Developing the QI Plan

QI refers to activities aimed at improving performance and is an approach to the continuous study and improvement of the processes of providing services to meet the needs of the individual and others. Continuous quality improvement (CQI) refers to an ongoing effort to increase an organization’s approach to manage performance, motivate improvement, and capture lessons learned in areas that may or may not be measured. It is an ongoing effort to improve the efficiency, effectiveness, quality, or performance of services, processes, capacities, and outcomes.

The key elements of a QI plan include a description of the purpose, priorities, policies, and goals of the QI program, as well as a description of the organizational systems needed to implement the program, including QI committee structure and functions; descriptions of accountability, roles, and responsibilities; the process for gaining consumer input; core measures and measurement processes; and a description of the communication and evaluation plan.

Describe the purpose of the QI plan, including the organization’s mission and vision, policy statement, the types of services provided, and so on. Also, define the key concepts and quality terms used in the QI program/project so that there is a consistent language throughout the organization regarding quality terms.

Organizational structure is a formal, guided process for integrating the people, information, and technology of an organization, and serves as a key structural element that allows organizations to maximize value by matching their mission and vision to their overall strategy in QI. Implementing a QI plan requires a clear delineation of oversight roles and responsibilities, and accountability. The QI plan should clearly identify who is accountable for QI processes, such as evaluation, data collection, analysis education, and improvement planning. The specific organizational structure for implementing a QI plan can vary greatly from one organization to another. In all cases, it is recommended that a quality coordinator is assigned to support the process.

Depending on the size of the organization, who participates in QI activities may vary. For example, in small organizations, most of the staff members are involved in all aspects of QI work. In larger organizations, a quality committee is often established that includes senior management, designated QI staff if there are any, and other key players in the organization with the expertise and authority to determine program priorities, support change, and if possible, allocate resources. The main role of this group is to develop an organizational QI plan, charter a team, establish QI priorities and activities, monitor progress toward goal attainment, assess quality programs, and conduct annual program evaluation.

Areas for improvement can be identified by routinely and systematically assessing performance. QI projects may be identified from self-assessment, customer satisfaction surveys, or formal organizational review that identifies gaps in services. Staff from all levels should be included to brainstorm and develop a list of changes that they think will improve the process. The QI projects that are selected and prioritized should show alignment with the organization’s mission.

Key program goals and objectives should be defined for the current year. This list should be tailored to the program and include specific objective(s) that need to be accomplished to successfully achieve the goal. The objective(s) for each of the selected goals need to be specific, measurable, achievable, relevant, and time-framed (SMART) objectives so that you will be able to clearly determine whether the objectives have been met at the end of the year by using a specified set of QI tools.

For example,

Generally, the QI committee identifies and defines goals and specific objectives to be accomplished each year. These goals may include training of staff regarding both CQI principles and specific QI initiative(s). Progress in meeting these goals and objectives is an important part of the annual evaluation of QI activities.

Performance measurement, discussed in more depth in the next chapter, describes how performance is measured and data are collected, monitored, and analyzed. It is used to monitor important aspects of an organization’s programs, systems, and processes; compare its current performance with the previous year’s performance, as well as benchmarks and theoretical test performance measures; and identify opportunities for improvement in management, development, and support services. The basic steps are to determine performance measures and develop indicators to measure performance. To do this will require the measurement population to be defined, the data collection plan and method to be described (e.g., survey, data analysis, interviews), and an analysis plan to be determined.

The QI methodology and quality tools/techniques to be utilized throughout the organization must be clearly identified. Strategies for improvement in the existing process can be identified by using QI tools such as benchmarking, fishbone diagram, root-cause analysis, and so on.

The plan-do-study-act cycle is one of the more widely used QI methodologies for testing a change on a small scale—by planning change and collecting baseline data, testing the change and collecting data, observing the results and analyzing the data, and acting on what is learned. If the change did not result in improvement in the process, try another strategy. If the change resulted in improvement, adopt the change, monitor the process periodically, and implement the change on a larger scale.

