MONTEKi.1 v^A y3343-5101
TOTAL QUALITY MANAGEMENT
AND APPLICATIONS TO THE CONSTRUCTION
JEFFREY M. SALTER
A REPORT PRESENTED TO THE GRADUATE COMMITTEE
OF THE DEPARTMENT OF CIVIL ENGINEERING IN
PARTIAL FULFILLMENT OF THE REQUIREMENTS
FOR THE DEGREE OF MASTER OF ENGINEERING
UNIVERSITY OF FLORIDA
TOTAL QUALITY MANAGEMENT
AND APPLICATIONS TO THE CONSTRUCTION
JEFFREY M. SALTER
A REPORT PRESENTED TO THE GRADUATE COMMITTEE
OF THE DEPARTMENT OF CIVIL ENGINEERING IN
PARTIAL FULFILLMENT OF THE REQUIREMENTS
FOR THE DEGREE OF MASTER OF ENGINEERING
UNIVERSITY OF FLORIDA
NAVAL POSTGRADUATE SCHOOI
MONTEREY CA 93943-5101
TABLE OF CONTENTS
Chapter One Introduction 1
Chapter Two History 5
Chapter Three What is Total Quality Management? 10
Chapter Four Important Points of Quality 14
4. 1 Create Constancy of Purpose for 14
Improvement of Product and Service
4.2 Adopt the New Philosophy 16
4.3 Cease Dependence on Mass Inspection ... 18
4.4 End the Practice of Awarding 20
Business on Price Tag Alone
4.5 Improve Constantly and Forever 23
the System of Production and Service
4.6 Institute Training, Retraining 25
and Educat ion
4.7 Institute Leadership 28
4.8 Drive out Fear 29
4.9 Break Down Barriers Between 31
4.10 Eliminate Slogans, Exhortations 33
Targets for the Workforce, and
4.11 Remove Barriers to Pride of 35
4.12 Take Action to Accomplish the 37
Transf ormat ion
Chapter Five Deadly Diseases and Other Obstacles ... 39
to Total Quality Management
5. 1 Lack of Constancy of Purpose 39
5.2 Emphasis on Short Term Profits 40
5.3 Evaluation of Performance, Merit 41
Rating, or Annual Review
5.4 Mobility to Top Management 43
5.5 Running a Company on Visible 44
Figures Alone - Counting the Money
Bib 1 iography
Excessive Medical Costs and 45
Excessive Costs of Warranty, Fueled
by Lawyers That Work on a Contingency
Other Obstacles to Total Quality 46
Safety Management is Vital to 47
Total Quality Management Success
The Role of Data 60
Total Quality Management Today 62
Conclusion - Total Quality 69
Eternally Successful Organization 74
How Ritz-Carlton Won the Baldrige 75
Shewhart Cycle 78
Selected Charts and Diagrams 79
Demonstrating How Data Transformed
By Statistics Can be Used
The theory of total quality management is not a new
phenomenon. Total quality management was first officially
introduced in the 1940's and has continued to change and
improve through the years. Even though this concept has not
yet been fully accepted by businesses in the United States,
the acceptance and implementation of total quality
management programs is increasing. The single greatest
obstacle for total acceptance seems to be based on the fact
that business managers in the United States are more
interested in short term results and profits than in steady,
long term growth and improvement. This mindset requires
that chief executive officers and top management improve the
bottom line rapidly. Usually these results are only
temporary and after the initial results begin to taper off,
top management personnel move on to a new company. This
trend produces negative side effects such as loss of company
loyalty and decrease in company knowledge.
As the development and evolution of total quality
management is examined, perhaps the realization that only
the occurrence of an economic disaster will cause America's
corporate giants to open their eyes and apply the basic
rules of total quality management. In May 1993, the trade
deficit was 10.5 billion dollars, with approximately one-
half attributable to the Japanese. Obviously, the
principles taught to the Japanese people forty years ago by
Dr. W. Edwards Deming are still awaiting endorsement by
American businesses today.
For some unknown reason, American companies became
locked into a specific format and this tendency keeps them
from looking toward the future. Managers believe their
company's future will always be in one particular area,
producing one specific product. After all, if it is a good
product, people will always want it. Not so. Just ask the
steel giants of the 1970's. Steel executives believed that
foreign countries could never import steel to the United
States because it would be too costly. As a result, the
steel magnates used capital to pay stockholder dividends
rather than reinvest in their companies by improving their
processes or by purchasing additional plant equipment.
Japan, taking advantage of poor planning on the part of
American steel magnates, was able to gain a stronghold in
the United States steel industry. People are mortal and
will eventually wear out. However, businesses with proper
management can always adapt, change and remain successful.
Philip Crosby sets up some basic guidelines:
A company that is going to be eternally successful will
have these easily identifiable characteristics:
People do things right routinely.
Growth is profitable and steady.
Customer needs are anticipated.
Change is planned and managed.
People are proud to work there.
For a company to succeed it must always apply the principles
of Total Quality Management. Companies begin to realize
that the true test of quality is whether or not it has met
the customer's needs. Even the American Society for Testing
and Materials (ASTM) has recognized this fact. The Society
publishes a manual that is used as a guide for consumer
The Manual on Consumer Sensory Evaluation concerns
itself with testing certain products using those
untrained people who will become the ultimate users.
These products can be evaluated on the basis, of taste,
smell, touch, hearing or visual differences.
Crosby suggests using a grid to determine a company's
progress toward becoming eternally successful. The
"Eternally Successful Organization Grid" (see Appendix A) is
an overview that allows any company to measure itself at any
point in time on items such as quality, growth, customers,
change and employees.
Total quality management seems to have its roots based
on Dr. W. Edward Deming's fourteen points of management.
These points, along with other principles of Dr. Deming's,
will be examined. Specifically, their application to the
construction industry will be explored. The seven deadly
Philip B. Crosby, The Eternally Successful Organization (New
York: McGraw-Hill, 1988) 16.
E. E. Schaefer, ed., ASTM Manual on Consumer Sensory
Evaluat ion (Philadelphia: American Society for Testing and
Materials, 1979) 1.
diseases and other obstacles which describe reasons why
total quality management could fail will be discussed in
some detail. Safety management is vital to an
organization's success and will also be examined in detail,
as will the role of data and statistical methods. Deming's
fourteen points of management seem to be the most widely
used and accepted when dealing with total quality
management. However, for the sake of comparison and
reference, Crosby's fourteen steps of quality are as
follows: management commitment; quality improvement team;
measurement; cost of quality; quality awareness; corrective
action; ZD (zero defects) planning; employee education; ZD
Day; goal setting; error-cause removal; recognition; quality
councils; and, do- i t-over-again . Finally, where total
quality management is today and where it will be tomorrow
will be discussed. Further, one possible plan for
implementing total quality management in construction will
The concept of total quality management was originated
by Dr. W. Edward Deming in the 1940's. Dr. Deming was a
graduate of physics from Yale University, but became a
statistician by trade. After graduating from Yale, Dr.
Deming worked at the Department of Agriculture and for the
Department of Commerce. His first application of
statistical techniques was in developing a plan for the 1940
census. Prior to 1940, the census process involved an
attempt to poll everyone in the United States. It was only
through Dr. Deming's random sampling technique that the old,
laborious, time-consuming method was changed. It was after
this that Dr. Deming received some short-lived notoriety for
his use of statistical methods which he had learned from
Walter A. Shewhart , a statistician for Bell Telephone
Laboratories. Dr. Deming was requested by W. Allen Wallis,
a professor at Stanford University (later to become
Undersecretary of State), to teach his methods to companies
and individuals involved in manufacturing for the war
In July 1941, Dr. Deming taught the first ten day
course in statistical methods with the aid of Ralph
Wareham of General Electric and Charles Mummery of
Hoover Corporation. Wareham had studied statistical
theory at the University of Iowa; Mummery was self-
taught in the Shewhart methods."
This initial effort resulted in 31,000 students across the
country being taught these statistical methods. The
American Society For Quality Control was initiated in 1946,
with Dr. Deming serving as one of its initial members.
Dr. Deming left the census bureau in 1946 and started
his own business as a statistical consultant. From 1946 to
1975, he was also a professor in graduate business school at
New York University. His first contact with the Japanese
was in 1951 after World War II had subsided. His initial
purpose for visiting Japan was to help with the planning of
a national census. It should be noted that after the war,
American industry was unscathed, unlike European countries
and Japan, which had their industries obliterated. Because
American industry had geared up for the war, they were more
than ready to be major suppliers of manufactured goods.
With production running at an all time high and with little
competition on the global market, corporate managers could
literally do no wrong. There was a high demand to produce
high quantities because of the attitude that the consumer
would buy anything produced. This situation resulted in Dr.
Deming's statistical quality control methods being shelved.
Another reason Dr. Deming's methods were not put to use was
because all of his previous efforts had been directed toward
'Mary Walton, The Deming Management Method (New York: Putnam,
teaching the technical people formulas and methods and not
toward management personnel who set policies and
procedures and provided for their implementation. Whatever
the reason for the shelving of Dr. Deming's methods, the
United States began a joy ride which would last for almost
forty years .
After helping with the Japanese census of 1951, Dr.
Deming lived and worked with the Japanese people off and on
for thirty years. He was successful in Japan for several
reasons. First, he lived in Japan long enough to learn
about its language, people and culture. This later afforded
him opportunities unavailable to any other American at that
time. It was only by learning the culture that Dr. Deming
was able to devise the best way to have his methods
integrated into Japanese businesses. Second, Dr. Deming was
able to seize the window of opportunity. After World War
II, the Japanese industrial base was nonexistent. In other
words, they were starting from scratch, which made them more
open to ideas which would help put them on the road to
recovery. The Japanese were a hard-working, patient people
and were willing to try new ideas that fit perfectly into
Dr. Deming's theory of total quality management. Japan was
on its way to becoming the most respected quality
manufacturer in the world. Third, Dr. Deming was able to
reach the Japanese' top management with his principles. On
several occasions, he met with top executives from Japan's
twenty-one leading businesses. By doing this he was able to
have his methods accepted and implemented from the top down
and not from the bottom up as he had once tried in the
United States. Additionally, the Japanese were more
interested in long term growth than the annual report to
stockholders which emphasized the bottom line. Dr. Deming
also learned that the Japanese were very loyal people. This
became very obvious to the American military that witnessed
the destruction of pearl harbor and the Kamikaze pilots that
were willing to give up their life because of their loyalty
to Japan. This same loyalty was used in all facets of their
lives. Unlike corporate takeovers and leveraged buy-outs in
the United States, Japanese firms mutually agreed to mergers
before they took place, with either company being able to
How and why was Dr. Deming finally discovered in
America? It was in 1980, at which time Dr. Deming was 80
years old. The Carter administration had left America with
double digit inflation running rampant and economic disaster
appearing imminent. People began to ask questions as to why
the Japanese were doing so much better in the world markets
than the United States. With the yen so strong against the
dollar, people wondered how a country like Japan, whose name
was once synonymous with junk ("Made in Japan"), could now
be setting the global standard for quality. A television
documentary was produced on June 24, 1980 entitled "If Japan
Can... Why can't we?" This documentary attempted to discover
how "good old American ingenuity" had become lost. The
Nashua Company of America was examined because of its
Japanese origin. It was found that it applied Dr. W. Edward
Deming's principles of total quality management. As to why
Nashua was doing so well in the United States, Dr. deming
replied "If you get gains in productivity only because
people work smarter not harder, that is total profit, and it
multiplies several times". In the documentary, Dr. Deming
was able to briefly describe his methods (15 minutes actual
interview time). He further used the interview as an
opportunity to chastise American industry for its ineptness.
