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CHAPTER 2
Foundations of Quality Management
Teaching Notes
This chapter introduces the concept of quality in production and service systems and develops
the idea that quality is central to effective operation of these systems. Students should be
encouraged to develop an understanding of the fact that quality is not an “add-on” to
organizational processes, but that it is “a way of doing business.”
Key objectives should include:
• To understand and appreciate the contributions of W. Edwards Deming, Joseph Juran,
and Philip Crosby who are recognized as the most influential thinkers and leaders of
modern quality management. A. V. Feigenbaum and Kaoru Ishikawa have also made
significant contributions to modern quality management practices.
• To appreciate Deming’s key tenets, encompassed in The Deming Chain Reaction, his
14 Points representing the practices that Deming advocated for achieving quality
excellence, and the four simple elements that he called a System of Profound
Knowledge:
o Appreciation for a system
o Understanding variation
o Theory of knowledge
o Psychology
• To define a system as a set of functions or activities within an organization that work
together for the aim of the organization. Systems thinking is critical in applying quality
principles because the organizational linkages among various functions of an
organization must be in alignment to meet the needs of customers and other stakeholders.
• To understand that variation exists in any production and service process, generally due
to factors inherent in the design of the system, which cannot easily be controlled.
Excessive variation results in products that fail or perform erratically and inconsistent
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direction for quality assurance in organizations; and his specifications for a detailed
program for quality improvement, called the breakthrough sequence.
• To know the concepts of Philip Crosby’s approach to quality, as summarized in his
Absolutes of Quality Management – conformance to requirements, no such thing as a
quality problem, doing the job right the first time, cost of quality measurement, and zero
defects as the only performance standard – and Basic Elements of Improvement –
determination, education, and implementation. He places more emphasis on behavioral
change rather than on the use of statistical techniques as advocated by Deming and Juran.
• To know the concepts of two global quality thinkers, A. V. Feigenbaum and Karou
Ishikawa. Feigenbaum, who views quality as a strategic business tool and coined the
• To understand that total quality can be characterized by its principles, practices, and
techniques. Principles are the foundation of the philosophy, practices are activities by
which the principles are implemented, and techniques are tools and approaches that help
managers and workers make the practices effective. All are vital for achieving high
quality and performance excellence.
• To learn that the three core principles of TQ are customer focus, teamwork, and
continuous improvement.
• To develop the capability to apply statistical thinking, which is is a philosophy of
learning based on principles of understanding that all work occurs in a system of
interconnected processes, variation exists in all processes, and variation must be
understood and reduced.
• To learn that Common causes of variation are inherent to a process, generally account
for most observed variation, and cannot be identified on an individual basis or controlled.
• To appreciate that not understanding the differences between common and special causes
can result in increasing the variation through tampering with stable systems, or missing
opportunities to reduce special cause variation when it exists. Deming’s Red Bead
experiment and Funnel experiment can help clarify the differences between common
and special causes and improve managers’ abilities to make effective decisions.
Management can make two fundamental mistakes in attempting to improve a process: 1.
To treat as a special cause any fault, complaint, mistake, breakdown, accident, or
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maximum customer satisfaction at the lowest overall cost to the organization.” A quality
management system represents a specific implementation of quality concepts, standards,
methods and tools, and is unique to an organization. A QMS provides a basis for
documenting processes used to control and improve operations.
ANSWERS TO QUALITY IN PRACTICE FEATURES
Bringing Quality Principles to Life at KARLEE
1. From the information presented here, how would you say that KARLEE defines
quality, drawing upon the definitions in Chapter 1?
Karlee seems to have a focus on their definition of quality from the user perspective. This is
evidenced by their practices of carefully selecting customers that support its values—
particularly a systematic approach to business and performance management, desire for long-
term partnerships, and global leadership. Management and Team Leaders work with each
customer to establish current requirements and future needs, and each customer is assigned a
three-person Customer Service team that is on call 24 hours a day for day-to-day production
issues.
The three basic principles of quality management: customer focus, focus on quality
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Their quality approach depends on deployment centered on the Involvement of People,
where teams are responsible for knowing their customer’s requirements and producing
according to those requirements. They use a Process Approach., where processes such as
prototype development, scheduling, production setup, fabrication, assembly, and delivery
require process owners to be responsible for maintaining the process to customer
2. Discuss how KARLEE’s practices reflect the philosophies of Deming, Juran, and
Crosby.
Deming’s philosophy, based on improving products and services by reducing uncertainty and
variation in design, manufacturing, and service processes, driven by the leadership of top
management. Karlee exemplifies these qualities through their leadership system, process design
and improvement, systematic management, and employee involvement and commitment.
