within an organization. You write about total improvement management (TIM). How is it different from total quality management (TQM)? Total quality management really focuses on the customer. The basic purpose of it is to add value for the customer. With total improvement management the basic focus is to add value to all stakeholders. I believe that business has an obligation to investors, to customers, to the management team, to employees, to suppliers, to employees' families and to the community. When business just focuses on one of these groups, e.g. the customer, it loses touch with reality. Total improvement management brings together five different management methodologies: total productivity management (TPM), total cost management (TCM), total technology management (TTM), total resource management (TRM) and total quality management (TQM). Total improvement management effectively incorporates the quality programme into all improvements and seeks to add value to the total rather than to just one small part of the whole. It integrates quality throughout the organization as a basic belief and a basic factor in the way each organization works. For example, it aims to ensure that the development engineering people feel that quality is an important part of the way they do their job, and that the HR team believes that the quality of the people they select is going to impact on the organization's performance. My goal is to integrate quality as a part of everybody's job not as a separate entity. What do you see as the major challenges of the future in the field of quality? Another good question. A blending of quality into the organization is a major challenge. In the past what we saw was a selection of quality initiatives SPC, teams, quality improvement programmes, total quality management, benchmarking, SIGMA process and so forth. To my mind the real challenge is to blend quality in with everything rather than make it stand alone. Executives have demands made on them from all sides for money to improve performance. The financial group espouses such concepts as whole cost management and activity based costing, the HR staff talk about total resource management and adding value to people, while the quality team wants to introduce total quality management... What I believe we should be doing is to blend quality into all of these programmes because currently they are all competing while trying to accomplish similar things. Total improvement management brings these things together to add maximum value to the whole organization. What we are seeking today is no longer best practice, a concept which I think is obsolete, but best value solutions; not the best solution, but the best value, the total combination value to the organization. We don't need best practice in every part of the organization. That is only necessary in the core capabilities and competencies. 4

5 Let me give you an example. If talking about hiring practice, the best practice is probably evidenced in Manpower when we consider how rapidly and economically they hire people. But we really don't need that type of cycle time to hire people at Ernst & Young. The best value to us is a far slower process which allows for many more checks and balances and a built-in assurance that people in whom we are going to invest a year's training will stay with us for a few years. That's value total value of quality, of productivity and time. After all, which is preferable to achieve a 60 per cent improvement which takes 18 months to implement or a 40 per cent improvement achievable in three months? Most of the time, the best-value solution is the 40 per cent improvement. Total improvement management is an integration issue it covers the total concept. What we have to do is to bring about behavioural change throughout the organization. That is the basic starting point, one that leads into really effective business planning. A good business plan involves everyone from the boardroom to the boiler room and includes a whole range of factors. We also need to consider what are the rewards that blend together a new behavioural pattern for the organization. If we want to change behaviours we have to change our reward system so that it reinforces the desired behaviours. TQM, meanwhile, focuses on teams. Admittedly, good teams will make a good company but we need to get past the team to the individuals. It is the individuals who excel, it's their individual creativity that counts, so we must look past the teams towards the teamwork where everybody is pulling together. The whole new concept of how we run a virtual organization is geared towards fostering teamwork where individuals excel and get rewarded for their excellence. But to date we have focused so closely on teams that we have overlooked the fact that the real key to our success lies in the performance of the individual. We need to recognize the people who take risks and reward this. And employees should then be able to go home, look in the mirror and say 'wow, I did a great job today.' It's at that point that we will have people who are as motivated and are as excited about coming to work on a Monday as they are on a Friday. That's the stage we need to get to. Interview republished from Emerald Now,