A number of other QI approaches have also been used. Based on your organizational priorities, the QI committee can choose a preferred approach such as Six Sigma (define, measure, analyze, improve, and control) and FADE (focus, analyze, develop, execute, and evaluate).

Once a QI initiative is launched, it is important to have regular communication on QI with all staff including the board and stakeholders. Regular updates on how the QI plan is being implemented, how training activities are being conducted, and improvement charting are important parts of any communication plan. The progress in QI projects can be documented using activity logs, issue identification logs, meeting minutes, and so on. Improvement efforts can be communicated through various methods, such as kick-off meetings or all-employee meetings; storyboards and/or posters displayed in common areas; sharing organization’s annual QI plan evaluation; e-mails, memos, newsletters, and/or handouts; and informal verbal communication.

Hewlett-Packard (HP) has adopted a similar methodology that they refer to as total quality control (TQC). A fundamental principle of TQC is that all company activities can be scrutinized in terms of the processes involved; metrics can be assigned to each process to evaluate effectiveness. HP has developed numerous measurements, as shown in Table 2.2.

The TQC approach places quality/productivity assessment high on the list of software-development tasks. When projects are first defined, along with understanding and evaluating the process to be automated, the team defines the metrics that are to be used to measure the process.

HP has also established a systems software certification program to ensure measurable, consistent, high-quality software through defining metrics, setting goals, collecting and analyzing data, and certifying products for release.

HP’s results are impressive. Defects are caught and corrected early, when costs to find and fix are lower. Less time is spent in the costly system test and integration phases, and on maintenance. This results in lower overall support costs and higher productivity. It has also increased quality for HP’s customers. HP’s success demonstrates what a corporate-wide commitment to productivity and quality measures can achieve.

Balanced Scorecard

We addressed the concept of the IT roadmap in Chapter 1. One of the popular techniques that many companies have selected is the balanced scorecard, as shown in Figure 2.1. Heralded as one of the most significant management ideas of the past 75 years, the balanced scorecard has been implemented in companies to measure as well as manage the IT effort.

Robert S. Kaplan and David P. Norton developed the balanced scorecard approach in the early 1990s to compensate for their perceived shortcomings of using only financial metrics to judge corporate performance. They recognized that in this “New Economy” it was also necessary to value intangible assets. Because of this, they urged companies to measure such esoteric factors as quality and customer satisfaction. By the mid-1990s, the balanced scorecard became the hallmark of a well-run company. Kaplan and Norton (2001) often compare their approach for managing a company with that of pilots viewing assorted instrument panels in an airplane cockpit—both have a need to monitor multiple aspects of their working environment.

Figure 2.1 The balanced scorecard and its four perspectives.

In the scorecard scenario, a company organizes its business goals into discrete, all-encompassing perspectives: financial, customer, internal process, and learning/growth. The company then determines cause–effect relationships—for example, satisfied customers buy more goods, which increases revenue. Next, the company lists measures for each goal, pinpoints targets, and identifies projects and other initiatives to help reach those targets.

Departments create scorecards tied to the company’s targets, and employees and projects have scorecards tied to their department’s targets. This cascading nature provides a line of sight between each individual, what he or she is working on, the unit that he or she supports, and how that impacts the strategy of the whole enterprise.

The balanced scorecard approach is more than just a way to identify and monitor metrics. It is also a way to manage, change, and increase a company’s effectiveness, productivity, and competitive advantage. Essentially, a company that uses the scorecard to identify and then realize strategic goals can be referred to as a strategy-focused organization. Cigna is a good example of this. When Cigna initiated the balanced scorecard process, the company had negative shareholder value. The parent company was trying to sell it but had no takers. Five years and a few balanced scorecards later, Cigna was sold for $3 billion.

For IT managers, the balanced scorecard is an invaluable tool that permits IT to link to the business side of the organization using a “cause-and-effect” approach. Some have likened the balanced scorecard to a new language, which enables IT and business line managers to think together about what IT can do to support business performance. A beneficial side effect of the use of the balanced scorecard is that, when all measures are reported, one can calculate the strength of relations between the various value drivers. For example, if the relation between high development costs and high profit levels is weak for a long time, it can be inferred that the developed software does not sufficiently contribute to results as expressed by the other (e.g., financial) performance measures.