After the documentary aired, Dr. Deming's popularity and
requests for his services blossomed overnight.
WHAT IS TOTAL QUALITY MANAGEMENT?
Total quality management, an effective business
technique predominately used in Japan, is rapidly evolving
in American business and industry. This concept consists
... an integrated process involving both
management and employees with the ultimate goal of
managing the design, development, production,
transfer and use of the various types of products
and services in both the environment and
marke t p 1 ace .
This approach to business strategy involves employees at
every level, from the Chief Executive Officer to the blue
collar worker who performs custodial duties. To have
successful total quality management, the products and
services must consist of both quality assurance and quality
control. Quality assurance must be differentiated from
quality control or inspection, for "although a quality
assurance program will include quality control and
inspection, both these activities form only a part of a
company's total commitment to quality.'
Johnson Aimie Edosomwan, Integrating Productivity and Quality
Management (New York: Marcel Dekker, Inc., 1987) 9.
Lionel Stebbing, Quality Assurance: The Route to Efficiency
and Competitiveness, 2nd ed. (Chichester: Ellis Horwood Limited,
Quality assurance sets the standard that products and
services must meet. The quality assurance function should be
based on the customer's needs, not on the desires of
suppliers or designers. These standards need to go further
than just the basic contract specifications and documents.
In doing so, "it is important to understand all of the
customer's standards, both those in the contract documents
and those more difficult to determine." After determining
the customer's needs and assuring that the products and
services can meet those needs, a quality control program can
be established which will complete the total quality
management strategy. Quality assurance is not stagnant, but
must be a continual process that improves, changes, and
seeks to satisfy an ever-changing, volatile and competitive
A good quality control program guarantees that the
products and services will conform to the specifications set
forth in product definition. Some of the different
parameters controlled in this process are size, type of
material used, manufacturing tolerances and reliability.
Quality of conformance is defined as "a measure of how well
the product conforms to the specifications and tolerances
required by the design." Every member of the quality
Robert D. Martin, "Follow a Simple Strategy: Exceed Customer
Expectations," Florida Constructor Jul. /Aug. 1992: 1.
control program must act as supplier, producer and customer.
Each employee must supply and produce a product that meets
the next employee's need. The employee must also act as a
customer upon receipt of the product and determine if the
product meets his or her own specific requirements. A good
quality control program will seek to deliver goods and
services that are correct the first time.
The total quality management process must consist of
both quality assurance and quality control to insure a
marketable, competitive product for today's demanding
customer. This management strategy must involve innovation,
continual adaptation and risk taking. In order to minimize
risks involved, training of quality management must be
provided at every level of the organization. Programs often
fail "due to lack of understanding or commitment."
Quality management is moving to the forefront of American
business and should make industries more competitive, both
in the United States and in the international market. More
and more companies are realizing that with proper
implementation of the total quality management process,
production will increase and costs will decrease. Even with
an average three to five year implementation period,
companies are realizing that quality assurance plus quality
control equals total quality management and this equation is
well worth the overall investment. The object of Total
Quality Management is best described by John J. Hudiburg,
CEO of Florida Power and Light CO.:
The object of total quality management is simple: to
establish a management system and corporate culture
that will assure higher customer satisfaction than your
compet i tors" .
The best way to examine total quality management is to
understand and examine the application of Dr. Deming's
fourteen points of management. These fourteen points were
especially written for American Industry, although with
small variations can be applied world wide. Several of the
points were never used in Japan, because they were not
necessary and did not apply to their specific way of doing
bus iness .
John J. Hudiburg, "The CEO's Role in Implementing Total
Quality Management." Alster, Judith and Holly Gallo, eds.
Leadership and Empowerment for Total Quality . Symposium sponsored
by KPMG Peat Marwick (New York: The Conference Board, 1992) 21.
IMPORTANT POINTS OF QUALITY MANAGEMENT
4.1 Create Constancy of Purpose for Improvement of Product
Most businesses are set up with their primary purpose
being that of making money or, at least, to achieve a
reasonable profit. Constancy of purpose is the notion that
everyone is on board for the purpose of staying in business,
being innovative, and investing in research and development.
Most businesses are so preoccupied with today that they are
unable to envision tomorrow. The most obvious* example of
this is the recent demise of the computer giant IBM. At one
time, IBM stock was worth $175.00 per share. It has now
dropped to about $46.00 per share. One of the reasons given
for this downfall was a lack of constancy of purpose. IBM
did everything it perceived necessary in order to maintain
its bottom line and, thus, achieved "good management".
Unfortunately, when the computer giant awoke the next day,
IBM found itself laying off thousands of people and closing
facilities worldwide. "It is easy to stay bound up in the
tangled knots of the problems of today, becoming ever more
ef f ic ient in them. "
Companies must continually improve and seek
innovations. I worked for a manufacturing firm that saw its
doors closed in the early 1980's. The first department to
suffer large budget cuts and personnel layoffs was research
and development. It was obvious that from that point on it
was only a matter of time before the company would close its
doors entirely. The company had literally cut its own
throat by eliminating its ability to be innovative.
Innovation does not require the design of a completely new
product, idea or service. Innovation does require the
manufacturer to be able to step back and examine its current
offerings, compare those capabilities to the current or
future demands of the customer, and make adjustments to meet
those demands. After all, the true test of quality is by
the end-user or consumer. Dr. Deming states that the
company must have a plan to be innovative and every plan
should answer the following questions:
What materials will be required, at what cost?
What will be the method of production?
What new people will have to be hired?
What changes in equipment will be required?
What new skills will be required, and for how many
How will current employees be trained in these new
How will supervisors be trained?
What will be the cost of production?
What will be the cost of marketing? What will be
the cost and methods of service?
How will the product or service be used by the
How will the company know if the customer is
sat isf ied? 12
For a contractor all of these questions should be answered
and independently addressed in the context of every new
contract. If these questions are not answered in the pre-
planning stages for a job, then constancy of purpose will
not be maintained. Each area covered by these questions
involves different individuals throughout a contractors'
organization. For example, it is impossible for an
estimator to know the cost of production without first
talking with the crews and determining their actual method
of construction. All too often an estimator will assume a
certain method when preparing a bid, which forces the field
personnel to tackle the problem of how to construct the job
and still achieve the same profit based on the estimator's
calculations. In order for companies to achieve constancy
of purpose they must be willing to expend resources in
research and education. Companies should seek continuous
improvement of products and services and invest in new aids
to production, both in the field and in the office.
4.2 Adopt the New Philosophy
This new philosophy must begin with management.
Moreover, it may have to start with major stockholders. In
order for large companies to implement a new philosophy,
stockholders (owners) must be willing to allow the time for
a transformation to take place. Only then will managers
become loyal and adopt "quality" as the new buzzword instead
of "profit". Obviously profit is necessary for success, bu c
quality must be considered first if companies expect to keep
their doors open and to compete effectively. American
companies have focused on bottom line results for too long
and have neglected the total quality management process.
This new approach to management must be applied to the
construction industry as well.
Total quality management is becoming a contract
requirement within the construction industry. The
nation's awareness of quality will be reinforced by the
annual presentation of the Malcolm Baldrige Award for
Quality. Most of Fortune 500 firms are pursuing this
award. As a result, they are requiring their
suppliers, which include contractors, to implement
their own total quality management process.
The Ritz-Carlton Hotel Company, a 1992 Malcolm Baldrige
Award winner, already categorizes its suppliers based on
their implementation of total quality management. They
currently award services and contracts based on quality and
not merely price. Service and contract companies must be
able to continually improve right along with Ritz-Carlton or
they will be seen as a barrier to the continued success of
Lou Bainbridge and Bill Abberger, "Partnering - A Progress
Report," The FMI Management Letter August 1992: 2.
4.3 Cease Dependence on Mass Inspection
The inspection system currently in place for American
industries is set up in such a way that the costs of
implementation far outweigh the system's worth. As products
are inspected at different points along the production line
and at the end of the line, a defective part or product may
be discovered. At this point in time the defective item
must either be scrapped, reworked or turned into something
else. Each of these alternatives are costly. Typically the
final cost for the end product is two to three times the
original price for that product. This process inevitably
slows down productivity.
Inspection with the aim of finding the bad ones and
throwing them out is too late, ineffective, costly,
says Dr. Deming. In the first place, you can't find
the bad ones, not all of them. Second, it cost too
Inspection will always be necessary, but not to ensure
quality. Inspection should be used to gather information.
If quality is already built into the process, then
inspection is only one tool that is part of the process. As
inspectors gather information, the data acquired is used to
define, analyze and redefine upper and lower control limits.
Statistics derived from this data can also be used to assist
in setting quality goals. Inspection is also necessary for
gathering information when a new process has been
implemented or a new piece of equipment or technology has
been introduced. Further, inspection for quality should be
used when attempting to ascertain a suppliers' initial
quality or for comparing potential product suppliers.
Using specifications to determine or measure quality is
not the answer either.
This practice implies that anything inside the
specifications may be all right, while something just
outside is all wrong. It was, he says, Dr. G. Taguchi
who won the Deming prize in 1960 who saw the absurdity
of such suppositions and proposed an important
improvement of principle.
The principle simply stated is that as variance is
decreased, cost decreases.
Is this applicable and true for the construction
process? In government and private contracting, quality by
inspection will probably always be necessary. Because of
the nature of construction, no two projects are the same,
jobs have different quality requirements, different crews
and customers, and hardly anything ever remains exactly the
same from one project to another. However, recently more
private companies and some government agencies have started
to replace some of their testing specifications. The
approach now being attempted is to use statistical
acceptance procedures in lieu of the old pass/fail type of
specification. This approach could be the wave of the
future. Old methods are not only unfair and costly, but
involved human judgement and opinions. However, this new
15 Walton 61
technique will take years to implement. The government
bureaucracy still inhibits progress more so than private
Red tape includes delay, buck-passing, pigeon holing,
indecision and other phenomena which contribute to an
end result of inaction. Red tape is of course a
popular phrase for a series of diseases which arise
from identifiable and curable specimens of management
germs. As we analyze these diseases we see that they
are present in industry as well. But the antibodies of
industry today keep the degree of infection down to a
more reasonable level.
Companies need to concern themselves with all aspects of
quality: performance; ease of use; delivery time;
dependability; consistency; serviceability; life expectancy;
aesthetics; and, perception.
4.4 End the Practice of Awarding Business on Price Tag
Every company that produces a product supplies it to
someone else. If the supplier of the raw material produces
inferior quality, then the end product (having gone through
other phases of production) will only be as good as the
original raw material would allow. Companies should seek to
establish suppliers that can be counted on for quality.
After the suppliers have attained the level of quality that
meets a company's needs, then a certain loyalty should be
established to do business with those suppliers. In the
past, companies have mainly used the supply source that
J. M. Juran, Bureaucracy: A Challenge to Better Management
(New York: Harper, 1944) 38.
could meet the minimum specification at the lowest price.
The suppliers with the lowest price more often than not
produce inferior products that are unreliable. Often these
suppliers go out of business before the warranty on their
In construction, this point applies to the way the
United States Government awards most contracts. Current
federal laws and regulations dictate that government
agencies must award construction contracts to the lowest,
responsive, responsible bidder. This translates into
approximately 90% of government contracts being awarded to
the contractor with the lowest price. In most cases these
are the companies that must cut corners to ensure a profit,
resulting in reduction in quantity and/or quality.
Typically this could involve means, methods, materials or
workmanship. Another problem inherent with this type of
government contracting is the "small business set-aside".