Juran’s “Quality Trilogy,” consists of three parts: Quality planning—the process for preparing to
meet quality goals; quality control—the process for meeting quality goals during operations; and
quality improvement—the process for breaking through to unprecedented levels of performance.
Karlee can be seen applying the Trilogy through their System Approach to Management, Factual
Approach to Decision Making, and their approach to Continual Improvement.
The concepts of Philip Crosby’s approach to quality were summarized in his Absolutes
of Quality Management – conformance to requirements; no such thing as a quality problem;
doing the job right the first time; cost of quality measurement; and zero defects as the only
• Production and delivery processes are designed around cell manufacturing. Teams
are empowered to change targets recommended during strategic planning if they
believe it will help them achieve higher performance, as well as to schedule work,
manage inventory, and design the layout of their work areas.
• Processes such as prototype development, scheduling, production setup, fabrication,
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• Teams use a structured approach to evaluate and improve their processes,
documenting them and presenting a status report of improvements to senior leaders
and the KARLEE Steering Committee. Teams benchmark competitors, “best
practice” companies, and customers to learn from others.
• Teams analyze defect data, customer-reported problems, and control charts
generated during production to identify problems and opportunities for
improvement. Every business goal and project has defined methods for
Using ISO 9000 to Improve Humanitarian Supply Chains
1. How are the Quality Management Principles in Table 2.2 reflected (or implied) in this
case?
Principle 1: Customer Focus – the project was entirely focused on customers – children and
adults from some of the poorest and most remote areas of the country for humanitarian aid.
Principle 2: Leadership – leadership was provided by US Agency for International Development
and Chemonics International.
Principle 3: Engagement of People – the project was a grassroots effort designed by and for the
project staff, helped staff at different points of the supply chain understand each other’s roles
better, and facilitated teamwork.
Principle 4: Process Approach – use of internationally recognized management practices to
support supply chain operations; use of ISO 9000 for a systematic approach to address key
2. What can other organizations learn from this example?
Other organizations can easily see how quality principles are brought to like and the value of
using a QMS system like ISO 9000.
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ANSWERS TO REVIEW QUESTIONS
1. How does Deming’s definition of quality—“ A product or a service possesses quality if it
helps somebody and enjoys a good and sustainable market”— compare with the definitions
discussed in Chapter 1?
Deming’s (assumed) definition of quality is perhaps closest to the user perspective and to the
definition of quality as “fitness for intended use.” Unstated, but implied, is the fact that (as
Deming spelled out in his 14 Points): quality is the result of action taken by management, acting
2. Explain the Deming chain reaction.
The Deming “chain reaction” theory states that by (a) improving quality, a firm can (b) decrease
costs because of less rework, fewer mistakes, delays, and snags, and better use of time and
materials, thus (c) improving productivity. The firm will therefore be able to (d) capture the
market with better quality and lower prices, and thus, not only (e) stay in business, but also (f)
provide and create more jobs.
3. Summarize Deming’s 14 Points. How does each point relate to the four components of
Profound Knowledge?
As will be explained in more detail in the answer to question 4, below, Deming’s System of
Profound Knowledge consists of four interrelated parts: (1) appreciation for a system; (2)
understanding of variation; (3) theory of knowledge; and (4) psychology. There are a number of
ways to classify his 14 Points, which could include these as categories.
Under appreciation for a system, points 1, 2, 4, 5, 9, 13, and 14 are most oriented towards
systems. Numbers 1 and 2, relating to vision, commitment, and development of a new
philosophy of leadership require a big picture view of the organization and its place in business
and society. Number 4 relates to the requirement that total costs, not incremental costs, must be
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Point 11 makes a similar point that quotas and management by objectives are approaches that do
not encourage improvement, but instead, create fear.
As Scholtes explained, when people don’t understand the theory of knowledge, they
don’t know how to plan, accomplish learning, improve, change, or solve problems, despite their
best efforts. Thus points 1, 2, 5, 6, and 13 may be seen as falling under theory of knowledge
category. Deming’s concept in points 1 and 2 of constancy of purpose and learning his “new
philosophy” are needed in order to effectively plan, learn and change. Point 5 relating to constant
improvement is also essential to knowledge, as is point 6 on instituting training, so that workers
will be able to understand their work processes, predict the result of changes, and actively
participate in problem solving and improvement. Point 13 is related in that it advises that
education and self-improvement will assist the organization in learning, changing, improving and
reaching organizational goals.
4. Summarize the four components of Profound Knowledge. How do they mutually support
each other?