The goal is to develop a scorecard that naturally builds in cause-and-effect relationships, includes sufficient performance drivers and, finally, provides a linkage to appropriate financial measures. At the very lowest level, a discrete software system can be evaluated using a balanced scorecard. The key, here, is the connectivity between the system and the objectives of the organization as a whole.

Establishing a Performance Management Framework

Several steps need to be undertaken to establish a performance management framework that makes sense and is workable throughout the organization.

1. Define the organizational vision, mission, and strategy. The balanced scorecard methodology requires the creation of a vision, mission statement, and strategy for the organization. This ensures that the performance measures developed in each perspective support the accomplishment of the organization’s strategic objectives. It also helps employees visualize and understand the links between the performance measures and successful accomplishment of strategic goals.

   The key is to first identify where you want the organization to be in the near future and then set a vision that seems somewhat out of reach. In this way, managers have the instrumentation they need to navigate to future competitive success. If you cannot demonstrate a genuine need to improve the organization, failure is a virtual certainty.

2. Develop performance objectives, measures, and goals. Next, it is essential to identify what the organization must do well (i.e., the performance objectives) in order to attain the identified vision. For each objective that must be performed well, it is necessary to identify measures and set goals covering a reasonable period of time (e.g., 3–5 years). Although this sounds simple, many variables actually impact how long this exercise will take. The first, and most significant, variable is how many people are employed in the organization and the extent to which they will be involved in setting the vision, mission, measures, and goals.

   The balanced scorecard translates an organization’s vision into a set of performance objectives distributed among four perspectives: financial, customer, internal business processes, and learning and growth. Some objectives are maintained to measure an organization’s progress toward achieving its vision. Other objectives are maintained to measure the long-term drivers of success. Through the use of the balanced scorecard, an organization monitors both its current performance (financial, customer satisfaction, and business process results) and its efforts to improve processes, motivate and educate employees, and enhance information systems—its ability to learn and improve.

   When creating performance measures, it is important to ensure that they link directly to the strategic vision of the organization. The measures must focus on the outcomes necessary to achieve the organizational vision and the objectives of the strategic plan. When drafting measures and setting goals, ask whether or not achievement of the identified goals will help realize the organizational vision.

   Each objective within a perspective should be supported by at least one measure that will indicate an organization’s performance against that objective. Define measures precisely, including the population to be measured, the method of measurement, the data source, and the time period for the measurement. If a quantitative measure is feasible and realistic, then its use should be encouraged.

   When developing measures, it is important to include a mix of quantitative and qualitative measures. Quantitative measures provide more objectivity than qualitative measures. They may help to justify critical management decisions on resource allocation (e.g., budget and staffing) or systems improvement. The company should first identify any available quantitative data and consider how it can support the objectives and measures incorporated in the balanced scorecard. Qualitative measures involve matters of perception, and therefore of subjectivity. Nevertheless, they are an integral part of the business scorecard methodology. Judgments based on the experience of customers, employees, managers, and contractors offer important insights into acquisition performance and results.

3. Finally, it takes time to establish measures, but it is also important to recognize that they might not be perfect the first time. Performance management is an evolutionary process that requires adjustments as experience is gained in the use of performance measures.
4. If your initial attempts at implementation are too aggressive, the resulting lack of organizational “buy-in” will limit your chance of success. Likewise, if implementation is too slow, you may not achieve the necessary organizational momentum to bring the balanced scorecard to fruition. Incorporating performance measurement and improvement into your existing management structure, rather than treating it as a separate program, will greatly increase the balanced scorecard’s long-term viability.

To achieve long-term success, it is imperative that the organizational culture evolves to the point where it cultivates performance improvement as a continuous effort. Viewing performance improvement as a one-time event is a recipe for failure.