The current laws and regulations force agencies to award a
large percentage of contracts to small businesses. In my
experience, the firms that are most able to provide good
quality construction are the big business construction
firms. They have the resources, continuity and experience
to deliver a quality product. In order for the United
States Government to receive better construction these
problems must be resolved. Obviously, resolution could be
achieved through the policy-making and legislative process,
but the "red tape" of the government seems to be unaffected
by total quality management at this point.
Currently there are more construction firms and
resources than there are jobs available for award. Because
of this, the industry will see a consolidation of firms in
the 1990's with fewer, but larger firms remaining. This
consolidation should be good for the industry.
This will cause the overall competition to improve.
Those companies that are marginal in their ability to
process work and manage their firms will become
casualties. We see this consolidation as being
positive for the companies that survive. One of the
problems facing the industry today, as it has for the
last 10 or 15 years, is an over-abundance of
contractors relative to the availability of work. This
consolidation will result in enhanced profits for its
The government must seek ways to enhance and improve
quality with the low bidders it currently does business
with. Several new methods such as "partnering" and
"statistical acceptance theory" are currently being tested,
but the jury is still out as to their success and
acceptance. Other ideas, such as contracting by negotiation
and selecting of pre-qual i f i ed bidder's list, have had some
success in specific contracting fields. Construction
contracting should be done in a similar fashion to the way
the United States Government awards design contracts. Firms
must first pre-qualify based on certain criteria, with price
being only one such element. Technical expertise, company
17 "Trends in Construction for 1992 and Beyond," The Contractors
Management Journal (August 1992) 2.
and personnel qualifications, and experience are also
considered for contract award. Regardless of the eventual
outcome, it takes years, even decades, to fully implement
new ways of doing business with the United States
4.5 Improve Constantly and Forever the System of Production
This appears to be different from the age-old adage "if
it ain't broke don't fix it". Just think where society
would be today if it were still satisfied with the first
model "T" that rolled off the production floor, the first
refrigerator that was cooled with a block of ice, or
communications without the use of satellite technology.
This improvement to products or services must start at the
design stage and continue through the entire process. The
process must include all the essential players. The
suppliers, producers, designers, quality personnel, owners,
management, and the consumer or ultimate user. Sometimes
these people are called stakeholders and need to be
empowered to contribute to the organization's survival and
prosperity. Michael E. Gerber breaks the participants into
four groups: customers; suppliers; employees; and lenders.
"To succeed, every business must learn to satisfy the
essential needs, unconscious expectations, and perceived
preferences of these groups in its universe." To survive
M. E. Gerber, The Power Point (New York: Harper, 1991) 47
and excel in the future, organizations need to concentrate
on two interrelated issues: meeting the stakeholders'
needs, and building a learning organization. Every step in
the business process must be continually improving. This
strive for continuous improvement must be initiated by
management. Improving the process does not mean temporarily
putting out a fire. "Finding a point of control, finding
the special cause and removing it, is only putting the
process back to where it was in the first place."
On a construction job, a slump test is taken and the
slump is too low. Someone grabs the hose and begins to add
water to solve the problem. The problem may be temporarily
solved, but neither the concrete nor the process is
improved. This is not an improvement in quality, it is
putting out a fire. It is very important that all
individuals are empowered to make decisions and suggestions
to continually improve the process and products. Management
must be willing to take this risk. No one knows more about
their job than the individual performing that job. If a
concrete finisher thinks of an idea that will improve
concrete finishing and provides a better quality product,
then this idea should be considered and reviewed. Without
empowerment, idea wills never surface.
19 Walton 67
4.6 Institute Training, Retraining and Education
Everyone in a company should participate in continuing
education and training. From the Chief Executive Officer to
the janitorial workers, each individual should be offered
the opportunity and be encouraged to further their
education. The more knowledge people have, the more
knowledge the company has. For construction, the point of
training and retraining is well taken. All too often in
construction, workers have learned from other workers. On
any job site, it is difficult to find anyone who did not
learn their trade from someone else, who in turn learned it
from someone else. There are apprenticeship programs used
by both union and non-union contractors. The problem that
arises is when a worker incorrectly learns his trade. Once
a person has been incorrectly trained, it is very difficult
to retrain that worker. All too often the situation arises
where "you can't teach an old dog new tricks". Statistical
control charts can be used to monitor and analyze
performance of workers. As long as a worker's performance
is not in statistical control, then training should
continue. There will always be good workers and bad
workers. However, knowing their upper and lower control
limits will allow managers to better know if something has
gone wrong with the system. Further, every time a new piece
of equipment, method, or technology is introduced, training
and retraining should take place. Individuals should also
be trained in total quality management concepts as well as
the basics in statistical methods. How do we see that
workers get the proper training that they need? First, the
company must commit resources for that purpose and realize
that not only is it going to cost money, but it will require
employees to spend time away from work. The Ritz-Carlton
Hotel Company, a 1992 Baldrige Award winner (see Appendix
B), requires its employees to receive 126 hours of training
annually. In the construction industry; contractors,
engineering societies, designers, universities, federal,
state and local governments all must be willing to take an
active role and expend resources of both time and money to
promote and upgrade vocat iona 1 - 1 echn i ca 1 schools. Trade
training for the non-college worker must be revitalized. In
a recent study it was found that the average unemployment in
four major college cities was 4% . This was mostly
attributed to high school graduates not planning on
attending college. Not once in the entire article did it
mention vocational training as a possible solution. Studies
have also shown that a high percentage of crimes are
attributed to unemployed high school graduates. With the
military scaling back, options are very limited for a high
school graduate with no training. Currently, the
Association of General Contractors and others are providing
20 Lillian Guevara-Castro, "Tale of Four Cities," The
Gainesville Sun 20 June 1993: Al .
some help in training, but will need a great deal of help to
thwart the inner-city unemployment that plagues America's
cities. One major benefit to training is that studies have
shown it reduces employee turnover. The Ritz-Carlton boasts
a turnover rate of 48% compared to the industry wide
standard of 100%. "Training expenditures will be viewed as
an ongoing investment of safety, quality and
productivity." Supervisory management training reduced
employee turnover in construction industry by 35% (see
Figure 1 ) .
By what percentage does supervisory management training reduce
32.80 Under $30M 39.33 Union 41.84
36.43 $30-$74.9M 32.11 Non-Union 24.67
39.23 $75-$199.9M 37.75 Both
$200M or More 33.00
Source: Survey of Supervisory Training in the U.S. Construction
Figure 1 - Percentage by which supervisory management
training reduces employee turnover.
The Contractors Management Journal 7
4.7 Institute Leadership
Install the new way of management by utilizing
continual quality improvement, principle centered
leadership, and use of statistical process control.
Management must learn how to motivate workers. Management
must also learn how to instill pride amongst the workers,
and when a product has been completed or service provided
each worker should be proud of his or her accomplishments.
It is the job of the manager to do everything possible to
help a worker do his job correctly. The problem with most
managers today is they do not know or do not understand what
the workers' job is. Managers that come straight out of
college are book smart, but are not street smart. Programs
could be set up to get management out on the floor or on the
job and learn about what workers actually do. At the Ritz-
Carlton Hotels managers are required to spend 25% of their
time on quality management. They actually dedicate time to
spend in the hotels interviewing and talking to customers
and employees. Programs must be set up to allow workers to
progress into management, which can be accomplished through
company education and training programs. This could mean
that a company sponsor and pay for a workers' college
educat ion .
In construction, management does a good job at
promoting crew workers to field supervision jobs. Most
superintendents, general foremen and foremen were promoted
from the field. Because of this, many field level
supervisors know the jobs of the workers quite well, but
often lack management and motivational skills. Likewise,
many small, independent contractors are owned by tradesmen
that have no formal schooling. Companies need to expend
more resources to promote and educate from within, which
will result in more long term employees. The Department of
Defense has a very good program for this. The enlisted
commissioning program affords the college opportunity for
its best enlisted personnel. These future officers have the
advantage of formal schooling and on-hands experience.
Generally, these officers are given more immediate respect
from their subordinates because of their experience and not
merely because of rank.
4.8 Drive out Fear
"Driving out fear" was invented by Dr. Deming
especially for American companies. Because of their
approach to business, the Japanese did not need to learn
this management principle. The Japanese encourage people to
ask questions, solve problems and take risks. The American
mentality encompasses the fear that one might ask a stupid
question and be embarrassed, cause a problem, or even start
an argument. If a worker attempts something risky, the
worker will not be rewarded, but punished. This fear has
been entrenched in American industry for decades and will be
difficult to overcome. Workers fear retribution by way of
job loss, reassignment, discrimination, and sometimes
It is necessary, Dr. Deming says, for better quality
and productivity, that people feel secure. He notes
that se comes from Latin meaning 'without,' cure means
'fear' or 'care.' Secure means 'without fear, '--'not
afraid to express ideas, not afraid to ask
quest ions ' .
For construction, perhaps driving out fear is not a
major problem. Because of its nature, most projects or jobs
are temporary and workers are also temporary. However, it
is still important that workers know that if they identify a
material or process that is lowering quality, then, without
fear, they can bring it forward. Workers should not have to
worry about the project getting behind schedule or how the
bottom line will be affected. Sadly enough, in construction
it is too easy for a worker to just overlook poor quality
because he knows that job will be over soon and he will be
moving on. This happens in the United States Naval
Construction Forces (Seabees), typically a detachment will
deploy to a job site for six to nine months and receive
"turnover" information about all of the ongoing
construction. This turnover period usually lasts one to two
weeks. Some workers in a battalion know that if they made a
mistake it probably will not be found until they are long
gone. Schedules, rather than quality, are stressed. Thus,
if a worker discovers a mistake or identifies an item that
is lowering quality, that worker may look the other way if
the established priority is to stay on schedule. Another
problem in construction is the fact that sometimes the
subcontractors are not included in quality planning, and
subsequently do not adhere to any plan promulgated. To
avoid liens and other problems, subcontractors will not ask
important questions and instead go with the status quo.
They usually believe in minding their own business, even if
they see a way to improve quality outside their portion of
work. If risks are taken, they fear possible loss of their
contract, legal recourse and future loss of business.
Companies must do away with the old style of management by
results: quotas; personnel evaluations; quality by
inspection; evaluate results; and, motivation by fear and
intimidation. The most important and perhaps most difficult
disease to overcome will be the psychological fear that has
been inbred in American workers for too long.
4.9 Break Down Barriers Between Staff Areas
Management must create a system that tears down the
inter-rivalries between departments. Teamwork, not just in
a department, but throughout the entire company must be
promoted and instituted. When it comes down to making a
decision between what is best for the company or the
individual, the person must choose for the company every
time. This means all departments should be aware that what
they purchase, produce or sell effects someone else in the
organization. This is why it is very important that all
departments are represented from the onset of the initial
design of a product or service. It does no good to produce
a perfect quality product for which there is no market.
Likewise, it is no better to market a product that a company
When determining whether breaking down these barriers
is important and relevant in construction, it is helpful to
examine the following possible scenario: A job is released
for bid that requires a certain type of gravel to be used to
produce architecturally pleasing concrete walkways. The
estimating department bids the job as specified. The
purchasing department orders a material that will conform to
all the necessary specifications, except color (scheduling
is tight and color of walkways cannot be that important).
The purchasing department informs project management that
they need to request a deviation in the specification for
the color. Management submits the request and, knowing
these approvals normally take a long time, instructs the
concrete foreman to use the product upon arrival. The wrong
color stone has now been ordered, delivered and is being
installed. The change has been sent from contract
management (owner's rep) to the owner for his approval. The
original owner who participated in the initial design has
changed companies. No one else remembers why he wanted that
particular color, but he was a smart man and if he had a
reason it must have been a good one. Specification
deviation request is disapproved.
