Quality Management: Scoping Study

Published by the Government Accountability Office on 1990-12-01.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                   United   States    General   Accounting   Office
                   Office of the Assistant Comptroller
                   General for Operations

December   1990

                   Scoping Study

                   For internal      GAO use


          The Office of the Assistant Comptroller General for Operations prepared
          this Quality Management: Scoping Study in response to a Comptroller
          General request to follow up on the June 6, 1990, visit to GAO by Dr. W.
          Edwards Deming. This study had three key objectives:

          to highlight the philosophies and principles of the leading quality man-
          agement experts,
          to summarize the experiences of other organizations that have adopted a
          quality management approach, and
          to assess the implications of adopting a quality management approach
          at GAO and present an implementation strategy.

          This study revealed that a major transformation is occurring in the
          United States in the way that quality management is defined and
          applied in organizations. We also learned that many of the best practices
          of leading organizations are applicable to GAO and offer opportunities to
          improve the way we serve the Congress and meet the monumental chal-
          lenges facing our nation. This study has six chapters:

          Chapter 1 provides a history of GAO'S interest in quality management
          and describes how the study was performed.
          Chapter 2 describes the history of quality management in the United
          States and introduces the significant experts and ideas in the field.
          Chapter 3 documents the quality management practices of leading orga-
          nizations and summarizes the most important lessons learned.
          Chapter 4 examines the attributes of GAO'S culture and organization that
          will influence GAO'S ability to adopt a quality management approach.
          Chapter 5 recommends a strategy for implementing quality management
          Chapter 6 includes specific steps that are recommended during the first
          phase of GAO'S quality management implementation.

          Appendixes and a bibliography are also included.

          Pagel                                                     GAO/ACGOps-91-l

This Scoping Study is a tool to assist GAO management in determining
the role quality management philosophies and principles can play in car-
rying out GAO'S mission and building a vision for meeting future

Ira Goldstein
Assistant Comptroller General for Operations

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Page 3    GAO/ACGops-91-l

Chapter 1
Chapter 2
Principles of Total
Quality Management
Chapter 3
Quality Management
in Practice
Chapter 4                                                                               31
Quality Management
Implementation Issues
at GAO
Chapter 5                                                                               36
GAO Quality
Proposed First-Year
Steps to Implementing
Quality Management
at GAO
Appendixes              Appendix I: Dr. Deming’s GAO Presentation                       46
                        Appendix II: Key Principles of W. Edwards Deming                50
                        Appendix III: Key Principles of Joseph M. Juran                 52


               Appendix IV: Key Principles of Philip B. Crosby                         54
               Appendix V: h’ational Quality Awards                                    57
               Appendix VI: Case Studies                                               59
               Appendix VII: GAO Prototypes/Pilots                                     68
               Appendix VIII: Glossary of Key Terms                                    75
               Appendix IX: Memo: Guidelines for Setting Work                          76
               Appendix X: Major Contributors to This Report                           80

Bibliography                                                                           81

Table          Table 1: Suggested Cultural Changes                                     35

Figures        Figure VII-l: Issue Area Organization for Model #1                      72
               Figure VII-2: Revised Pay and Bonus System for Model #2                 73
               Figure VII-3: Issue Area Organization for Model #2                      74

               Page 6                                                    GAO/ACG-ops-91-l


BARS       Behaviorally Anchored Ratings Scales
CEO        chief executive officer
CIIAMPUS   Civilian Health and Medical Program of the Uniformed
                Services (Office of)
CIT        continuous improvement team
CSF        critical success factors
DEC        Digital Equipment Company
 DELTA     DEC Employees Leveraged Team Activities
 DES       Division of Engineering Services
 DISC      Defense Industrial Supply Center
 DOD       Department of Defense
 EAG       Economic Analysis Group
 El        employee involvement
 FQI       Federal Quality Institute
 FTD       Federal Tax Deposit
 GAO       General Accounting Office
 GGD       General Government Division
 HHS        Department of Health and Human Services
 IBM        International Business Machines Corporation
 ID         identification
 IRS        Internal Revenue Service
 ITC        International Trade Commission
 ITT        International Telephone and Telegraph
 NASA       National Aeronautics and Space Administration
 NAVSEA     Naval Sea Systems Command
 NIII       National Institutes of Health
 NSIAD      National Security and International Affairs Division
 OCG        Office of the Comptroller General
 OMB        Office of Management and Budget
 OPM        Office of Personnel Management
 PMP         participative management program
  RASC       Regional Administrative Services Center (of San Francisco)
  SPC        statistical process control
  SSA        Social Security Administration
  STEP       Strive for Excellence in Performance
  TEF        Trade, Energy, and Finance
  TQM        total quality management
  USAA       1Jnited Services Automobile Association
  USDA       U.S. Department of Agriculture

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Chapter 1


               GAO  has always met challenges with a sense of pride and profession-
               alism. Today, a number of critical issues are challenging our nation and
               GAO as never before: a $3 trillion national debt, the need for restruc-
               turing financial institutions and markets, the lack of a new framework
               for considering national and economic security, a faltering health care
               system, a festering problem with nuclear waste cleanup, a weak educa-
               tional system, and too many cities ravaged by crime and drugs. The
               overall impact of these problems fosters an urgent need for government
               to examine the issues in new ways.

               At GAO, we must increasingly ask whether our traditional approaches to
               managing and performing our work will enable us to meet these chal-
               lenges. A number of forces are leading GAO to reevaluate its management
               approach. GAO'S workload is increasing and becoming more analytically
               and technically complex without an increase in the resources available
               to meet this workload. Consequently, GAO must comprehensively review
               its work processes. To fulfill its mission, GAO must become more innova-
               tive and perform its work more efficiently.

               To achieve this additional innovation and efficiency, GAO will have to
               consider new practices in quality, productivity, and continuous improve-
               ment. In many ways, GAO'S management approach can benefit from
               being rethought using the “total quality management” philosophy that
               is spreading across the llnited States. Today, successful organizations
               using this approach share several characteristics: a pervasive customer
               orientation; a flat, dynamic organization structure; an obsession with
               quality; and a management philosophy that builds the self-esteem and
               dignity of all employees, leading to a full commitment to achieving the
               organizational mission. GAO has opportunities to assess-and enhance-
               itself in all these areas.