Deming’s System of Profound Knowledge consists of four interrelated parts: (1) appreciation for
a system; (2) understanding of variation; (3) theory of knowledge; and (4) psychology.
Appreciating a system involves understanding how each component of the system works to
produce the end product or service, and understanding how the system may be optimized for
better or smoother performance. Understanding of variation involves knowing and anticipating
factors (i.e. increasing personnel, the wearing out of tools) that may cause the system to change,
for better or worse. Theory of knowledge involves understanding the system and current and
possible variations within, to the point where past and present events and performance can
5. What is a system? Why is “systems thinking” important to quality management?
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A system is the set of functions or activities within an organization that work together for the
aim of the organization. Systems thinking is critical to the application of quality, because it
supplies organizational linkages that help to align various functions, in order to meet the needs of
customers and other stakeholders.
6. Why is it important to understand variation from a statistical perspective?
Variation exists in any production and service process, generally due to factors inherent in the
design of the system, which cannot easily be controlled. Today, modern technology has
improved our ability to produce many physical parts with very little variation; however, the
variation that stems from human behavior and performance continues to hamper quality efforts.
Deming suggested that management first understand, and then work to reduce variation through
improvements in technology, process design, and training. With less variation, both the producer
and consumer benefit. The producer benefits by needing less inspection, experiencing less scrap
7. Explain the implications of not understanding the components of Profound Knowledge
as suggested by Peter Scholtes.
As Scholtes explained, lack of understanding of the components of Profound Knowledge can
have a profound impact on the health of organizations. To briefly summarize the multiple points
that Scholtes made is difficult. However, he pointed out that when people don’t understand
systems, they basically don’t understand that incidents, interventions, and control are the net
result of many actions and interdependent forces. When people don’t understand variation, they
8. Explain Juran’s Quality Trilogy.
Juran’s “Quality Trilogy,” like all trilogies, consists of three parts: Quality planning—the process
for preparing to meet quality goals; quality control—the process for meeting quality goals during
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operations; and quality improvement—the process for breaking through to unprecedented levels
of performance.
Quality planning begins with identifying customers, both external and internal,
determining their needs, and developing product features that respond to customer needs. Quality
goals are then established that meet the needs of customers and suppliers alike, and do so at a
minimum combined cost.
Quality control involves determining what to control, establishing units of measurement
9. Summarize the breakthrough sequence that Juran advocated for quality improvement.
According to Juran, all breakthroughs follow a commonsense sequence of discovery,
organization, diagnosis, corrective action, and control, which he formalized as the breakthrough
sequence, and which can be summarized as follows:
• Proof of the need: Managers, especially top managers, need to be convinced that quality
improvements are simply good economics. Through data collection efforts, information
on poor quality, low productivity, or poor service can be translated into the language of
money—the universal language of top management—to justify a request for resources to
implement a quality improvement program.
• Project identification: All breakthroughs are achieved project-by-project, and in no other
way. By taking a project approach, management provides a forum for converting an
atmosphere of defensiveness or blame into one of constructive action. Participation in a
project increases the likelihood that the participant will act on the results.
• Organization for breakthrough: Organization for improvement requires a clear
responsibility for guiding the project. The responsibility for the project may be as broad
appropriate skills.
• Diagnostic journey: Diagnosticians skilled in data collection, statistics, and other
problem-solving tools are needed at this stage. Some projects will require full-time,
specialized experts (such as Six Sigma Black Belts) while the workforce can perform
others. Management-controllable and operator-controllable problems require different
methods of diagnosis and remedy.
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• Remedial journey: The remedial journey consists of several phases: choosing an
alternative that optimizes total cost (similar to one of Deming’s points), implementing
remedial action, and dealing with resistance to change.
• Holding the gains: This final step involves establishing the new standards and
procedures, training the workforce, and instituting controls to make sure that the
breakthrough does not die over time.
10. How is Juran’s philosophy similar to or different from Deming’s?
Like Deming, Juran advocated company-wide quality management, with a never-ending process
of quality improvement, involving such activities as market research, product development,
production process control, inspection and testing, and customer feedback. He emphasized the
need for management commitment to quality improvement, and the need for training of all
employees in quality techniques. Juran also asked workers to get to know their external and
internal customers, and to identify and reduce causes of variation by determining the difference
11. What are Crosby’s Absolutes of Quality Management and Basic Elements of
Improvement? How are they similar to or different from Deming’s 14 Points?
Crosby’s Absolutes of Quality Management are:
(1) Quality means conformance to requirements, not elegance. Crosby sees requirements
as being ironclad; they are communication devices which must be clearly stated so that
they cannot be misunderstood. Once this is done, a company can take measurements to
determine conformance to those requirements.