Creating, leveraging, sharing, enhancing, managing, and documenting balanced scorecard knowledge will provide critical “corporate continuity” in this area. A knowledge repository will help to minimize the loss of institutional performance management knowledge that may result from retirements, transfers, promotions, and so on.

Developing Benchmarks

The central component of any performance management and measurement system is benchmarking. A benchmark is a point of reference from which measurements may be made. It is something that serves as a standard by which others may be measured.

The purpose of benchmarking is to assist in the performance improvement process. Specifically, benchmarking can

1. Identify opportunities
2. Set realistic but aggressive goals
3. Challenge internal paradigms on what is possible
4. Understand methods for improved processes
5. Uncover strengths within your organization
6. Learn from the leaders’ experiences
7. Better prioritize and allocate resources

Table 2.3 describes the ramifications of not using benchmarking.

Obviously, benchmarking is critical to your organization. However, benchmarking needs to be done with great care. There are actually times when you should not benchmark:

1. You are targeting a process that is not critical to the organization.
2. You do not know what your customers require from your process.
3. Key stakeholders are not involved in the benchmarking process.
4. Inadequate resources, including budgetary, have been committed.
5. There is strong resistance to change.
6. You are expecting results instantaneously.

Most organizations use a four-phase model to implement benchmarking:

1. Plan
2. Collect
3. Analyze
4. Adapt

When planning a benchmarking effort, considerable thought should be given to who is on the benchmarking team. In some cases, team members will need to be trained in the different tools and techniques of the benchmarking process.

The creation of a benchmarking plan is similar to the creation of a project plan for a traditional systems development effort, with a few twists:

1. The scope of the benchmarking study needs to be established. All projects must have boundaries. In this case, you will need to determine which departmental units and/or processes will be studied.
2. A purpose statement should be developed. This should state the mission and goals of the plan.
3. If benchmarking partners (i.e., other companies in your peer grouping who agree to be part of your effort) are to be used, specific criteria for their involvement should be noted. In addition, a list of any benchmarking partners should be provided. The characteristics of benchmarking partners that are important to note include: policies and procedures, organizational structure, financials, locations, quality, productivity, competitive environment, and products/services.
4. Define a data collection plan and determine how the data will be used, managed, and ultimately distributed.
5. Finally, your plan should discuss how implementation of any improvements resulting from the benchmarking effort will be accomplished.

The collection phase of a benchmarking effort is very similar to the requirements elicitation phase of software engineering. The goal is to collect data and turn them into knowledge.

During the collection phase, the focus is on developing data collection instruments. The most widely used is the questionnaire with follow-up telephone interviews and site visits. Other methods include interviewing, observation, participation, documentation, and research.

Once the data have been collected, they should be analyzed. Hopefully, you will have managed to secure the cooperation of one or more benchmarking partners so that your analysis will be comparative rather than introspective.

The goal of data analysis is to identify any gaps in performance. Once you find these, you will need to

1. Identify the operational best practices and enables. In other words, what are your partners doing right that you are not? Then you need to find out exactly “how” they are doing it.
2. Formulate a strategy to close these gaps by identifying opportunities for improvement.
3. Develop an implementation plan for these improvements.

The analysis phase uses the outputs of the data collection phase—that is, the questionnaires, interviews, observations, and so on. It is during this phase that process mapping and the development of requisite process performance measurements are performed.

Process performance measurements should be

1. Tied to customer expectations
2. Aligned with strategic objectives
3. Clearly reflective of the process and not influenced by other factors
4. Monitored over time

Once the plan has been formulated and receives approval from management, it will be implemented in this phase. Traditional project management techniques should be used to control, monitor, and report on the project. It is also during this phase that the continuous improvement plan is developed. In this plan, new benchmarking opportunities should be identified and pursued.

The benchmarking maturity matrix can be used for a periodic review of the benchmarking initiative. They stress that to understand an initiative’s current state and find opportunities for improvement, the organization must examine its approach, focus, culture, and results. The benchmarking maturity matrix demonstrates the maturity of 11 key elements derived from 5 core focus areas: management culture (e.g., expects long-term improvement), benchmarking focal point (e.g., team), processes (e.g., coaching), tools (e.g., intranet), and results.