               This Scoping Study examines the possibilities of adopting a quality man-
               agement philosophy at GAO that will support the ongoing self-improve-
               ment process. This is in accord with the consistently expressed desire of
               the Comptroller General, who has recognized the need for self-evalua-
               tion. In April 1990 he stated that the “demand for our work will con-
               tinue to grow as the United States finds itself in an increasingly
               competitive environment. We have to decide where to invest U.S.
               resources to promote the general welfare of American citizens and our
               standing among nations. There will be no shortage of challenges in this

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                            Chapter 1

Dr. Deming’s Visit to GAO   To gain a new perspective on our organization, the Comptroller General
                            recently sponsored a visit to GAO by Dr. W . Edwards Deming, a noted
                            international authority on management. In June 1990 Dr. Deming spoke
                            for several hours to a number of GAO executives and staff. He discussed
                            his management philosophy and introduced his principles concerning
                            quality, productivity, and competitiveness.

                            W Edwards Demmg with Comptroller General Bowsher and AssIstant Comptroller General for Opera
                            t~ons GoldsteIn

                            Dr. Deming’s message, based on 40 years of studying Japanese and U.S.
                            organizations, is that nothing short of a radical transformation is needed
                            in the way organizations are managed:

                            “We are in a new economic age. We can no longer live with commonly accepted
                            levels of mistakes, defects, material not suited for the job, people on the job that do
                            not know what the job is and are afraid to ask...failure of management to under-
                            stand their jobs, antiquated methods of training on the job, inadequate and ineffec-
                            tive supervision, We have learned to live in a world of mistakes and defective

                            Page 9                                                                      GAO/ACG-Ops-91-l
                           Chapter 1

                           products as if they were necessary to life, It is time to adopt a new philosophy in

                           Dr. Deming’s visit to GAO, as with many of his visits to other organiza-
                           tions-he estimates that he spoke to 80,000 U.S. managers and execu-
                           tives during the 1980s-sparked considerable interest in assessing GAO’S
                           approach to quality and productivity improvement. This Scoping Study
                           is one result of that interest.

Objectives of This Study   This study has three primary objectives:

                           1, To highlight the philosophies and principles of the leading quality
                           management experts-W. Edwards Deming, Joseph M. Juran, and Philip
                           B. Crosby-and contrast their approaches to achieving quality and

                           2. To summarize the experiences of other private- and public-sector
                           organizations that have adopted quality management approaches; and

                           3. To assess the implications of adopting a quality management
                           approach at GAO and present an implementation strategy, including a
                           discussion of pilot applications that may be required.

Approach and               To address these objectives, we conducted an extensive review of the
Methodology                current literature in organizational management. We reviewed recent
                           GAO testimony in this area prepared by the Trade, Energy, and Finance
                           (TEF) issue area. We spoke with a number of leading quality manage-
                           ment practitioners, both in the consulting area and in quality manage-
                           ment offices in leading U.S. companies.

                           We also engaged McManis Associates, Inc., a firm that has performed
                           strategic planning and other assignments for the White House and many
                           federal departments and agencies, to assist us in preparing this report.
                           McManis and 3M, its subcontractor, have worked for about 25 federal
                           agencies on total quality management engagements under a Federal
                           Supply Schedule contract.

                           To observe quality management in practice, we visited a number of com-
                           panies and state and federal agencies recognized for excellent manage-
                           ment practices. During these visits we identified the key elements
                           required to develop a quality management culture.

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                       Chapter 1

Conclusions in Brief   During our scoping study, we learned that a radical transformation is
                       occurring in the management approaches of progressive organizations.
                       These organizations have committed themselves to understanding and
                       implementing the principles of quality management. As a result, they
                       are receiving numerous tangible and intangible benefits.

                       Organizations that practice quality management are keenly aware of the
                       expectations of all their customers-external and internal-and they
                       evaluate their performance primarily in terms of satisfying these expec-
                       tations. These organizations have empowered their work forces to shape
                       their environments and focus on truly value-enhancing activities. They
                       have also abolished many traditional barriers to effectiveness-unnec-
                       essary bureaucracy and hierarchy, a focus on results at the expense of
                       improving work processes-and have created flexible environments of
                       continuous learning and self-improvement.

                       And, perhaps most importantly, most elements of a quality management
                       transformation apply to any organization-private     or public. Many of
                       GAO’S cultural and historical strengths are conducive to quality manage-
                       ment. But some GAO characteristics warrant examination or change in
                       the quest for improved quality. Increased awareness and education can
                       address the aspects that work against a quality management approach.
                       In short, GAO has a clear opportunity to improve its ability to perform its
                       critical mission in an ever more challenging environment.

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Chapter 2

principles of Total Quality Mzwagement

                          The concept of producing high-quality products or services is an old one.
                          The quest for quality has been an ongoing theme throughout history.
                          What is new is today’s interdisciplinary approach to total quality, which
                          involves consistent performance to customer expectations; internal pro-
                          ductivity and teamwork; and cultural commitment to continuous

History of Quality        The understanding of quality that has emerged through the decades has
                          profoundly affected how organizations have been managed, In the late
Management                19th century, the United States broke with European tradition to adopt
                          Frederick Taylor’s system of scientific management, which dramatically
                          changed the way organizational processes are viewed and managed.
                          This system separated planning and execution and led to the notion of
                          the professional manager.

                          Scientific management emphasized productivity at the expense of
                          quality. Taylor’s approach crippled the concept of pride in craftsman-
                          ship. To build in quality, managers adopted a new strategy: a central
                          inspection department, headed by a chief inspector and production
                          supervisors. An extreme example of this strategy was the Hawthorne
                          Works of Western Electric Company, which at its peak in 1928
                          employed 40,000 people at the manufacturing plant-5,200 of whom
                          were in the inspection department.

                          Responsibility for quality became vague and confused. Executive man-
                          agement grew detached from the idea of managing to achieve quality.
                          The general work force had no stake in increasing the quality of its
                          products and services. This was the fundamental approach of U.S. orga-
                          nizations until quite recently.