From this scenario one could surmise that teamwork in
construction is important. All departments should be in on
the original design. After a problem arose, the company,
along with the owner should have met and tried to work out a
team solution. At the very least they could have seen how
their product was going to effect the next department.
Instead, the problem was just passed on to the next
department, with no regard to quality or the needs of the
4.10 Eliminate Slogans, Exhortations, Targets for the
Workforce, and Numerical Quotas
When management decides to set targets for its
employees, it has virtually ensured poor quality. A person
whose performance is measured by numbers will do whatever is
necessary to meet his quota. This means the number of
inferior products will increase because there is only
motivation for the individual to speed up and not slow down.
Slogans and exhortations that put additional pressure on
workers to complete impossible tasks should be eliminated.
'Zero defects.' 'Do it right the first time.' These
have a lofty ring, Dr. Deming says. 'But how could a
man make it right the first time when the incoming
material is off-gauge, off-color, or otherwise
defective, or if his machine is in not good order?'
23 Walton 76
Management must provide the worker with everything he needs
to work smarter, thus affording him the opportunity to
produce his best if so motivated.
Sometimes slogans are managements' way of actually
setting goals for employees and putting them on public
display, which creates even more pressure. Usually how that
worker will accomplish that particular goal is not even
discussed with him. Management should encourage employees
to create their own slogans and mottos. This allows the
employee to show pride in his work. To improve quality, the
worker must improve the process and management must improve
the process .
In construction, goals are often set by the home office
and handed down to the field offices. The project manager
or superintendent communicates these goals to construction
crews through bulletin boards, newsletters, or weekly
toolbox meetings, if at all. However, these goals are top
driven and the work force is not told how to accomplish
them. They are told to stay on schedule by working harder
and longer. More times than not, if a contractor falls
behind schedule, the solution is either to hire more workers
or work more hours or both. Typically, the causal delay of
the schedule is in the construction process and not in the
people. The correct solution should be to analyze the cause
and improve the process.
Slogans are found in construction just as in any other
industry. Slogans such as "Think Safety" or "Safety First"
are meaningless to workers if they have not received proper
training, equipment and motivation. With management trying
to achieve a goal of no lost time accidents on the job,
slogans such as these are fruitless without proper planning.
If management has not provided the methods to achieve the
goal, then it will most assuredly fail.
4.11 Remove Barriers to Pride of Workmanship
Management needs to first identify all items involved
in the process of manufacturing their particular product or
providing their particular service. The biggest barrier to
pride of workmanship is lack of communication between
management and the worker. Management tends to be very good
at dealing with numbers and dollars, but when it comes to
communicating with workers, they have received very little
to no training in this area. This makes them feel very
uncomfortable if forced to deal routinely with the work
force. Therefore, the easiest answer is avoidance. Once
this communication barrier has broken down, the other
barriers crumble much more rapidly. The other barriers
could be anything in the process; from incoming defective
material to improperly maintained equipment. If a worker
uses a piece of equipment that is faulty, then it causes him
to produce defective products. The worker can have no pride
of workmanship while producing defective components and the
end result is that his productivity actually decreases.
Further, whatever that worker produces is being supplied to
someone else, who now has to work with a defective product
and this problem continues to get exponentially worse
through the entire process.
In construction, communication is very important
because most jobs are built vertically. Also, in vertically
constructed facilities, all the components end up comprising
one final product. Therefore, it is paramount that quality
begin with incoming material that is involved in the initial
phase. For example, if quality for soil compaction is not
ensured for a large building, then the propagation could be
catastrophic. Once, while I was a project manager for two
$13 million warehouses, concrete testing identified
defective material in the buildings footers. The 28 day
breaks revealed that the concrete was falling well below the
required compressive strength specification. Obviously,
this was an embarrassing situation for the contractor,
concrete crews and concrete supplier. Pride of workmanship
was being prevented by some barrier in the process. It was
discovered that the problem was in the process at the batch
plant. There was a defective piece of equipment at the
plant that was causing the problem. This piece of equipment
was a barrier to people being able to have pride in their
job. The equipment was replaced, the process improved and
quality was enhanced.
4.12 Take Action to Accomplish the Transformation
This final point emphasizes that it takes a special
effort by everyone to implement all of these points.
Training in statistics will have to take place and, perhaps,
even the hiring of a temporary statistical consultant. The
top management must buy in and completely endorse the
program or it will fall flat on its face. All members of
the company will have to receive training on the program
itself. The best way to implement the program is to utilize
the Plan-Do-Check-Act ( PDCA ) Cycle. In the PDCA Cycle,
first a company should plan, which involves identifying the
opportunity for improvement, documenting the present
process, creating a vision of the improvement effort and
defining the scope of the improvement effort. Second, it
should "do" or carry out the plan which entails piloting the
proposed changes on small scales with customers. Next,
with time, study the results by observing what you learned
about the improvement of the process. Finally, "act" or
adjust the process based on your new knowledge by
efficiently utilizing the new mixture of resources and
repeating the PDCA steps on the very next opportunity.
Originally, this was the Shewhart Cycle (see Appendix C).
This plan will continually improve as the cycle is used.
The implementation must not only have constancy, but also
consistency. If there is not consistency among the
employees, "they will tend to go off in different
directions, well-meaning but misguided, diluting their
efforts and sometimes working at cross-purposes."
Mistakes will be made because management will actually be
trying something new and different. But because fear has
been driven out, this should not cause a problem. Further,
everyone works as a team and teamwork should be stressed.
Each team should find ways in their part of the process to
continually improve all points.
24 Walton 88
SEVEN DEADLY DISEASES AND OTHER
OBSTACLES TO TOTAL QUALITY MANAGEMENT
Application of total quality management in some
businesses has succeeded where in others it has failed. Dr.
Deming cites some deadly diseases that can and have caused
the program to fail. If companies wish to succeed in
implementing total quality management, then continual
improvement would include avoidance of the diseases. If a
company is not willing to completely shake itself up to
establish total quality management, then it probably is not
serious about improving quality and productivity. However,
if ready to become completely immersed, the long term
success is in the company's future. Examination of these
deadly diseases warrants a more detailed look. It should be
noted that these are not the only reasons for failure, but
are the major and most common reasons.
5.1 Lack of Constancy of Purpose
If a company goes out of business after having tried to
implement a total quality management program, it probably
failed to create a constancy of purpose amongst its
employees for quality of products and services. The
dedication to the new philosophy must be sincere, obvious
and widespread. Employees have seen many faddish programs
attempted before. To set this program apart from the
others, something dramatic may have to be used. Employees
need something to convince them that this is different and
is also long term. To show how serious the management is,
Deming suggests "such concrete activities as spending money
on training and equipment, or shutting down operations when
something is wrong can help convince employees."
5.2 Emphasis on Short Term Profits
Companies may actually have to take a short term loss
to make the strategy work. This may require the involvement
and cooperation between top management and the major
stockholders. With the probability of long term growth and
profit, the risk will be well worth it.
There are estimates that 20-40% of an organization's
efforts are spent in rework and unnecessary work. By
making reductions in these areas, a company can clearly
recover its up-front costs to implement total quality
management, but it must recognize that there are up-
front costs and provide for them.
The problem occurs when attempting to convince the
impatient, profit-driven owners. The return on investment
in three to five years should please most owners, especially
when given the alternative of decreased profit, short term
growth or bankruptcy. Further, their company will become
known for producing quality products.
25 Walton 90.
Transportation Research Board 72nd Annual Meeting January 10-
14, 1993, Total Quality Management "Putting Theory into Practice"
Session 168 , Sponsored by Committee A2F03 Management of Quality
Assurance , 1 .
5.3 Evaluation of Performance, Merit Rating, or Annual
Evaluation of personnel encourages competition amongst
employees and usually results in less teamwork. Evaluations
and merit ratings force people to put themselves number one
and the company two. Also, performance ratings mean people
must be evaluated against someone or something. If it is
against someone, say the top performer in their particular
area, then this inspires competition and rivalry. If the
evaluation is tied to something, then typically this means
quotas or numbers. This will result in production of poor
quality and service. A persons' evaluation should be tied
to quality. Perhaps, like at the Ri t z-Car 1 ton ,
In all levels of the organization, annual raises and
reviews are tied to evaluations of an individuals'
quality of performance. Members of work teams can also
share in bonus pools when solutions they recommend to
quality related problems are successfully
imp 1 ement ed .
In construction, or any industry, this problem is not
easily resolved. Annual raises tied to cost-of-living
adjustments should be given out equally to all employees
based as a percentage of their income. Companies should
consider longevity raises at certain points in workers'
careers. This type of raise also keeps people with the
Edward Watkins , ed., "How the Ritz-Carlton Won the Baldrige
Award," Lodging Hospitality Nov. 1992: 22.
company longer. Profit-sharing should be considered as a
viable alternative for all employees.
We introduced company-wide profit sharing, which again
was driven by our values. Our salaries are set on the
50th percentile of our major competition. In addition,
we have a variable component ranging from 1-7% of
salary based on how we perform against the year's
profit goal. The impact on our employees has been
significant. One question in our 1988 survey asked
employees to agree or disagree with, 'I will share in
the business success of Hoechst Celanese.' In 1988,
only 39% agreed with that statement, in 1991, 87%
agreed. The responsibility for the quality process
lies with line management; 25% of their performance
appraisal is tied to our quality objectives.
Bonuses, and other incentives or raises could be given based
on quality improvement ideas or suggestions that continually
improved the company. A working suggestion program is also
a good way to measure a company's progress in the new
culture of total quality management. Florida Power and
Light Company initiated just such a program.
The number of suggestions went from 600 in 1986 to
25,000 in 1989. Quite an improvement. If I had only one
indicator to judge a corporate culture by,, I would
choose to look at the suggestion program.
Another idea would be to base raises or incentives on an
individual's personal strive to continually improve. If the
company sponsors education and training, it should reward
individuals who take advantage of it. Attention should be
given to those employees who go beyond what is expected.
Ernest H. Drew, "Winning with 'Quality Values'," Judith
Alster and Holly Gallo, eds . , Leadership and Empowerment for Total
Qual i ty , Symposium sponsored by KPMG Peat Marwick (New York: The
Conference Board, 1992) 18.
29 Hudiburg 25.
Employees should be recognized for their continuous
improvement and dedication to quality.
... the recognition process needs to be thought out and
it needs to be done on several levels. I have become
even more convinced that money is a bad form of
recognition. It is just not personal enough.
5.4 Mobility of Top Management
Retaining the chief executive officer and other top
managers is a growing problem in the United States. With
corporate mergers and leveraged buyouts, top executives find
themselves moving around quite often, usually before they
have made any real, long-term impact. For example, the
average engineer moves around every two to three years in an
effort to either find a better paying job, one with more
responsibilities, or perhaps one that is just more
satisfying. This constant requirement to improve one's
position by being mobile is probably the number one reason I
joined the United States Navy. After graduating Auburn
University in 1980, I had already started looking to move up
with another company in 1986 (this would have been my third
company in six years). I figured moving every two years, on
average, could be no worse than the moves required in the
Navy. Although I change jobs with the Navy every two to
three years, I still maintain my seniority and benefits and
I do not have to start over from scratch, as would probably
Philip B. Crosby, Quality Without Tears: The Art of Hassle-
Free Management (New York: McGraw-Hill, 1984) 119
be required in the civilian world. A definite allegiance to
my employer has developed and I have acquired a great deal
of corporate knowledge which carries over from one job to
the next. With top management moving every couple of years,
the opportunity to learn about the company, much less its
employees and their concerns, is greatly limited.
Unfortunately, this is presently the American way of life
and may never change, especially for the large corporations.
There is a great chasm between what the owners perceive as
good for the company and what is taught in total quality
management. Small and medium size companies, especially
family owned, can probably best overcome this disease.