The 11 key elements within the matrix are

1. Knowledge management/sharing
2. Benchmarking
3. Focal point
4. Benchmarking process
5. Improvement enablers
6. Capture storage
7. Sharing dissemination
8. Incentives
9. Analysis
10. Documentation
11. Financial impact

The five maturity levels are, from lowest to highest:

1. Internal financial focus, with short-term focus that reacts to problems
2. Sees need for external focus to learn
3. Sets goals for knowledge sharing
4. Learning is a corporate value
5. Knowledge sharing is a corporate value

Based on these two grids, a series of questions are asked and a score is calculated:

• Key 1: Which of the following descriptions best defines your organization’s orientation toward learning?
• Key 2: Which of the following descriptions best defines your organization’s orientation toward improving?
• Key 3: How are benchmarking activities and/or inquiries handled within your organization?
• Key 4: Which of the following best describes the benchmarking process in your organization?
• Key 5: Which of the following best describes the improvement enablers in place in your organization?
• Key 6: Which of the following best describes your organization’s approach for capturing and storing best practices information?
• Key 7: Which of the following best describes your organization’s approach for sharing and disseminating best practices information?
• Key 8: Which of the following best describes your organization’s approach for encouraging the sharing of best practices information?
• Key 9: Which of the following best describes the level of analysis done by your organization to identify actionable best practices?
• Key 10: How are business impacts that result from benchmarking projects documented within your organization?
• Key 11: How would you describe the financial impact resulting from benchmarking projects?

The maturity matrix is a good tool for internal assessment as well as for comparisons to other companies.

Looking Outside the Organization

Competitive analysis serves a useful purpose. It helps organizations devise their strategic plans and gives them insight into how to craft their performance indicators. It is quite possible that information coupled with the experience of a seasoned industry manager is more than adequate to take the place of expensive experts in the field of competitive analysis.

The goal of this technique is to analyze one competitor at a time to identify strategies and predict future moves. The key difference between this technique and others is the level of involvement of senior managers of the firm. In most companies, research is delegated to staff who prepare a report on all competitors at once. An alternative is to gather the information on just one competitor, and then use senior managers to logically deduce the strategy of the competitor in question.

Once the competitor is chosen, a preliminary meeting is scheduled. It should be attended by all senior managers who might have information or insight to contribute concerning this competitor. This includes the chief executive officer as well as the general manager and managers from sales, marketing, finance, and manufacturing. A broader array of staff attending is important to this technique since it serves to provide access to many diverse sources of information. This permits the merger of external information sources—as well as internal sources—collected by the organization, such as documents, observations, and personal experiences.

At this meeting, it is agreed that all attendees spend a specified amount of time collecting more recent information about a competitor. At this time, a second meeting is scheduled in which to review this more recent information.

At an information meeting, each attendee will receive an allotment of time to present his or her intimation to the group. The group will then perform a relative strengths/weaknesses analysis. This will be done for all areas of interest uncovered by the information obtained by the group. The analysis will seek to draw conclusions about two criteria. First, is a competitor stronger or weaker than your company? Second, does the area have the potential to affect customer behavior?

Unless the area meets both of these criteria, it should not be pursued further either in analysis or discussion. Since managers do not always agree on what areas to include or exclude, it is frequently necessary to appoint a moderator who is not part of the group.

At this point, with areas of concern isolated, it is necessary to do a comparative cost analysis. The first step here is to prepare a breakdown of costs for your product. This includes labor, manufacturing, cost of goods, distribution, sales, administrative as well as other relevant items of interest as necessary.

At this point, compare the competitor’s cost for each of these factors according to the following scale:

• Significantly higher
• Slightly higher
• Slightly lower
• Significantly lower

Now, translate these subjective ratings to something a bit more tangible, such as slightly higher is equivalent to 15%. By weighting each of these factors by its relative contribution to the total product cost, it is now possible to calculate the competitor’s total costs.