Impetus for an American   By the late 197Os, it was evident that the traditional American approach
Quality Revolution        to management was seriously flawed. Between 1978 and 1982, Ford’s
                          ITS. sales of cars and trucks fell by 49 percent, resulting in a cumulative
                          operating loss of more than $3 billion. Xerox, the company that invented
                          dry-paper copying, saw its share of the North American market plunge
                          from 93 to 40 percent during the 1970s. Many other examples of
                          declining U.S. competitiveness existed. [Jnderlying all these cases, how-
                          ever, was the realization that an international quality revolution had
                          arrived and that ITS. companies did not know how to respond.

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                       Chapter 2
                       Principles of Total Quality Management

                       Traditionally, quality in the United States had been the business of spe-
                       cialists-product specification engineers and process control statisti-
                       cians-who determined acceptable levels of product variability and
                       performed quality control inspections on the factory floor. In contrast,
                       the total quality revolution of foreign competitors introduced the idea
                       that quality is everyone’s business and should be the focus of all signifi-
                       cant business processes. This view emphasized listening to, under-
                       standing, and satisfying all customers’ expectations.

Quality Man .agement   U.S. companies began to seek out quality management experts to try to
                       understand what was happening and to fashion an appropriate
Experts                response. Three experts were widely regarded as leaders in quality man-
                       agement: W . Edwards Deming, Joseph M . Juran, and Philip B. Crosby.
                       Deming and Juran in particular had consulted extensively with foreign
                       companies-many of whom were making inroads into the American
                       market-after      finding US. firms uninterested in earlier quality manage-
                       ment initiatives.

                       While others have contributed to our understanding of quality manage-
                       ment, this study concentrates on the principles and philosophies of these
                       three experts. Brief biographical sketches appear below.

W . Edwards Derning    A worldwide consultant for more than 40 years in quality and produc-
                       tivity improvement, W . Edwards Deming is best known for his work in
                       Japan, where he led a revolution in quality and economic production. He
                       has been referred to as the “genius who revitalized Japanese industry.”

                       In 1980 Dr, Deming’s philosophy and principles were the subject of one
                       of the most successful documentaries in television history, “If Japan
                       Can...Why Can’t We?*’As a result of this exposure and the continuing
                       difficulties of once successful companies, 1J.S.companies began to con-
                       sult Dr. Deming.

                       Today, the Deming Prize, sponsored by the Japanese IJnion of Scientists
                       and Engineers, is awarded to companies that demonstrate excellence
                       and superior quality throughout their operations. Deming was awarded
                       the Japanese Emperor’s Medal in 1960 and the National Medal of Tech-
                       nology by President Reagan in 1987. He has written several books, most
                       recently, Out of the Crisis. He earned a doctorate in mathematical
                       physics from Yale and has since received many honorary doctorates.

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                   Chapter 2
                   Principles of Total Quality Management

                   The Demlng Prize

Joseph M . Juran   Like Deming, ,Joseph Juran had a role in the quality revolution in Japan.
                   Invited to Japan in the early 1950s he taught the principles of quality
                   management to hundreds of executives. JIe stressed the need for senior
                   management’s active involvement in improving quality.

                   Before entering quality management consulting, ,Juran studied electrical
                   engineering and law. He led the inspection control division at Western
                   Electric Company and later taught at New York ITnivcrsity. He has
                   written many books on quality and management; Juran on Leadership
                   for Quality is the most recent.

Philip B. Crosby    Philip Crosby, formerly ITT'S Director of Quality, runs Philip Crosby
                    Associates in W inter Park, Florida, perhaps t,he world’s best-known

                    Page 14                                                    GAO,‘ACG-Ops-91-l
                                  Chapter   2
                                  Principles of Total Quality Management

                                  quality management training institute. Crosby pioneered the concept of
                                  “zero defects” and has focused on helping managers understand the true
                                  costs of unsatisfactory quality. He has written many books on quality.

Key Principles of Quality         The quality management experts’ work with U.S. clients revealed a fun-
                                  damental chasm in the perceptions of quality and productivity. For
Management                        example, the Honorable John A. Betti, current Under Secretary of
                                  Defense for Acquisition, was at one time a senior executive at Ford. He
                                  recalls, “I distinctly remember some of Dr. Deming’s first visits to Ford.
                                  We wanted to talk about quality, improvement tools, and which pro-
                                  grams work. He wanted to talk to us about management, cultural
                                  change, and senior management’s vision for the company. It took time
                                  for us to understand the profound cultural transformation he was

                                  What Deming, Juran, Crosby, and others were proposing was a revolu-
                                  tionary new approach to management that draws on the intrinsic com-
                                  mitment and abilities of everyone in an organization. These practitioners
                                  saw quality not as a discrete function but as an elemental part of all
                                  business processes-a way of life.

                                  Each expert offered a slightly different view of the key principles of
                                  and approaches to quality management. (These viewpoints are summa-
                                  rized in apps. II through IV.) But each practitioner also cited a number
                                  of fundamental elements common to all quality management

A Visionary, Committed            The experts all agree that such leadership is the most important element
Leadership Team Willing to Lead   of a quality management environment,. Of course, this idea has spread
the Improvement Effort            far beyond the traditional quality management school. Tom Peters, in
                                  Thriving on Chaos, for example, calls for a virtual revolution in the
                                  management of U.S. organizations. Leaders, not managers, drive quality
                                  management. Too many organizations today are overmanaged and
                                  underled. The profound implications of large-scale organizational
                                  change make strong leadership a must.

An Organizationwide               The adoption of a quality management approach requires redefining all
Understanding of Customer         customers, external and internal. Quality management is built on the
Expectations and a Commitment     assumption that everyone in an organization has customers and sup-
to Satisfying Them                pliers. For many employees, a customer may be a fellow employee who
                                  is involved in the same business process. Other employees’ customers

                                  Page 15                                                    GAO/ACG-Ops-91-l
                                 Chapter 2
                                 Principles of Total Quality Management

                                 are outside the organization. Quality management determines the expec-
                                 tations of all customers-external and internal-and establishes sys-
                                 tems to meet these expectations.

Empowerment of Employees at      Employee empowerment is a fundamental attribute of a quality manage-
AI1 Levels of the Organization   ment system. Essential knowledge of business processes resides in
                                 employees involved in the processes, and management must create sys-
                                 tems that allow these employees to influence the decisions and direc-
                                 tions of the organization. Quality is everyone’s job, and all employees
                                 must feel ownership. Empowerment requires that all members of an
                                 organization work together and that a spirit of innovation, risk-taking,
                                 and problem-solving be conveyed throughout the organization.