5.5 Running a Company on Visible Figures Alone - Counting
This disease is difficult to avoid because most owners
are concerned with hard figures and the bottom line.
However, if total quality management is given a viable
chance to succeed, then the invisible figures will
eventually affect the visible ones. For example, as the
number of a company's satisfied customers increases, the
effect will be an increase in revenues, a visible figure.
As quality (an invisible figure) improves, cost, a visible
figure, will decrease. Because the correlations are
sometimes difficult to prove and because they take time to
occur, owners and stockholders become impatient and abandon
the process too early.
5.6 Excessive Medical Costs and Excessive Costs of
Warranty, Fueled by Lawyers That Work on a Contingency
For the construction industry, these may be the two
biggest deterrents to not only implementing total quality
management, but for survival as well. Concerning medical
costs, "for some companies this is their largest single
expenditure." Currently, the country is in turmoil
concerning the health care debate. The current
administration has promised a national health care plan, but
the revenue to pay for the plan has not yet been found.
Crosby sums up the current national health care problems
Physicians wouldn't let anyone run the health care
industry, so costs went out of sight, and now the
insurance and health maintenance organizations (HMOs)
are taking over. Thus, practicing medicine is no fun
anymore; it's like being in Britain. Soon patients
will be assigned, except for the very rich. Hospitals
are being bought up and run 'efficiently' through mass
purchasing and fewer laboratory tests.
Medical costs can be controlled in a large part by using a
good safety program as part of total quality management.
Lawsuits are either generated by internal employees or
external entities. Most lawsuits that come from within
involve safety and health issues. These, too, can be
controlled for the most part by a new and improved quality
safety program being introduced as part of the total quality
management process. Because these issues are vital to a
31 Walton 93.
Crosby, The Eternally Successful Organization 20
construction firm's existence, safety will be discussed
later in detail. External lawsuits usually involve product
liability. A total quality management program will correct
some of this problem, but not all of it. As quality
increases and defects decrease, accidents caused from faulty
products will decrease. Other ways of reducing external
lawsuits are partnering and design-build contracts.
5.7 Other Obstacles to Total Quality Management
Dr. Deming points out several other obstacles to total
Neglect of long-range planning and transformation.
The supposition that solving problems, automation,
gadgets, and new machinery will transform
indust ry .
Search for examples.
Our problems are different.
Obsolescence in schools.
Reliance on quality control departments.
Blaming the workforce for problems.
Quality by inspection.
The unmanned computer.
Inadequate testing of prototypes.
Anyone that comes to try to help us must
understand all about our business.
SAFETY MANAGEMENT IS VITAL TO
TOTAL QUALITY MANAGEMENT SUCCESS
In today's litigious society safety is a major
consideration for construction managers. To ignore
construction safety could mean the difference between
staying in business and filing for bankruptcy. Apart from
the economic impact, some sort of moral consideration for
the importance of safeguarding human life must also occur:
The struggle to provide safeguards to eliminate or
reduce the number of accidents that occur, and the
injuries and damage that result are predicated chiefly
on these two aspects: (1) costs and (2) regard to human
life and well-being.
For many years the construction industry served as its own
watchdog. However, safety today is determined through a
combination of requirements set forth in laws, regulations,
and extravagant costs resultant from rising insurance
premiums and numerous claims. Penalties and other
deterrents imposed by organizations such as Occupational
Safety and Health Administration (OSHA) have raised the
safety awareness of construction managers. Some of the
safety components that affect and control costs are
management participation, education of personnel, hazard
identification and control, promotion of safe practices on
Wi 1 1 ie Hammer , Occupational Safety Management and Engineering
(New Jersey: Prentice-Hall, Inc., 1976) 2.
the job, accident investigation and a comprehensive safety
To reduce work injury risk there are five basic areas
of influence: safety laws and inspection, employee
safety training, availability of accident statistics,
and management sponsored safety programs.
The two economic considerations that need to be
evaluated concerning safety are direct and indirect costs.
Sometimes where safety is concerned, these terms are
analogous to insured and uninsured costs. Direct costs are
those which can be clearly identified and directly
correlated to job safety. Insurance costs depend upon the
number of claims for accidents and injuries and the past
safety record of the company. Most of these insurance costs
are encompassed under workers' compensation. Although the
specific requirements for workers' compensation vary from
state to state, the employer pays 100% of the cost.
Workers' compensation insurance can be obtained either
through an insurance company, a self-insurers' fund or by
being self insured. Workers' compensation is based on
occupational rates published for each particular craft and
on the experience of the employer. The insurance premium
will vary according to the current safety record of the
employer. If an accidental death were to occur on a job
site, this could be equated financially to as much as 5,000
Dalha A. Muazu, "A Safety Program for a Building
Construction Firm." Diss. University of Florida, 1976: 3.
lost-time man hours on the job. Consequently, the direct
result would be a rise in the insurance premiums.
Liability insurance is also carried by employers in
order to minimize loss when equipment or property is damaged
through an accident. Liability requirements are usually set
forth in the contract. Many studies have been undertaken to
establish a basis for which losses could be related to a
measurable cost and "in almost every instance it has been
found that the total losses exceeded by far the amounts
reimbursable by insurance companies." This non-
reimbursed cost has caused many companies to increase
coverage limits, which results in increased premiums, while
others have decided to reduce risks instead. Risk reduction
can be directly related to a specific job and is the cost
attributable to safety prevention. However, the cost
savings derived from these elements are negligible when
compared to the positive results of increased productivity
and increased profits.
There seem to be many indirect or uninsured costs and
pinpointing exact amounts is difficult. For example, from
the following list some items will have actual costs more
readily identifiable than others: cost of wages paid for
working time lost by workers who were not injured; payments
for settlement of injury or death claims; legal fees for
defense against claims; cost of wages for working time lost
by injured workers (other than workers' compensation
payments); assessed punitive damages; recovery and salvage
costs for equipment and vehicles; extra cost due to overtime
work; loss from function and of operation income; wage cost
due to decreased output of worker upon return; slowdown in
operations; cost of time spent by supervisory personnel and
clerical workers investigating or processing claims and
workers' compensation forms; OSHA penalties; fines and
temporary shutdowns; cost for corrective action; degradation
of efficiency of operations because of loss of experienced
and trained personnel; training costs for replacements;
increased insurance costs; loss of public confidence and,
therefore, revenue; loss of prestige; and degradation of
morale. However, the actual costs attached to each of these
should not be the number one motivational factor:
At the present time attempting to predict how much
could be lost in an accident to evaluate risk involved
may be an exercise in futility. Not only will any loss
probably be far higher than expected, but recent
legislation has virtually eliminated cost
cons iderat ions . "
Passage of the Occupational Safety and Health Act in 1970
forced many companies to reevaluate their safety practices
and programs. In addition to fines or penalties, companies
can now be forced to cease operations. In some cases jail
sentences are invoked. Until recently many companies
practiced safety only to avoid hassles with government
agencies such as OSHA and the Environmental Protection
Agency (EPA). Even though the construction industry created
consensus safety standards to operate under, it became
necessary to enact the Occupational Safety and Health Act
because on-the-job injuries and deaths remained at
unacceptable levels. The fox in the henhouse was not
working and perhaps Admiral Hyman G. Rickover said it best:
To forestall intrusion of Government, the industry
concerned will usually propose voluntary safety
requirements. These requirements represent the minimum
all are willing to accept. This is not enough. There
are more accidents. Only after the lapse of much time
are laws finally enacted. Much harm will have been
done in the int erva 1 --harm which could have been
Unfortunately, regulations and laws applied by agencies
vary. This unending problem results from the diversity of
the construction industry. The construction industry
encompasses many and varied types of work and this tends to
increase the complexity and uniform application of the laws
as they apply to specific safety plans and practices.
According to common law, the employer has historically been
responsible for "a safe place to work, safe tools to perform
their work, knowledge of hazards, competent fellow employees
and supervisors and rules by which all could perform safely
and a means to ensure that the rules were observed."
Simply put, this means the employer must provide rules for a
safe work place and must have a plan or program that
monitors safety. Legislation and regulation will not work
if workers and management do not take positive action to put
these rules into practice in everyday activities and begin
to care about safety in the work environment.
From experience we know that as a federal agency OSHA
makes rules concerning safety, supervises industry safety,
investigates safety violations and holds hearings and makes
rulings on those violations. Many companies have problems
in dealing with the bureaucracy of OSHA. Once the rules are
learned, it seems the rules change or new ones are added.
Further, companies cannot use OSHA as a single source for
information on safety rules. OSHA alone references more
than twenty sources which, piled on top of one another,
would be several feet high. Many costs can result from an
OSHA inspection such as changing out faulty equipment,
fines, penalties, jail terms, operational slowdown, work
stoppage and record keeping. Underlying many of the
problems in dealing with OSHA and other government agencies
is the fact that standards vary from state to state and from
agency to agency. This variance causes great difficulties
when trying to deal with legal and technical requirements
for safety as outlined by government agencies whether
federal, state, city or municipality. A "standard" is that
"which requires conditions or the adoption or use of one or
more practices, means, methods or operations or processes,
reasonably necessary or appropriate to provide safe or
healthful employment and places of employment." Perhaps
in an effort to get away from consensus standards the
government went too far. The construction industry and
government need to strive toward a medium whereby all can
understand the laws efficiently and with relative ease.
Management of safety has been tried many different ways
in construction. All styles seem to have their own positive
and negative aspects. However, most management safety plans
have seven principal factors which significantly reduce
accident costs: (1) know safety records of all field
managers and consider their record in evaluations for
promotion or salary increases, (2) communicate safety on job
visits the same way you communicate about costs and
schedules, (3) use cost accounting system to encourage
safety by allocating safety costs to a company account or
allocate accident costs to each specific project, (4)
require detailed work planning to ensure equipment or
materials needed to safely perform work are at hand, (5)
insist that newly hired employees receive training in safe
work methods, (6) use safety awards, and (7) use the
expertise of safety departments where they exist.
39 Hammer 62.
Safety awards for workers, if used, should be incentives
(nominal monetary value) based on first aid injuries rather than on
lost-time injuries. Safety awards for field managers should be
bonuses (substantial monetary value and made in private) based on
lost-time injuries or reduction in insurance claim costs.
An important aspect of construction safety is that all
personnel, from the general laborer to the chief executive
officer, must have and understand their role in safety.
More importantly, each person must know their responsibility
and should be held accountable for their respective safety
tasks. Just as in their regular job, personnel should be
promotable to a higher safety position. If not, they will
become stagnant in their safety role and accidents will
ensue. Continuing education should be afforded to all
personnel. Key personnel should receive first-hand training
and be briefed on any new rules or prevention methods and
they should subsequently educate their fellow employees
regarding same. At a minimum, all individuals should know
basic safety responsibilities such as proactive accident
prevention, awareness of hazardous situations, knowledge of
the safety rules, knowledge of emergency procedures and
their responsibility to report mishaps. As personnel
function in safety roles, production should increase and
Any accident, as the word implies, can be avoided.
Almost all are avoidable through the prevention of human
error. This error is not necessarily always by the injured
party. Human error could occur in design, operation of
equipment, manufacture of equipment, maintenance, or even
through the inaction of a witness to a potentially dangerous
situation. All people in the construction industry should
strive to provide:
(1) equipment and procedures that will minimize the
possibilities of errors by operators, (2) designs that
eliminate or minimize the possibilities of accidents if
an operator does make an error, (3) designs and
safeguards that will prevent injury if an accident
Anyone involved should use their best judgement, apply the
known rules, and have a moral consideration for life. Also,
we must learn from our mistakes and seek to correct
problems. Besides the obvious reduction in insurance costs,
accident reporting and accompanying statistics are vital to
prevention of similar accidents. If a common problem exists
within a community, such as a virus or disease, it must be
reported and corrected in order to keep others from being
As with most construction jobs, hazards are going to
exist. It is the nature of the beast. It is very important
that these hazards are clearly identified and controlled.