Analysis of competitor motivation is perhaps the most intangible of the steps. The group must now attempt to analyze their competitor’s motivation by determining how the competitor measures success as well as what its objectives and strategies are.

During the research phase, the senior manager and his or her staff gather considerable information on this topic. By using online databases and websites, it is possible to collect information about self-promotions, annual reports, press releases, and the like. In addition, information from former employees, the sales force, investment analysts, suppliers, and mutual clients is extremely useful and serves to broaden the picture.

Based on the senior managers’ understanding of the business, it is feasible to be able to deduce the competitor’s motivation. Motivation can often be deduced by observing the way the competitor measures itself. Annual reports are good sources for this information. For example, a competitor that wants to reap the benefits of investment in a particular industry will most likely measure success in terms of return on investment.

By reviewing information on the competitor’s strengths and weaknesses, relative cost structure, goals, and strategies, the total picture of the firm can be created.

Using this information, the group should be able to use individual insights into the process of running a business in a similar industry to determine the competitor’s next likely moves.

For example, analysis shows that a competitor is stronger in direct sales, has a cost advantage in labor, and is focused on growing from a regional to a national firm. The group would draw the conclusion that the competitor will attempt to assemble a direct sales effort nationwide, while positioning itself on the basis of low price.

Process Mapping

Process mapping is an approach to systematically analyzing a particular process. It provides a focal point for the performance improvement and measurement processes.

Process mapping involves mapping each individual step, or unit operation, undertaken in that process in chronological sequence. Once individual steps are identified, they can be analyzed in more detail.

Because it is best done in small teams, process mapping is an important focal point for employee involvement. The act of defining each unit operation of a given process gives a much deeper understanding of the process to team members—sometimes leading to ideas for immediate operational improvements.

The following six steps will help you apply process mapping to your company’s operational processes:

• Step 1: Understanding the basic process mapping tool
• Step 2: Creating a flowchart of your product’s life cycle
• Step 3: Using the flowchart to define boundaries
• Step 4: Identifying the processes within the boundaries you have set
• Step 5: Applying the basic process mapping tool to each process
• Step 6: Compiling your results

The first basic step in process mapping is to break down a process into its component steps, or unit operations. The process map depicts these steps and the relationship between them.

The second basic step in process mapping is to analyze each unit operation in the form of a diagram that answers the following questions:

1. What is the product input to each unit operation? (The product input to a given unit operation is generally the product output of the preceding unit operation. For the first unit operation of a process, there may not be any “product input.”)
2. What are the nonproduct inputs to the unit operation? (These include raw materials and components as well as energy, water, and other resource inputs.)
3. What is the product output of the unit operation?
4. What are the nonproduct outputs of the unit operation? (These include solid waste, water discharge, air emissions, noise, etc.)
5. What are the environmental aspects of the unit operation? (These may have been designated as inputs or outputs.)

The first application of the basic process mapping approach is to create a simple flowchart or process map showing the main stages of the life cycle of your product, from raw material extraction to end-of-life disposal (or reuse or recycling).

On the simple process map, draw a dotted line around the processes that you want to include in your analysis, as shown in Figure 2.2.

Your next step is to identify the processes included in the scope you selected. As you look at your life-cycle process map, most of your basic processes will be obvious. However, there may be some processes or operations that are not central to making your product but have an impact nonetheless.

Now you need to apply the process mapping tool to each of these processes to generate a process map showing the unit operations for each process. You can then use a unit operation diagram to identify the relevant aspects of each unit operation. Be sure to include employees familiar with the operation in question on the team that identifies the aspects.

If you have completed the previous steps, you have identified unit operations for all of your organization’s processes and identified the relevant aspects for each unit operation. You will then use these data to evaluate which of the aspects that you have selected for analysis are significant.

Figure 2.2 Life-cycle process map for a screen-printing operation with boundaries defined.

In Conclusion

Organizations seek to create an efficient and effective performance management system to translate vision into clear measurable outcomes that define success, and that are shared throughout the organization and with customers and stakeholders. Doing this provides a tool for assessing, managing, and improving the overall health and success of business systems.