An Understanding That Quality    Quality management is a never-ending process. Organizations committed
Improvement Is a Continuous,     to adopting a quality management approach must create flexible sys-
Long-Term Approach to            terns that can adapt to a changing environment: customers, competitors,
Improving Processes, Products,   processes, and employees all change.
and Services

Establishment of Valid           The only way an organization can know if it is meeting quality objec-
Approaches for Measuring         tives is through the use of valid measures. Measuring quality supports
Quality                          improvement and provides essential information on progress toward
                                 meeting objectives. Where good quality measures exist, good planning

Establishment of Open            Open communication channels are vital to quality management. Too
Communication Channels           often, bureaucracy, rigidity, and fear block communication. An organi-
                                 zation that adopts a quality management approach actively encourages
                                 meaningful communication both vertically and horizontally.

Development of a Comprehensive   All quality management practitioners emphasize the need for compre-
Quality Education and Training   hensive awareness training for all employees. In addition, specific
Program                          training should be provided for employees who have key roles in imple-
                                 menting the quality improvement program. Areas of specific training
                                 may include work flow analysis, measurement, strategic quality plan-
                                 ning, organizational change, facilitation skills, work team skills, and sta-
                                 tistical analysis,

                                 Page 16                                                      GAO/ACG-Ops-91-l
Chapter 3

Qutity Management in Praetiee

                 A decade after the introduction of quality management principles in the
                 United States, many private- and public-sector organizations have
                 adopted them to varying degrees. Some of the achievements of these
                 organizations are

             . excellent reputations among consumers and industry peers (USAAInsur-
               ance Company);
             . profitability (3M);
             l regaining of market share (Ford, Goodyear, Xerox);
             l innovation (Digital, 3M, NASA);
             . savings (Defense Industrial Supply Center, Internal Revenue Service);
             l improvements (Naval Sea Systems Command, Internal Revenue Service).

                 Private-sector U.S. companies, faced with economic uncertainty and
                 intense foreign competition, have generally led their public-sector coun-
                 terparts in implementing quality management. But even in the private
                 sector, change has been slow. Tom Peters, for example, argues in
                 Thriving on Chaos that “quality is still not often truly at the top of the
                 American corporate agenda.” After presenting his evidence demon-
                 strating the value of quality management practices, Peters asks “...why
                 does all this remain the best-kept secret in North America?”

                 To determine the status of U.S. quality management programs, we
                 examined the efforts of such programs in a number of companies and
                 agencies. In the private sector, we studied seven companies renowned
                 for their high-quality management practices:

             l Ford Motor Company,
             l Motorola Corporation,
             9 Xerox Corporation,
             l 3M Company,
             l usfL4 Insurance Company,
             l Goodyear Tire & Rubber Company, and
             l Digital Equipment Company (DEC).

                 In the public sector, we studied quality management initiatives in sev-
                 eral agencies and subagencies, including

             . Office of Civilian Health and Medical Program of the Uniformed Ser-
               vices (CHAMPUS) of the Department of Defense (DOD);
             l Naval Sea Systems Command (NAVSEA);
             l Internal Revenue Service (IRS), selected service centers;

                 Page 17                                                     GAO/ACGOps-91-1
                                  Chapter 3
                                  Quality Management in Practice

                          l San Francisco Regional Administrative Services Center           of the

                            Department of Health and Human Services (HHS);
                          . Forest Service of the Department of Agriculture (USDA);
                          I Division of Engineering Services (DES) of the National Institute of Health
                          . National Aeronautics and Space Administration           (KASA),   Lewis Research
                          l International Trade Commission (ITC);
                          l U.S. Coast Guard; and
                            Defense Industrial Supply Center (DISC).

                                  We also reviewed literature on the efforts of many other private- and
                                  public-sector organizations, including some in state and local govern-
                                  ments. This chapter discusses t.he lessons learned from these organiza-
                                  tions and their implications for GAO and profiles many exemplary
                                  quality management efforts. (See app. VI for case study examples.)

Summary of Observations           Based on our study, we have determined that while reservations about
                                  the lack of widespread awareness of quality management may be valid,
                                  a number of leading-edge organizations have had remarkable success
                                  with quality management improvement programs. The perceptions of
                                  quality and methods to achieve that quality have changed notably in
                                  important sectors of the U.S. economy.

                                  After 30 years, large and small companies are using the teachings of
                                  Deming, Juran, Crosby, and other quality experts. The manufacturing
                                  sector, under severe pressure from foreign competition, has generally
                                  led the way, but many service companies are expanding their efforts. In
                                  1990, for the first time, a service company-Federal Express-has won
                                  the Malcolm Baldrige National Quality Award. The Florida Power and
                                  Light Company-a public utility-is the only American company to win
                                  the Deming Prize for quality. (App. V discusses the key quality awards
                                  and criteria used. >

                                  In general, private-sector quality efforts have been considerably more
                                  effective than the public-sector efforts cited above. But, in several cases
                                  as noted, the public-sector efforts have led to gains in productivity, cost
                                  reduction, and employee morale and effectiveness. Public-sector organi-
                                  zations are in a position to learn from the best practices of leading

                                  Page 18                                                              GAO/AC%-Ops-91-l
Chapter 3
Quality Management in Practice

The Malcolm Baldrlge Natlonal Quality Award

Organizations that have adopted a quality management approach have a
number of common strengths. They are keenly aware of all their cus-
tomers-external     and internal-and they evaluate their business
processes primarily in regard to satisfying customer expectations.
Employees at these organizations, knowledgeable in quality manage-
ment principles, assume responsibility to shape their environment, iden-
tify the value-added activities, and feel at a personal and professional
level that their contributions really impact the organization. The tradi-
tional barriers to effectiveness-bureaucracy     and hierarchy-are   being
stripped away and transformed. And, perhaps most importantly, high-
quality organizations have created more flexible environments that

Page 19                                                    GAO/AcGOps-91-l
                         Chapter 3
                         Quality Management in Practice

                         emphasize continuous learning and self-improvement so they can
                         respond to ever-changing conditions.

Implications for GAO     For GAO, the key consideration is the extent to which successful applica-
                         tions of quality management principles in other organizations are trans-
                         ferable or relevant. Every organization has a unique culture,
                         environment, and mission. Many quality management successes,how-
                         ever, can apply to GAO.