Sometimes this requires bringing in an expert from outside
the organization. If the job entails a hazard with which no
one in the organization is experienced, an outside expert is
advisable. The scope of the hazard must be identified and
also controlled. Once identified, all employees should be
made aware of the hazard and its potential effects.
Companies should never attempt to control a hazard for which
they have no experience.
A good safety program is probably the best tool for
accident prevention on the construction site. Safety
programs can be very sophisticated, as often is the case
when dealing with large companies, or they can be relatively
simple, as is typical of smaller organizations. Due to
their inexperience, smaller companies often ask insurance
companies for assistance when formulating a program.
Regardless of size, most plans seem to have two main parts:
planning and controlling. Once the program has been
established (planned), then it should be implemented with
controls in place. Controls are numerous and vary greatly,
but two important elements are regular site inspections and
continual, detailed hazard analysis. The National Safety
Foundation found that "85% of all accidents are unsafe acts
rather than unsafe conditions." If through a safety
program employees are made aware of potential safety
hazards, then some accidents could be predictable and
therefore avoidable. It is estimated that 50% of all
construction accidents could have been avoided by common
sense and attention to basic safety practices. An
employee's responsibilities include such items as: (1)
Muazu vi i .
The Associated General Contractors of America, Manual of
Accident Prevention in Construction , 6th ed. (Washington, D.C.:
AGCA, 1971) 8.
compliance with all safety standards, (2) compliance with
approved safety plans, and (3) wearing the prescribed safety
equipment. Even items that seem trivial can return savings.
For example, it has been shown that "a clean, safe job site
may increase productivity by 5% and has been responsible in
one case for a 12% increase in productivity.'
One area still under close scrutiny is the application
of behavioral science to construction safety. There are
verifiable statistics that show most workers who are
needlessly injured on the job through their own carelessness
were injured due to lack of attention. This lack of
attention is mainly due to a worker's concentration being
diverted to other problems present in the worker's life such
as marital or family problems, financial troubles, a recent
move, new job, new position or others. Values can be
assigned to each factor and employees can complete
questionnaires related to these specific areas. After
compilation of the values, a risk assessment can be made on
employees. This could provide a possible warning for an
employer that certain employees are at a higher risk than
others. This would afford the employer the opportunity to
minimize both his liability and the employee's risk for
injury. This could be done by employer-sponsored
counseling, reduced overtime, work assignment in less
David Goldsmith, Safety Management in Construction and
Industry (New York: McGraw-Hill, 1987) 39.
dangerous areas, closer supervision, monitoring and
communication. Sometimes emotional or mental problems are
considered occupational illnesses if they are found to be
work related and may be covered by workers' compensation,
"An eager, we 1 1 -mot i vated individual who is undistracted by
personal problems or stresses can out perform a distracted
or poorly motivated person, all other things being
equal ," 45
There are many reasons to practice good construction
safety. With the threat of government agencies imposing
fines, work stoppage or possible jail sentences, companies
can no longer ignore the impending cost of not managing
safety properly. Even though exact cost savings are
difficult to quantify, many managers are realizing
significant cost savings through safety management. With
the current wave of litigation in the air, everyone must
stand up, take notice and assume responsibility. If not,
they will be heading down a long, one-way road to
extinction. Companies are beginning to realize that proper
safety management increases profit and productivity, while
at the same time enhancing the company's reputation within
its community. More importantly, however, is the
significance now being placed on preventing injury and loss
of life. Although it is difficult to quantify such
45 Hammer 108.
achievements, it is clear that total job safety is rapidly
becoming paramount in today's construction industry.
THE ROLE OF DATA
Data is an important and useful tool when establishing,
maintaining and improving a quality process. Data should
always be based on facts and not include opinions,
impressions or any human manipulation or intervention
whatsoever. If the data is collected cleanly and used
correctly, it is a viable tool in the overall scheme of
total quality management. Any company that currently does
not use statistics will find that statistical procedures can
transform their business. "Only with the proper use of
statistical methods can people minimize confusion in the
presence of variation." Only after data has been
collected and a statistical procedure applied can a company
actually begin to understand their own production process.
It is only after understanding the production process that
they can attempt production. Finally, after learning how to
actually control or change the process can a company start
the process of continuous improvement. Improvement is
possible because a quality process with control limits
(upper and lower) has been established. If part of the
process exceeds one of those limits, then the fact that a
variation has occurred will be readily identifiable. Other
46 Walton 96
methods can be used to determine the actual root cause of
the variation. In almost every case, the cause will be part
of the process, not controlled by the worker. The cause is
usually not the worker nor anything within his controllable
domain. This is because the control limits were set based
on data that included the workers production. Humans do not
tend to vary greatly in their day to day job performance, so
if a variation occurs outside a control limit, it is likely
due to the process and not human error.
Statistics and how they are utilized needs to be
understood by all employees. This can be done as part of
the training and education process. Statistical methods are
fairly straightforward and can be handled mathematically by
most people. There are many helpful charts which
demonstrate how data transformed by statistics can be used.
Some of these are cause and effect diagrams (fishbone), flow
charts, Pareto analysis, run (trend) charts, histograms,
control charts and scatter diagrams. The actual use and
sample applications for each of these is included in
Appendix D. Gathering and using data to transform a company
into a quality leader in business is important, but only one
part of the total program.
TOTAL QUALITY MANAGEMENT TODAY AND TOMORROW
Most companies that have introduced and implemented
total quality management concentrate in the following areas
directly exposing employees to customers; se 1 f- inspect ion ;
simplifying work; cos t -of -qua 1 i ty monitoring; and working
with vendors and suppliers on efforts of quality (Figure 2)
itllilillllllllillllillllllllllllliiniilllllilliillllilllllllllllllllllllllllillllllllllllllllllllll lllllllllllll nillllllllllllllllllllllllllllllllllll Illlllllllllllllllllllllllllllllllllllllllllllllllllllllllltllllllllllli llllllillllliilililliiillliiiiiiiill minimi; mmiumillllliillllllllilmllllill
Percentage of Employees Covered by Total Quality Practices.
Almost About Almost
None None Some Half Most All All
OX 1-20% 21-40% 41-60% 61-80% 81-99% 100%
exposure to customers
Sel f- inspect ion
Work s imp 1 i f i ca t ion
Cost-of-quality monitoring 18
Collaboration with suppliers 13
Just-in-t ime deliveries 24
Work cells or 41
" iNMiii^riNii imiiiii,MiLtJ!>Nr;rii( Ji i ai ih r u un M ui 1 1 1 ?f n i - ■ Hin n nil [ r r i H 1 1 in 1 1 1 1 . i n i(]i h i m i i m 1 1 , u,: ■ , i ■ h M m. 1 1 1 1 ' ,.n,iN. i m . . h nr - ■ : 1 1 1 ■ i lti i i :.. ■ i i i ii ; ; i i i - iimiii: r i n ( i tn i i i i;h unit (i imi uiifii iniMMf <, n i n; i n : m h i n m i : 1 1: 1 1 - 1 it: ■ ■ ■ >.
Figure 2 - Percentage of Employees Covered by Total Quality
Prac t ices.
Studies have shown the major problem for the Fortune 1000
companies was failing to expose all employees to total
quality management. Less than 40% of all employees were
actually exposed to the total quality management program.
For the companies that are involved in manufacturing,
emphasis on total quality management is taught to
management, then exposure is made on the production floor.
The total quality management process sometimes never leaves
the manufacturing floor. Similarly, in the service
business, because the main business is dealing directly with
the customer, the emphasis on total quality management is
placed on customer interface first and rarely becomes a
company wide program. The good news is that total quality
management has been introduced to some degree to most major
companies in the United States.
The results show that total quality programs are in use
in the vast majority of U.S. organizations and suggest
that a fairly standard pattern of practices is typical
of total quality programs.
Today companies that are in declining markets tend to adopt
total quality management programs more quickly. Further,
more manufacturing firms have adopted the program than other
major industries, although the service industry is not far
Edward E. Lawler, Susan Albers Mohrman and Gerald E. Ledford,
Jr., Employee Involvement and Total Quality Management (San
Francisco: Jossey-Bass Publishers, 1992) 96.
48 Lawler 96.
behind. It should be noted that all industries have, to
some point, adopted total quality management (Figure 3).
Total Quality Management Index Scores by Industry
Total Quality Index
Elect ton i cs
Motor Vehicles and Parts
Diversified Financial Services
Life Insurance Companies
2 . 2
2 . 2
2 . 5
Figure 3 - Total Quality Management Index Scores by
Indus t ry .
The chart is based on scoring indices correlated to seven
total quality management practices. These are: direct
exposure to customers; se 1 f- inspect ion ; work-simplification;
cos t -of -qua 1 i ty monitoring; collaboration with suppliers in
quality efforts; just-in-time deliveries; and work cells or
manufacturing cells. To interpret the total quality
management index, the scores are averaged over these seven
principles as applied by each industry.
In examining the construction industry, it is important
to know how it currently stands in connection to total
quality management and the direction to which it is heading.
Due to the nature of the construction industry, only some
companies have implemented total quality management
programs. However, the companies that have used total
quality management report improved customer and employee
satisfaction, improved relationships with suppliers,
subcontractors, owners and engineers, and that the return on
investment is increasing. The companies praise total
quality management and report that it has helped business.
"The principles practiced in manufacturing firms are just as
applicable to construction companies and can produce the
same dramatic improvements in the quality of roads and
bridges." The concepts, as discussed, are difficult to
incorporate because they change the culture of companies.
The culture of the construction industry would have to
change and this would be no easy task. Changing the culture
of your business is not something that will be accomplished
quickly. The change must also happen in such a way as to
effect a permanent change and not just a temporary phase the
business is going through.
A few managers - the explorers - are readily open to
testing the new ways. Most managers - the
conservatives - want to see results demonstrated before
departing from their existing order.
As one examines Deming's or Crosby's fourteen points it is
obvious the construction industry would have to alter the
way it conducts business significantly. Construction
companies must begin to look more toward customer
satisfaction, quality assurance, and continuous improvement.
"Current estimates on improving rework and repair has a
potential to exceed fifteen billion dollars per year and are
probably closer to fifty billion dollars." Contractors
will have two choices, investing in good quality or paying
for bad quality. In the near future the construction
industry will see a decrease in the sealed, low bid type of
contracts. J Therefore, companies will need to establish
themselves as quality contractors first, and low cost
companies second. Numerous studies have shown that more
than 20% off the bottom line of most construction projects
can be achieved by the use of a good, sound quality
management program implemented at the beginning of a job.
Quality calls for doing better with your customers, better
J. M. Juran, Juran on Planning for Quality (New York
Harper, 1944) 312-13.
Manual of Accident Prevention in Construction 20
Lou Bainbridge and Bill Abberger 2.
than you have ever done before, and better than your
competitor. Total quality management will allow the
production of better quality products at a lower price.
Productivity improvements represent the single largest
opportunity for cost reduction and enhanced
competitiveness and profitability. Statistics show-
that some thirty percent of labor dollars expended
annually in construction projects are wasted."