(2) Crosby maintains there is no such thing as a quality problem. Those individuals or
departments that cause them, so there are accounting problems, manufacturing problems,
logic problems, etc, must identify problems.
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(5) The only performance standard is “Zero Defects.” Zero Defects is a performance
standard, NOT a motivational program. The idea behind ZD is to do it right the first time,
to concentrate on preventing defects rather than just finding and fixing them.
(6) People are conditioned to believe that error is inevitable; thus they not only accept
error, they anticipate it. Each of us has limits within which we can accept errors.
Eventually we reach a point where the errors are unacceptable. This usually occurs when
the errors affect us personally, such as when you discover that your bank has made a
$100 error in your account, in their favor.
Crosby’s Basic Elements of Improvement include determination, education, and
implementation. According to Crosby, most human error is caused by lack of attention rather
than lack of knowledge. Lack of attention is created when we assume that error is inevitable. By
determination, Crosby means that top management must be serious about quality improvement.
12. Summarize the key contributions of Feigenbaum and Ishikawa to modern quality
thinking.
A.V. Feigenbaum was primarily known for three contributions to quality — his international
promotion of the quality ethic, his development of the concept of total quality control, and his
development of the quality cost classification.
Kaoru Ishikawa was instrumental in the development of the broad outlines of Japanese
quality strategy, the concept of CWQC, the audit process used for determining whether a
company will be selected to receive the Deming award, the quality control circle, and cause-and-
effect diagrams—a principle tool for quality management.
13. Explain the differences among quality principles, practices, and techniques.
14. List and briefly explain the eight principles of quality management.
Principle 1: Customer Focus – Organizations depend on their customers and therefore should
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understand current and future customer needs, should meet customer requirements, and strive to
exceed customer expectations.
Principle 2: Leadership – Leaders establish unity of purpose and direction of the organization.
They should create and maintain the internal environment in which people can become fully
involved in achieving the organization’s objectives.
Principle 3: Engagement of People – People at all levels are the essence of an organization and
their full involvement enables their abilities to be used for the organization’s benefit.
Principle 4: Process Approach – A desired result is achieved more efficiently when activities and
related resources are managed as a process.
15. State two or three practices associated with each principle of quality management.
Practices associated with quality principles include:
Principle 1: Customer Focus
• Researching and understanding customer needs and expectations.
• Ensuring that the objectives of the organization are linked to customer needs and
expectations.
• Communicating customer needs and expectations throughout the organization.
• Measuring customer satisfaction and acting on the results.
Principle 2: Leadership
• Considering the needs of all interested parties including customers, owners,
employees, suppliers, financiers, local communities and society as a whole.
• Establishing a clear vision of the organization’s future.
• Setting challenging goals and targets.
Total Quality in Organizations 13
• Creating and sustaining shared values, fairness and ethical role models at all levels of
the organization.
• Establishing trust and eliminating fear.
• Providing people with the required resources, training and freedom to act with
responsibility and accountability.
• Inspiring, encouraging and recognizing people’s contributions.
Principle 3: Engagement of People
• People understanding the importance of their contribution and role in the
Principle 4: Process Approach
• Systematically defining the activities necessary to obtain a desired result.
• Establishing clear responsibility and accountability for managing key activities.
• Analyzing and measuring of the capability of key activities.
• Identifying the interfaces of key activities within and between the functions of the
organization.
Principle 5: Improvement
• Employing a consistent organization-wide approach to continual improvement of the
organization’s performance.
• Providing people with training in the methods and tools of continual improvement.
• Making continual improvement of products, processes and systems an objective for
every individual in the organization.
Principle 6: Evidence-based Decision Making
• Ensuring that data and information are sufficiently accurate and reliable.
• Making data accessible to those who need it.
• Analyzing data and information using valid methods.
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• Making decisions and taking action based on factual analysis, balanced with
experience and intuition.
Principle 8: Relationship Management
• Establishing relationships that balance short-term gains with long-term
considerations.
• Pooling of expertise and resources with partners.
• Identifying and selecting key suppliers.
16. What is statistical thinking? Why is it important to managers and workers at all levels
of an organization?
Statistical thinking is a philosophy of learning and action based on these principles:
1. All work occurs in a system of interconnected processes.
2. Variation exists in all processes.
3. Understanding and reducing variation are keys to success.
Understanding processes provides the context for determining the effects of variation and
the proper type of managerial action to be taken. By viewing work as a process, we can apply
17. What are the operational problems created by excessive variation?
Operational problems created by excessive variation include:
• Variation increases unpredictability: If we don’t understand the variation in a system,
we cannot predict its future performance.