                         GAO’S  challenge is to balance the short-term demands imposed by the
                         Congress with the longer term requirements of a new management phi-
                         losophy. This entails scanning emerging national issues and building a
                         quality vision. GAO can then develop strategies to effectively deal with
                         both immediate and management issues as it faces more complexity and
                         conflict in a highly competitive global economy. Internally, GAO should
                         examine the value of its multilayered report review processes, its
                         training and certification of staff’s management and t,echnical skills, the
                         implications of changing long-standing work processes, and empowering
                         its work force while changing cultural and bureaucratic norms.

                         Although practical quality improvement has tended to be crisis driven,
                         GAO  should not, be overly complacent. Once a major crisis is imminent, it
                         becomes extremely difficult to address without multiple adverse conse-
                         quences and cost to the nation, The challenge for GAO is to seize the initi-
                         ative and implement a comprehensive self-improvement effort based on
                         the best examples of leading organizations. To facilitate GAO’S action in
                         this area, we have summarized the most important lessons learned from
                         other organizations.

Lessons Learned F’rom    Successful companies integrate the ideas of several quality        experts
                         and tailor these ideas to their unique environments.
Private-Sector Quality
Efforts                  As detailed in the preceding chapter, although the principles of quality
                         management are fairly uniform among different practitioners, subtle
                         differences exist. The companies we studied evaluated the philosophies
                         of several quality experts before tailoring a set of guiding principles for
                         their unique situations. The executives at different companies all spoke
                         a remarkably similar quality language-“benchmarking,        six sigma (3.4
                         defects per million units), constancy of purpose,” and so on-but also
                         said they had spent a lot of time customizing quality. As Deming has

                         Page 20                                                      GAO/A!XOpsBl-1
                     Chapter 3
                     Quality Management in Practice

                     stressed, profound knowledge must be gained from outside the organiza-
                     tion, and we found this to be the case. But acting on that knowledge
                     requires a keen awareness of the organization. This is the art of imple-
                     menting quality management. The following examples illustrate the
                     experience of companies that have done so.

Ford Motor Company   Dr. Deming began working with Ford in the dark days of the early
                     1980s; his assistance probably had the greatest influence in shaping a
                     total corporate commitment to quality. Former CEO Donald Peterson has
                     publicly attributed most of Ford’s success to Dr. Deming. But, while
                     Ford was shaping its “Quality is Job 1” theme, it drew on the skills and
                     ideas of several practitioners. A number of Ford executives were trained
                     at Philip Crosby’s Quality College in W inter Park, Florida. Specialists in
                     quality manufacturing worked with Ford in many areas. The company
                     spent more than a year defining and articulating its quality vision and
                     corporate mission. Ford used Deming’s foundation but built its own
                     quality structure.

Xerox Corporation    Xerox Corporation was staring into the abyss in the late 197Os, when
                     Japanese copiers of comparable quality were being shipped into this
                     country at a price below Xerox’s cost of production.

                     In 1981 David Kearns, Xerox’s CEO, announced a new corporate direc-
                     tion focused totally on improved quality, increased efficiency, and
                     enhanced customer satisfaction. Thus began, as at Ford, a decade-long
                     effort to redefine a major corporation. Xerox, like Ford, considered the
                     ideas of several quality practitioners. Xerox customized its quality
                     approach, however, by incorporating benchmarking into its quality
                     deployment efforts. Xerox identified its most important business
                     processes and compared its performance in these areas with world-class
                     standards. Today, Xerox shares its experience by training executives
                     from leading U.S. companies in benchmarking. Xerox has also, not inci-
                     dentally, recaptured its leadership in document processing technologies.

DEC                  DEC is another company synthesizing the principles of several quality
                     experts to build a unique approach to quality management. Historically
                     among the most profitable of U.S. companies, DEC has recently experi-
                     enced sluggish growth and declining profitability in the critical North
                     American market. DEC, seeking to avoid the abyss that Ford and Xerox
                     once peered into, has embarked on a massive quality improvement
                     effort. Benefiting from the earlier efforts of other companies, DFX has
                     integrated a range of proven quality management techniques into its
                     program. Cross-functional process improvement teams (a Juran idea),

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    Quality Management in Practice

    benchmarking (used at Xerox), and six sigma (used at Motorola) are all
    elements of DEc’s program.

    Another key element, however, is strictly home grown. DELTA (DEC
    Employees Leveraged Team Activities) is a sophisticated, closed-loop
    suggestion system designed to discover and address problems. Under
    DELTA, only employees who make a suggestion can dispose of it. They
    also have the responsibility, however, of working with other employees
    to either implement or reshape the suggestion or determine that it is
    infeasible. Thus, DELTA empowers employees and promotes team-
    building, two essential elements of quality management.

    Successful companies are committed to defining the expectations
    and requirements  of external and internal customers.

    High-quality companies are keenly aware of who their customers are,
    what their customers’ expectations are, and how well they are meeting
    these expectations. This applies to external and internal customers,
    Today, virtually all organizations claim to be close to their customers.
    High-quality companies go beyond this concept, however, and inter-
    nalize customer expectations into every significant business process.

    Quality management is a never-ending process driven by customer
    expectations. Peters notes that “even among the best companies, their
    improvement had not automatically taken them close enough to the cus-
    tomer, especially according to the customers’ perceptions of quality.”
    According to 3M Company, quality is “consistent conformance to the
    customer’s expectations.”

    Examples of companies’ efforts that aggressively seek to understand
    and satisfy external customer demands include the following:

l   Goodyear Tire & Rubber established in 1984 a customer support net-
    work built around a toll-free 800 number.
l   Xerox, using external and internal resources, annually surveys hun-
    dreds of thousands of current and potential customers, gauging their
    perceptions of Xerox’s and competitors’ products and services. Xerox
    also has a policy of responding to any written negative comment within
    24 hours.
l   3M Company has implemented a sophisticated three-dimensional cus-
    tomer survey approach, complementing internal customer data with
    that obtained from hand-delivered surveys and focus groups.

    Page 22                                                    GAO/ACGOpsBl-1
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          Quality Management in Practice

      .   USAAInsurance conducts quarterly customer attitude surveys and
          benchmarks its service delivery against L.L. Bean.