The issue of quality is becoming a competitive force. When
times are tough, consumer purchases are based increasingly
on the durability and quality of the product and the price-
quality relationship becomes much more important. Total
quality management has become a trend in United States
industries and will continue to grow in the construction
industry as well. Those companies that do not use these
principles will fall behind the industry standard. Further,
many companies in other industries which contract out
services and construction will increasingly require their
contractors to have implemented total quality management
programs. Suppliers for construction companies must also
become more active. Typical, adversarial relationships will
begin to disappear as ideas like partnering and selective
bidding type contracts increase. Even more formal
partnering will begin to increase in popularity, such as
design-build contracting. This type of contracting will go
to the larger firms with more resources and experience.
Just as the Japanese are on the verge of using virtual
The Contractors Management Journal 2 .
reality to let customers design their own cars, larger
design/construction firms will use this technology to sell
their services. As companies consolidate, they will invest
in employees and the work force will get older, more
permanent, experienced and more productive.
TOTAL QUALITY MANAGEMENT IMPLEMENTATION RECOMMENDATIONS
Institution of an integrated approach to total quality
management and quality assurance/quality control is vital to
the success of today's companies. The development of a
total corporate quality management program should be
accomplished after thoroughly investigating the different
approaches offered by various consultants/theorists and the
aspects of each one as applied to the specific needs of the
company. Education of management personnel should be
accomplished first, as managers must fully understand and
support the total quality management process and actively
participate in its implementation. Both the technical and
humanistic aspects of total quality management must be
addressed in the training effort and training should be
tailored to the job functions of each employee. Use of
pilot projects during the early stages of implementation is
necessary to obtain an indication of management and employee
acceptance of total quality management. In order to create
a team attitude toward improving quality, companies should
strive to develop closer, more productive relationships
among owners, contractors, subcontractors and vendors.
The company needs to have an overall philosophy that
encompasses plans for improvements and makes company
decisions based on facts. The company needs to pursue
continuous improvement while maintaining a long-term
perspective. Improvement will have to be made both in the
processes and the organizational system within the company
in order for the total quality management program to be
success f u 1 .
The Associated General Contractors of America. Manual of
Accident Prevention in Construction . 6th ed.
Washington, D.C.: AGCA, 197
Bainbridge, Lou and Bill Abberger. "Partnering - A Progress
Report." The FMI Management Letter August 1992.
Crosby, Philip B. The Eternally Successful Organization .
New York: McGraw-Hill, 1988.
Quality Without Tears; The Art of Hassle-
Free Management . New York: McGraw-Hill, 1984.
Deming, W. Edwards. Sample Design in Business Research .
New York: John Wiley & Sons, 1960.
Statistical Adjustment of Data . New York: John Wiley
& Sons, 1943.
Deming, William Edwards. Some Theory of Sampling . New
York: John Wiley & Sons, 1950.
Drew, Ernest H. "Winning With 'Quality Values'." Alster,
Judith and Holly Gallo, eds. Leadership and
Empowerment for Total Quality . Symposium sponsored by
KPMG Peat Marwick. New York: The Conference Board,
Edosomwan, Johnson Aimie. Integrating Productivity and
Quality Management . New York: Marcel Dekker, Inc..
Gerber, M. E. The Power Po int . New York: Harper-Row,
Guevara-Castro, Lillian. "Tale of Four Cities." The
Gainesville Sun 20 June 1993: A1+.
Goldsmith, David. Safety Management in Construction and
Industry . New York: McGraw-Hill, 1987.
Hammer, Willie. Occupational Safety Management and
Engineer ing . New Jersey: Prentice-Hall, 1976.
Hudiburg, John J. "The CEO's Role in Implementing Total
Quality Management." Alster, Judith and Holly Gallo,
eds . Leadership and Empowerment for Total Quality .
Symposium sponsored by KPMG Peat Marwick. New York:
The Conference Board, 1992.
Johnson, H. Thomas. Relevance Regained; From Top-Down
Control to Bottom-Up Empowerment . New York:
Juran, J. M. Bureaucracy: A Challenge to Better
Management . New York: Harper, 1944.
Juran on Planning for Quality . New York:
Juran on Quality by Design . New York:
Juran, J. M., ed. Quality Control Handbook . New York:
Lawler, Edward E., Susan Albers Mohrman and Gerald E.
Ledford, Jr. Employee Involvement and Total Quality
Management . San Francisco: Jossey-Bass Publishers,
Martin, Robert D. "Follow a Simple Strategy: Exceed
Customer Expectations." Florida Constructor
Jul. /Aug. 1992.
"'Total Quality' Boosts Performance." Roads & Bridges
July 1992: 19.
Muazu, Dalha A. "A Safety Program for a Building
Construction Firm." Diss. University of Florida,
Schaefer, E. E., ed. ASTM Manual on Consumer Sensory
Eva 1 uat ion . Philadelphia: American Society for
Testing and Materials, 1979.
Stebbing, Lionel. Quality Assurance: The Route to
Efficiency and Competitiveness . 2nd ed. Chichester:
Ellis Horwood Limited, 1989.
Transportation Research Board 72nd Annual Meeting January
10-14, 1993. Total Quality Management "Putting Theory
into Practice" Session 168 . Sponsored by Committee
A2F03 Management of Quality Assurance.
"Trends in Construction for 1992 and Beyond." The
Contractors Management Journal August 1992: 1-16.
Walton, Mary. The Deming Management Method . New York:
Watkins, Edward, ed. "How the Ritz-Carlton Won the
Baldrige Award." Lodging Hospitality Nov. 1992:22-23
THE ETERNALLY SUCCESSFUL ORGANIZATION GRID
a list of
■ bought a
one to be
How Ritz-Carlton Won
An unswerving focus on continuous
mprovement helped this luxury hotel
hain land the biggest prize in quality
BY EDWARD WATKINS
"^ he Ritz-Carlton Hotel Co. has
done what many people
thought no hotel chain could
do. Last month, the Atlanta-
chain became the first hotel corn-
to win the coveted Malcolm
;e National Quality Award,
jress created the award in 1987 to
te and recognize quality achieve-
in U.S. businesses. Named after
; Secretary of Commerce Malcolm
;e, an early proponent of Total
y Management (TQM) in the.
ace. it is regarded as the ultimate
mong those U.S. companies that
hemselves on the quality of their
ts and services.
ming the Baldrige Award estab-
hat Ritz-Carlton Hotels is not just
uxury lodging, but about provid-
:ry reliable product that gives our
in exceptional value for their dol-
ys a proud President and Chief
ing Officer Horst Schulze. "And
'ou think about it. that describes
I meaning of quality." 1
Zariton was a finalist in last year's
tition. This year. 90 companies
i for the award in one of three
ies: manufacturing, service and
with the founding of the firm in 1983,
when parent company W.B. Johnson
Properties bought the U.S. rights to the
Ritz-Carlton name. The company cur-
rendy operates 23 properties in the U.S.
and two in Australia.
President and COO Horst Schulze.
"At the company's founding, it was
clear that there was no single supplier of
quality hotels in multiple locations that
met consistently high standards for tran-
sient guests and provided uniformly su-
perior products and services for meeting
a commitment to fill that role with qual-
ity products and services that do what
we say they will do."
By 1987. Ritz-Carlton was recognized
as one of the best luxury hotel chains in
the industry, but Schulze wanted more.
"We asked ourselves how we could
become even better than we were," says
Schulze. "The hardest thing for me to do
was overcome my ego and admit that I
really didn't know how to take the com-
pany beyond where it was. Once we did
that, the job became easier."
The company closely examined sev-
eral early Baldrige winners such as Mil-
liken & Co. to learn how they instituted
quality improvement programs in their
operations. From there, Ritz-Carlton
plunged head-first into TQM with aston-
ishing results. In 1991, it received 121
quality-related awards and earned in-
dustry-best ranking from all three major
hotel-rating organizations. Independent
research commissioned by the chain
shows that 97 percent of its customers —
both transient guests and meeting plan-
ners — aren't just satisfied but say they
have a -memorable experience" when
they stay at a Ritz-Carlton.
T7 ven though running a hotel is one of
tz-Cartton Palm Beach is one of the chain's grand luxury resorts.
ire able to apply many of the qual-
itrol principles that manufacturing
mies use to monitor and improve
iroducts. Of course, the challenge
tvice company is to create excel-
with people rather than with ma-
or raw materials.
iv people think you can t transfer
lality improvement techniques
in manufacturing to the service in-
es." says Mene. "In all busi-
— whether it's a factory or a ho-
ork gets done by transforming
is. materials and people into a
pt or service. In both environ-
(work is processed through a sys-
ind management must decide
(its going to concentrate its ef-
I manufacturing plant probably
i more time on machinery and
ills, whereas were more con-
i^with the flow of people coming
alitz-Carlton approach to qualm.
I on a number of basic but com-
(inciples. many of them drawn
tditional TQM theory,
shieve its goals, the company re-
n everal key quality initiatives:
in/^ *w * %i*%»
correct them immediately and then
report them to management.
"When things go wrong in a pattern,
some aspect of the process is probably
out of control," says Mene. "It's up to all
employees to spot those problems and
help develop ways to prevent them in
The company trains, coaches and en-
courages employees to prevent break-
downs in service before they happen.
All Ritz-Carlton employees receive at
least 126 hours of training on quality
topics. Much of the schooling centers on
the company's Gold Standards, which
include a mono ("ladies and gemlemen
serving ladies and gentlemen"), three
steps of service and 20 "basics."
Mene views the company's quality im-
provement effort as an investment rather
than an expense. What drives up costs in
hotels. Mene argues, is the cost of re-
peating service that should have been
done right the first time. Most properties
maintain a safety margin of employees
on duty at all times just to correct prob-
lems, because management knows that
service isn't always provided correctly
the first time.
iThr r-r»m«"»:»nv'« rnn *»Tr*»<~tit Itpc
tive. The officers are much more than
cheerleaders when it comes to quality;
they each spend at least one-fourth of
their time on quality issues.
"They spend a lot of time working on
ways to improve our product by talking
to as many guests and employees as
possible." says Mene. The chain s 14 top
executives also meet weekly as a senior
management quality team to review
quality standards and performance, indi-
cators of guest satisfaction, market
growth and development and profit and
The executive team's involvement in
quality issues is most evident at the
opening of a new property. Rather than
soft or phased openings with shake-
down periods to iron out operational
bugs. Ritz-Carlton hotels open all at
once, and management expects every-
thing to be right when the doors open
for the first guest.
To see that it is done, a specially se-
lected start-up team picked from the
staffs of other hotels makes sure that all
facilities, services and systems are in line
with Ritz-Carlton standards.
A "seven-day countdown control
plan' synchronizes all steps leading to
the opening. During that week. Schulze
and the other senior leaders work at the
hotel, coaching and testing the new em-
Bloyees on the chain's Gold Standards.
|Thc company meticulously
gathers data on every aspect of the
guest's stay to determine if the
hotels are meeting customer ex-
Key to the research are the daily quality
production reports that identify all prob-
lems, defects and waste reported in each
of the r 20 work areas in the chain s sys-
tem. The data compiled ranges from the
time it takes for housekeepers to clean a
room to the number of guests who must
wait in line to check-in.
The reports are die chain's early-warn-
ing system to detect recurring problems
for which it must develop prevention
plans. "We make about 100,000 cus-
tomer contacts every day, and if every
one of those encounters is done cor-
recdy. the customers are always happy
and we have no waste," says Mene.
The chain relies on technology to
keep comprehensive computerized
guest history profiles on the likes and
dislikes of more than 240,000 repeat
guests. Researchers survey more than
25,000 guests each year to find ways the
chain can improve its delivery of service.
■ The company recognizes and
rewards employees for contribu-
tions to continuous improvement.