• Variation reduces capacity utilization: If a process has little variability, then
managers can increase the load on the process because they do not have to
incorporate slack into their production plans.
• Variation contributes to a “bullwhip” effect: This well-known phenomenon occurs in
supply chains; when small changes in demand occur, the variation in production and
inventory levels becomes increasingly amplified upstream at distribution centers,
factories, and suppliers, resulting in unnecessary costs and difficulties in managing
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• Variation makes it difficult to detect potential problems early: Unusual variation is a
signal that problems exist; if a process has little inherent variation, then it is easier to
detect when a problem actually does occur.
18. Explain the difference between common and special causes of variation.
Common causes of variation occur as a natural part of the process and are difficult to change
without making a major change in the system of which they are a part. Special causes of
variation arise from sources outside the system and can generally be traced back to a specific
19. Explain the two fundamental mistakes that managers make when attempting to
improve a process. Can you cite any examples in your personal experience in which such
mistakes were made?
The two fundamental mistakes which managers can make in attempting to improve a process are:
(1) To treat as a special (or outside) cause any fault, complaint, mistake, breakdown, accident, or
shortage which is actually due to common causes, and (2) to attribute to common causes any
20. What are the lessons of the red bead and funnel experiments? Can you cite any
examples in your experience where someone acted counter to these lessons?
The Red Bead experiment emphasizes that little, if anything, can improve quality in a poorly–
managed production system. In the experiment, managers control incoming material (white and
red beads) and work procedures so rigidly that there is little room for change. It is their mistake
that there is an input of red bead (defective) production material which the workers cannot stop
from coming. Management inspects the beads only after they (and the mistakes involved) have
The Funnel experiment is designed to show how people can and do affect the outcome of
a process and create unwanted variation by “tampering” with the process, or indiscriminately
Total Quality in Organizations 16
trying to remove common causes of variation. The system of dropping the ball through the
funnel towards the target is damaged by the variation of each participant moving the funnel
around to “get a better aim” at the target. The lesson is that once a plan or process is determined
21. What is a quality management system (QMS)? Describe the features that a good QMS
should have.
According to the ASQ online glossary, a quality management system (QMS) can be considered
a mechanism for managing and continuously improving core processes to “achieve maximum
customer satisfaction at the lowest overall cost to the organization.” It applies and synthesizes
standards, methods and tools to achieve quality-related goals. Thus, a quality management
system represents a specific implementation of quality concepts, standards, methods and tools,
and is unique to an organization. A QMS provides a basis for documenting processes used to
control and improve operations, and achieve the following objectives:
• Higher product conformity and less variation.
22. Briefly summarize the rationale behind ISO 9000. What are the objectives of the
standards?
The ISO 9000 family of standards are a set of standards and guidelines for quality management
systems that represents an international consensus on good quality management practices. They
provide a comprehensive framework for designing and managing a quality management system
and help organizations establish a process orientation and the discipline to document and control
key processes.
The original objectives of the ISO 9000 standards were to:
1. Achieve, maintain, and seek to continuously improve product quality (including
services) in relationship to requirements.
2. Improve the quality of operations to continually meet customers’ and
stakeholders’ stated and implied needs.
3. Provide confidence to internal management and other employees that quality
Total Quality in Organizations 17
Subsequent revisions have changed and simplified the original ISO 9000 standard. They
have placed much more emphasis on quality management concepts, as contrasted with
procedural correctness of the previous standard.
23. What are the principal benefits of ISO 9000?
The principal benefits of ISO 9000 are:
• It provides discipline. The requirement for audits forces an organization to review its
quality system on a routine basis. If it fails to maintain the quality system, audits
should recognize this and call for corrective action.
• It contains the basics of a good quality system. ISO 9000 includes basic requirements
for any sound quality system, such as understanding customer requirements, ensuring
the ability to meet them, ensuring people resources capable of doing the work that
affects quality, ensuring physical resources and support services needed to meet
product requirements, and ensuring that problems are identified and corrected.
• It offers a marketing program. ISO certified organizations can use their status to
differentiate themselves in the eyes of customers.
In addition to improving internal operations, the most important reasons why companies
seek ISO 9000 certification include:
a. Meeting contractual obligations— Some customers now require certification of all their
suppliers. Suppliers that do not pursue registration will eventually lose customers.
24. Why are all quality management systems not effective? What can be done to make
them effective?
A primary reason why not all quality management systems are effective is, as one practitioner
has observed: many quality management systems focus more on compliance rather than
improving quality. This is an easy trap to fall into, when applying ISO 9000 or other compliance