          In addition to the activities described above, high-quality companies
          integrate the awareness of customers into their culture and daily opera-
          tions. At Goodyear, every employee carries a credit card-sized mission
          statement: “Our mission is constant improvement in products and ser-
          vices to meet our customers’ needs. This is the only means to business
          success for Goodyear and prosperity for its investors and employees.”
          At Xerox and DEC, customer satisfaction data obtained through formal
          customer surveys determines managers’ partial compensation. 3M
          includes customers in certain internal product development meetings.

DEC       The notion of internal customers is also important to many of the com-
          panies we examined. For example, as a step in its quality transforma-
          tion, DEC asked each of its 125,000 employees to answer in writing the
          following questions:

          1. What business processes are you involved in?

          2. Who are your customers (that is, the next step in the processes you
          are involved in)?

          3. Who are your suppliers (that is, the preceding step in the processes
          you are involved in)?

          4. Are you meeting the expectations of your customers?

          5. Are your suppliers meeting your expectations?

          6. How can the processes be simplified and waste eliminated?

          DECtold us that this simple survey has had a massive impact. In the
          short run, countless redundant activities were discovered and elimi-
          nated. In the long run, DEC employees now think in terms of meeting
          internal and external customers’ expectations.

          Successful companies         strive to establish   a constancy   of purpose in
          daily activities.

          Deming’s first and what he considers his most important point of man-
          agement obligation is to “create constancy of purpose for improvement
          of product and service with a plan to become competitive and to stay in

          Page 23                                                           GAO/ACGOpe91-1
                         Chapter 3
                         Quality Management in Practice

                         business. Decide whom top management is responsible to.” Peters
                         argues that in a high-quality company every employee should be able to
                         articulate the company’s mission in a couple of sentences.

                         In the companies we examined, we found a consistent effort to define a
                         mission and build constancy of purpose. This mission, focused on cus-
                         tomers, enables companies to target their efforts. We found systems
                         adapted to work requirements, not to the needs of the hierarchy. High-
                         quality companies strive to demonstrate constancy.

                         Examples of companies that have constancy of purpose include

                     l   Motorola, whose employees understand and strive for the six sigma
                         target; and
                     l   3M, which has established a requirement that 25 percent of each profit
                         center’s sales in a given period must come from products less than 5
                         years old, institutionalizing the overall company focus on innovation.

Ford Motor Company       Ford spent more than a year defining its mission. Under Secretary of
                         Defense for Acquisition John Betti (former Vice President for Corporate
                         Quality at Ford), says that “there are few these days who will not claim
                         that quality is one of their most important business principles. The real
                         test of commitment to quality comes when there is some immediate pain
                         such as the cost of interrupting production when quality products are
                         not being produced.” Several years ago, Ford withheld releasing a new
                         Thunderbird model, a “sure bet” for Motor Trend’s car of the year,
                         because the car’s quality was not yet suitable for a production model.

                         Successful companies empower their work forces to achieve organi-
                         zational objectives.

                         Empowerment of employees is a consistent theme among the companies
                         we visited. This is illustrated in several ways:

                     .   reduced layers of supervision;
                     .   recognition of employees’capabilities;
                     .   increased authority and accountability for line employees;
                     .   upward as well as downward communication channels; and
                     l   decreased reliance on traditional, hierarchical organizational structures.

                         The following paragraphs describe four companies’successful efforts in
                         this area.

                         Page 24                                                     GAO/ACGOps-91.1
                         Chapter 3
                         Quality Management in Practice

Goodyear Tire & Rubber   Goodyear Tire & Rubber has historically used a traditional management
                         approach. Recent events, however, have led the company toward
                         employee empowerment. A hostile takeover attempt forced Goodyear to
                         assume dangerous levels of long-term corporate debt and to sell several
                         large, non-tire divisions. Two foreign-owned companies, Michelin and
                         Bridgestone, acquired B.F. Goodrich and Firestone, respectively-Good-
                         year’s largest U.S. competitors.

                         Goodyear realized it had to adopt a more flexible management style to
                          adapt to its radically changed environment. Increased empowerment
                         was one method. Another was to use salaried workers operating under
                         minimal supervision to staff new, state-of-the-art manufacturing facili-
                         ties. Layers of management have been trimmed. In unionized plants,
                         joint management-union problem-solving teams have been established.
                         As one executive told us, “all our people read the paper and know what
                         is going on out there. They are now committed to working together.”

3M Company               3M has built empowerment into its management incentive systems. Divi-
                         sional managers are given key financial targets and permission to shape
                         their own strategies for hitting those targets.

Milliken                 Milliken, another Baldrige Award winner recognized for its quality man-
                         agement approach, uses an employee suggestion system (used as a
                         model by other companies) to empower its work force. Milliken responds
                         to all suggestions within 48 hours and works with the suggestors to
                         shape and implement valid suggestions as soon as practicable.
                         Employees quickly see the fruits of their creativity.

Motorola                 Motorola strives continually to encourage decision-making by first-line
                         employees. Motorola complements this effort with a comprehensive edu-
                         cational effort designed to “breathe the very spirit of creativity and
                         flexibility into manufacturing and management.” In its early empower-
                         ment efforts, Motorola realized it was asking its work force to undertake
                         new responsibilities without giving them adequate skills and knowledge.
                         Today, Motorola is recognized for “Motorola University,” a $120 million
                         annual investment in improving the skills of its work force.

                         Successful companies         are driven by vision and strong leadership-a
                         future orientation.

                         Ultimately, strong visionary leaders are the most important element of a
                         quality management approach. Donald Peterson at Ford, Robert Galvin
                         at Motorola, David Kearns at Xerox, Kenneth Olsen at ~~~--a11 led

                         Page 25                                                       GAO/ACGOps-91-l
                               Chapter 3
                               Quality Management in Practice

                               quality management efforts. Tom Peters outlines 12 attributes of a
                               quality revolution. His first attribute ? “First comes management’s atten-
                               tion-or obsession, as I prefer to call it. What does that mean? It’s vis-
                               ceral...it is essential to begin with emotion. Quality begins precisely with
                               emotional attachment, no ifs, ands, or buts.”