In all l#*v^k of rhe organization annual
►erformance. Members of work teams
an also share in bonus pools when
olutions they recommend to qualitv-
elated problems are successfullv
iRitz-Carlton asks its suppliers
join the chain in adopting the
•rinciples of TQM. As part of its
upplier certification program. Ritz-
iarlton asks potential vendors to
onduct self-assessments of their
uality efforts. The chain categorizes
endors as either not-acceptable,
cceptable. certified or as full partner.
"NJC'e only want to deal with suppliers
iat are capable of continuous improve-
lent. says Mene. "Ultimately, we choose
jppliers on their quality standards, not
ist on their pnce tags."
1 Ritz-Carl to n empowers its
mployees to -move heaven and
arth" to satisfy customer needs. If a
jest has a need or a complaint or if a
rrvice problem anses. employees must
op what they're doing and do
hatever it takes to provide
At each hotel, the executive
>mmittee doubles as a senior
uality management team.
Iso. a quality advisor at each
3tel — usually someone with
Derations or personnel expen-
lce but trained in TQM — acts
an advisor to the team to fa-
litate the quality process and
make sure management s fo-
is stavs on quality issues.
Tow will winning the N'a-
Xtional Quality Award help
tz-Carlton in the lodging mar-
"Maybe there s no tangible market ad-
intage. " says Mene. "but by going
rough the Baldrige selection process.
e now have a road map that will heip
i be more competitive and continu-
islv improve our product."
Schulze believes the award Firmly
entifies Ritz-Carlton as the hotel com-
iny that guests can count on if they
ant a reliable product and value for
"Thousands of companies are becom-
g involved in the quality movement,
id to the peopie in those firms Ritz-
irlton will become a kev supplier be-
use they know we offer a product thev
n count on."
Topping the winning of a Baldrige
tard will be a tough chore, but the
ain has set its sights even higher: bv
96 it wants to be the first hotel com-
,ny to provide a "memorable expen-
ce" for 100 percent of its customers
"U e never want to lose a single cu>-
tJis does a truly cus-
lpany go to
. If you're as
% you profess to
:%a mountain in
tmight offer toj
rding they want - ,
r^^*^ f ^ l ^''\- < ^? rnen ^ oca i zoning regulations forced
ik~*& % c t" 3 *^ to dose the tent, Freni went to
*pIu^^Hton President and COO Horst
ISchulze to propose The Pavilion as a
^permanent replacement. "We had all
•seen this thing evolve into a huge hit.
? pot just in our meetings business but in
the local social community as well."
Freni says. "The company was all for
obnhrjuing that success.*
' i^Hc and Schulze put together a budget
rim combined company funds with the
s own capital.
1th financing in place and The Pavil-
tiSh'sahell under construction, Freni
me inpurof longtime customers
__iding what the building's guts
fefc"t>e- He also pulled drawers of
l ana* catering files to determine how
jdustomers had used the ballroom, the
tand the grounds over the years. "I
■ ^realized we needed to incorporate fea-
rd never really seen before in a ho-
that allowed for ex-
ffadbaity," he says.
Freni, his customers and its de-
created in The Pavilion are
flexible ceiling and a state-
jting system. Painted mid-
the ceiling is inset with hun-
lights that give the
lighting standpoint, your
is really your only limita-
i says. The computer-oper-
attaches to motorized ceil-
ions that can be raised or
to create a tiered or patterned
JKabric panels hang across the
to form a visual "curtain."
•lighting system also enables event
to adjust portions of the room
;orrpm point specific tables and speakers
hotel's A/V department can create
ifates of company logos and theme
lions that are projected on
Instead of ornate wallpaper.
«e painlecTplainly to reflect
of the spotlights.
to die resorts main building by
can-style courtyard, the
vflion includes a 10,000-
meedng/event level and an
of 12,000 square feet. The
800 for dinner or 1,000 in a
seating configuration. Its
_ area accommodates 130 booths
f*8)r ^SdTeatures electrical and water outlets
most i mp ortant thing about The
ys Freni, *is that we listened
customer. Consequendy, we built
Lcffify lhafs more in tune with their
<? Zl BK
■«-«--< ,. <Jil
than with what some architect
thoughts building like this should in-
THE SHEWHART CYCLE 2
of the change
What could be the most important
accomplishment of this team?
What changes might be desirable?
What data are available? Are new
observations needed? If yes, plan
a change or test. Decide how you
will use the observations.
Search for data on hand that could
answer the question propounded
in Step 1. Or, carry out the change
or test decided upon, preferably on
a small scale.
Step 5. Repeat Step 1, with knowledge accumulated.
Step 6. Repeat Step 2, and onward.
-Own** O* 4 ** Cfwm
Selected Charts and Diagrams Demonstrating
How Data Transformed by Statistics Can be Used
Run (Trend) Chart
— Diane Ritter
Excerpts from The Deming Management Method by Mary Walton
(pages 98-113) .
Cause-and-Effect: "Late for Work"
1 Man Powerj
I Methods I
* | Machines!
Ishikawa, whose Guide to Quality Control was written for Japa-
nese workers and is now the most widely read book on basic
statistics for quality in the United States, outlines these benefits
from cause-and-effect diagrams:
1. The creation process itself is educational. It gets a discussion
going, and people learn from each other.
2. It helps a group focus on the issue at hand, reducing com-
plaints and irrelevant discussion.
3. It results in an active search for the cause.
4. Data often must be collected.
5. It demonstrates the level of understanding. The more com-
plex the diagram, the more sophisticated the workers are about
6. It can be used for any problem. 3
In an actual case, a hospital used a cause-and-eff ect diagram to
examine the reasons why patients were receiving meals that were
different from the orders they had placed. Afterward, the hospital
staff targeted some of the causes for data collection.
Cause and Effect: "Wrong Hospital Meals" 4
Hiring polibea in dietary
Lack of attention
lack of .t*H
— GOAL. M t marf ftggiT
Flow Chart: "From Bed to Work"
Drive to Work
Arrive at Work
Park & Walk
Pronounced pah-ray-toe, these are among the most commonly
used graphic techniques. People will speak of "doing a pareto" or
say, "Lefs pareto it." This chart is used to determine priorities.
The pareto is sometimes described as a way to sort out the "vital
few" from the "trivial many."
Suppose, in our continuing example of a morning routine, you
would like to leave the house at 8:15, arriving at work by 8:45, so
as to have a fifteen-minute period in which to relax — or a cushion
against being late — before work begins at 9 a.m. More often, you
leave by 8:30 a.m. and barely make it. You decided to keep track
of the things that interfere with your departure for sixty days.
You are sure that waiting for the bathroom is a major cause. And
you know that getting caught up in reading the paper is a delay.
So is the pesky garage door, which occasionally sticks. Sometimes
you can't resist hitting the snooze alarm.
In your research, you might use a checklist, a good way of
Here are some possible results:
Conditions That Might Cause Lateness
(Some days have more than one occurrence)
Reading paper (more than
Having to iron
These incidents could be displayed on a pareto chart.
'Conditions That Might Cause
As a result, you might make some changes. Switch to an after-
noon paper. Get up earlier. Buy a clock without a snooze alarm.
At the printed circuit board plant, management organized a
safety campaign at the employees' request. A team gathered data
on accidents, then used a pareto to diagram the findings. Eye
injuries were more common than any other. The team then re-
searched causes and again made another pareto chart. The largest
number of eye accidents occurred during the process of clipping
the wire leads of components after they were soldered to the
printed circuit board. In this fashion, pareto charts can be used to
narrow down problems.
Pareto Chart: 'Types of Injury" 6
Types of Injury
Causes of Eye Injury
dipped Solder Duit
— GOAL, Memory jofxtr
A run chart is perhaps the simplest of the statistical tools. Data
are charted over a period of time to look for trends. Sales per
month over a period of a year is a typical use.
A run chart could be used to track the number of minutes it
takes to get to work. You discover that it always takes longer on
Monday, and accordingly you allow more time.
Weekly Week 2 Week 3 Week 4
A hospital found that its emergency room was often either
overstaffed or understaffed. It took the data it already had on
emergency room cases and made a run chart. Admissions had
been highest during January, July, September, and December.
One might speculate that holidays and weather were a factor. The
hospital decided it needed more information, investigating pas*
years to see if the same pattern existed. It also used the run chart
as a guide for conversations with the admissions staff.
Run Chart: "Emergency Room Admissions"
—GOAL Mrmor, fan
A histogram is used to measure how frequently something oc-
curs. Suppose, for example, you are wondering just how much
time you should allow for the drive to work. On good days you can
make it in fifteen minutes. Every so often, you hit a traffic jam, and
it takes forty-five minutes. What is "normal"? dearly, not the av-
erage of the two. To find out, you might — if you're really commit-
ted to this project — collect data for, say, a hundred working days.
Hypothetical Commuting Times
15 16 20 15 18 17 20 18 17 19 23 20 21 21 16 15 17 21 17 17
18 16 22 25 17 16 19 19 18 17 25 18 16 17 17 16 15 22 20 17
16 15 18 17 17 16 19 18 19 20 24 27 17 19 22 16 18 21 20 24
18 22 22 18 17 18 19 17 21 24 18 15 19 20 23 22 19 18 17 21
32 22 18 20 21 19 20 24 16 17 18 20 22 20 20 19 18 15 19 20
The data show that the longest trip was thirty-two minutes; the
shortest, fifteen. All but two of the trips, fell between fifteen and
twenty-five minutes. On a histogram, there is a distinct curve.
Histogram: "How Long to Get to Work'
14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35
Travel Time to Work
A print shop was receiving complaints about the quality of its
finished product. Some customers thought the print wasn't dense
enough. The shop measured the density over a period of time,
then organized the results by frequency on a histogram to see
where the bulk of the measurements fell.
ii "Print Density" 8
.60 .70 JO .90 1.00 1.10 1.20 1JO. 1.40 1.50
Black Density of Print
— GOAL, Memory joxx"
A scatter diagram is a method of charting the relationship be-
tween two variables.
Continuing our example, suppose your office has just insti-
tuted flextime. You may come to work anytime between 7:30 and
9:30 a.m. and leave eight and a half hours later. You would like to
choose your hours to minimize drive time.
Over the next month, you leave the house at various times
between 7 and 9 a.m. and record how long it takes you to get to
work. On a scatter diagram, the two variables show a distinct
Scatter Diagram: "Drive Time"
_ — _„ _
• • •
• • •
Time Leaving House
Leaving before 7:30 or after 8:30 greatly shortens the trip. You
much prefer leaving later, and it eases competition for the bath-
room. You tell your boss you will work from 9:30 a.m. to 6 p.m.
A manufacturer wanted to know whether there was a correla-
tion between shelf life and the stability of his product. A scatter
diagram showed that indeed there was.
In business, a scatter diagram might be used to chart the rela-
tionship between a worker's training and the number of defects,
between moisture content and durability, between light levels
and computer errors.
M.G. Active Ingredient Per Sample
3 8 Si
) 5 10 15 20 25
Shelf Life (Months)
— -GOAL. Mrmtry fax"
Dr. Deming often talks about the need to use control charts to
analyze processes. The purpose, he emphasizes, is "to stop peo-
ple from chasing down causes." Properly understood, a control
chart is a continuing guide to constant improvement. Control
charts are easy to use and certainly not beyond the capabilities of
most workers. But even experts, notes Dr. Deming, on occasion
"find them extremely difficult to interpret."
Writes Dr. Deming on this subject, "The production worker
requires only a knowledge of simple arithmetic to plot a chart. But
he cannot by himself decide that he will use a chart on the job,
and still less can he start a movement for use of charts.
"It is the responsibility of management to teach the use of con-
trol charts on the job [ongoing] where they can be effective."
He sounds this cautionary note: "Proliferation of charts without
purpose is to be avoided."
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