                               In all the companies reviewed, we found leaders willing to shatter
                               existing paradigms, and to “walk the talk.” Artificial barriers between
                               divisions and levels of hierarchy were abolished. “Outrageous” goals
                               were established (for example, six sigma at Motorola) to force organiza-
                               tions to think in new ways. Senior executives taught quality manage-
                               ment principles to their employees. Cross-functional quality
                               improvement teams reported directly to senior executive management.
                               Quality objectives were written into business plans and mission state-
                               ments The vigorous support of senior management for these efforts was

Lessons Learned From           Successful agencies are redefining     their customers   and identifying
Public-Sector Quality          requirements.
Efforts                        The role of government is changing due to shifts in national priorities,
                               deregulation, and budget constraints. In this climate, successful agencies
                               are reexamining their customer bases to determine whom they are really
                               serving, their customers’ requirements, and whether the agency’s prod-
                               ucts continue to serve them well.

                               NASA'S  Lewis Research Center, the IRS Federal Tax Deposit (FTD) System,
                               and NAVSEA conducted assessments of their customers through inter-
                               views, surveys, and representative customer focus groups. All have
                               realized the importance of customer involvement and input and saved
                               significantly in money and manpower. Profiles of other agencies that are
                               examining their customer bases follow.

CHAMPUS of the Department of   CHAMPUS  recently conducted a customer analysis in response to the
Defense                        800,000 inquiries and complaints it receives each year. It found that its
                               employees did not recognize a half dozen customer groups. CHAMPUS
                               employees often recognized only their immediate customer as their only
                               customer but are now beginning to understand that total quality means
                               meeting the realistic needs of all customers in order of priority. CHAMPUS
                               has extended this customer awareness philosophy to its vendors, the
                               major insurance companies that process its health care claims. It is con-
                               sidering making total quality management (TQM) mandatory for all its

                               Page 26                                                      GAO/ACGOpz+I)l-1
                          Chapter 3
                          Quality Management in Practice

                          vendors and including customer satisfaction indicators as performance
                          criteria in its contracts.

U.S. Coast Guard          The U.S. Coast Guard just completed a survey of its entire membership
                          to assess the quality of health care it provides to members and their
                          families. The results of the survey, which showed a 30 percent dissatis-
                          faction level with the quality and accessibility of medical treatment, are
                          being used to develop new Coast Guard policies and medical practices
                          and procedures. The Coast Guard is using TQM tools, such as statistical
                          process control (SPC) and Pareto analyses (see the glossary in app. VIII),
                          to improve the quality of its health clinic operations,

Madison, W isconsin       Madison, W isconsin, launched a communitywide effort to improve
                          quality in both the business and government sectors. The city’s Motor
                          Equipment Division conducted one of the first such efforts, and it
                          focused on identifying customers’ problems and improving service, cut-
                          ting turnaround time on repairs from more than 9 days to about 2.5
                          days Philadelphia is conducting a similar communitywide quality
                          improvement program.

                          Successful agencies develop quality     visions.

                          A basic tenet of management science is that, without a plan, any path
                          will do. Many agencies, in today’s volatile government environment,
                          want to shift from being crisis driven to a proactive stance. Many suc-
                          cessful agencies are conducting strategic planning and translating future
                          requirements into vision statements. Vision statements serve a number
                          of purposes; specifically, they

                      l   crystalize an agency’s purpose and responsibilities for customer quality
                          and the quality of its employees’work environment;
                      l   communicate the organization’s goals and future agenda to employees,
                          promoting ownership at all levels; and
                      l   enable progressive executives to lead their agencies, avoiding the plight
                          of many traditional organizations, which are often overmanaged but

                          The NASA Lewis Research Center, the USDA Forest Service, and the IRS
                          have strongly committed to strategic planning and have a vision focused
                          on quality. The Forest Service initiated a 5-year strategic plan for
                          piloting the new management philosophy, with a long-term goal of

                          Page 27                                                    GAO/ACG-Opa-91-l
                                  Chapter 3
                                  Quality Management in Practice

                                  implementing quality principles organizationwide. The IRS uses a decen-
                                  tralized approach because of the organization’s size. But the IRS Commis-
                                  sioner communicates to the work force commitment to planning and a
                                  quality vision. Profiles of other agencies that are developing quality
                                  visions follow.

FIASC of the Department of        The RASCof the Department of Health and Human Services recently
Health and Human Services         launched a strategic planning process to enhance the quality of its ser-
                                  vices. The process started with the development of a quality vision that
                                  identified customers and their requirements. Based on this vision, the
                                  RASC identified internal customers and teamwork requirements; estab-
                                  lished goals for enhancing existing financial, personnel, and administra-
                                  tion services; and developed an action plan.

David Taylor Research Center of   The Navy’s David Taylor Research Center has launched a major stra-
the U.S. Navy                     tegic planning initiative. The center consists of 2,800 employees in 6
                                  engineering laboratory detachments that serve different customer bases
                                  and operate semiautonomously. To create a more cohesive organization,
                                  establish cross-cutting management priorities, and optimize the use of
                                  scarce resources, the commanding officer has established a quality
                                  vision and implementation plan.

                                  The plan, which is nearly in place, has trained facilitators, established
                                  cross-functional problem-solving teams, and trained mid-level managers
                                  in TQM. Specific outcomes at the Center include greater communications
                                  among departments, a sense of common ownership, and a long-term per-
                                  spective by the managers. In commenting on these accomplishments, a
                                  department official stated, “T Q M has been the methodology that helped
                                  us accept the pain that is inevitable in such a dramatic direction

                                  Successful agencies empower their employees.

                                  The rigid organization structures and compartmentalization of work in
                                  federal agencies deprives managers and employees of power. This stifles
                                  creativity, initiative, and productivity; in addition, it often diverts the
                                  agency from customer service issues to issues of internal turf, con-
                                  flicting priorities, and parochialism.

                                  Successful agencies counter this tendency with concerted efforts to
                                  empower managers and employees. Greater delegation of authority,
                                  organizational streamlining, and simplification of work procedures
                                  achieve this.

                                  Page 28                                                     GAO/ACG-Ops-91-l
                                 Chapter 3
                                 Quality Management in Practice

                                 By empowering their employees, the Forest Service, the DISC, and NASA’S
                                 Johnson Space Center have improved not only quality, but employee
                                 morale and commitment to organizational goals. When allowed to par-
                                 ticipate in decision-making and given greater authority, employees have
                                 demonstrated a desire to help solve the problems of the organization.
                                 Other examples follow.

USDA Forest Service              The Forest Service has been a leader in this regard by advocating that
                                 its people serve customers directly rather than “hide behind policies.” It
                                 has delegated considerable lump-sum budget authority to national forest
                                 managers and simplified many of its administrative regulations. The
                                 Forest Service is delivering TQM awareness and facilitator training to
                                 personnel in regional offices across the country.

Social Security Administration   Another agency focusing on cultural change through employee empow-
@=I                              erment is the Social Security Administration. The Commissioner has
                                 established quality service to beneficiaries as a major priority. Recog-
                                 nizing local differences in the beneficiary populations served and in SSA
                                 offices serving them, ss~ has delegated substantial lump-sum budget and
                                 management authorities to local directors and managers. Ten offices are
                                 conducting pilot programs, which are supplemented with quality aware-
                                 ness training.

State of Minnesota               In Minnesota, the Strive for Excellence in Performance (STEP) program
                                 has called upon all state employees to contribute their advice and
                                 insights on quality and productivity improvements. Similar efforts have
                                 been undertaken at the agency level in other states, such as Maryland
                                 and W isconsin.

                                 Successful agencies use comprehensive      quality   management   to
                                 realize continuous improvements.

                                 Several progressively managed agencies are using comprehensive
                                 quality management to realize continuous improvements in products
                                 and work processes. These agencies do not have mandates for change
                                 but nevertheless recognize that today’s procedures may not necessarily
                                 be the formula for tomorrow. A t,ypical comment of top executives in
                                 these organizations is! “today we are playing baseball but tomorrow’s
                                 game may be football-new rules and demands for teamwork will
                                 govern us.”

                                 Page 29                                                    GAO/ACGOps-91-l
                                   Chapter 3
                                   Quality Management in Practice

                                   Some noteworthy agencies that have successfully focused on constantly
                                   improving their products and processes are the IRS (FTD System), NAVSEA,
                                   and DISC. Other examples follow.

International   Trade Commission   The ITC is similar to GAO in that its major products are congressional
                                   reports and testimony. It started a T Q M approach for the continuous
                                   improvement of its financial and administrative services. The office of
                                   administration, which supports report preparation, has an impressive
                                   customer service record but nevertheless wants to improve. It has con-
                                   ducted an external environmental assessment of issues confronting ITC,
                                   inventoried its internal customers, established a 20-member quality
                                   council, conducted quality awareness training, and identified process
                                   action teams.

Division of Engineering Services   The Division of Engineering Services of the National Institutes of
(DES) Of the National Institutes   Health, which is responsible for the facility planning, construction, and
of Health                          maintenance of NIH, has also undertaken a continuous quality improve-
                                   ment effort, primarily to improve the quality of services delivered
                                   through approximately 40,000 work orders each year. While NIH pro-
                                   grams are expanding and the number of laboratories increasing, admin-
                                   istrative budgets and the number of support personnel are static. DES
                                   believes that through continuous quality improvements, it can accom-
                                   modate future customer needs.

                                   DES'S continuous quality improvement efforts are helping it structure
                                   work processes in a way that most closely parallels customer interface
                                   requirements. Its planning process for continuous quality improvement
                                   started with quality awareness training and the development of critical
                                   success factors (CSFs) for DES. From the CSFS, DES redefined and inte-
                                   grated its functional work processes and assigned key action areas to
                                   division managers. DES is currently using T Q M tools, such as Pareto anal-
                                   ysis and value chain analysis, to help improve work processes.

                                   Page 30                                                     GAO/M’x;-ops-91-l
Chapter 4

Quality Management linplementation Issues
at GAO

                                GAO'S  work environment is rapidly changing, requiring corresponding
                                cultural changes. The major policy and program challenges facing the
                                nation and the government increasiigly drive our workload, with Con-
                                gressional requests accounting for most of our evaluative work. In addi-
                                tion, the workload is increasing without increased resources or
                                significantly more time to do the work. Indeed, the Comptroller General
                                announced in April 1990 the need for GAO to do a better job of estab-
                                lishing work priorities.

                                GAO  is also seeking a more aggressive role in shaping national policy. The
                                Comptroller General, through publications like Facing Facts and the
                                Transition Reports, is positioning GAO as a major contributor to various
                                public policy issues while the country is facing the implications of sev-
                                eral faulty national policies.

                                Based on our study, we believe the adoption of a quality management
                                philosophy at GAO is the best guarantee that the agency will be able to
                                respond to this challenging new environment. The principles of quality
                                management-enhanced leadership, flatter organizations, empowered
                                and trained employees, increased customer focus, measured quality,
                                improved communications-are        designed to make an organization more
                                flexible, more efficient, and better able to use its full range of internal

Impact of GAO’s Internal        Organizational change is possible only if grounded in a thorough under-
Environment on Quality          standing of the present environment. Certain of GAO'S organizational
                                attributes will affect its ability to make the cultural changes required to
Management                      implement quality management. Some attributes are conducive to
                                quality management and some are averse to it. The following discussion
                                of these attributes is based largely on informal interviews with staff at
                                all levels both in the division and staff offices. (As will be discussed
                                later, a cultural values survey is useful to formally assessing an organi-
                                zation’s culture. We recommend using such a survey to illuminate fur-
                                ther the major cultural issues facing GAO.)

GAO Attributes Conducive
to Quality Management
Continuity of GAO’s Executive   Quality management requires a long-term commitment. GAO, due to the
Leadership                      continuity and apolitical nature of its senior management, is able to

                                Page 31                                                     GAO/ACGops-91-l
                                       QualityManagement   ImplementationIssues

                                       make such a commitment. Quality management practitioners often cite
                                       the political turnover in government agencies as a primary deterrent to
                                       the success of quality management in the public sector. GAO can adopt a
                                       long-term strategic outlook, largely unencumbered by short-term polit-
                                       ical interference.

GAO’s Historical Emphasis on           The importance of delivering a high-quality product is ingrained in the
Quality and Operational                GAO culture. Quality management would refine GAO’S understanding of
Improvements                           quality-satisfying   customer expectations-and its methods of building
                                       it into GAO’S processes. Recause GAO already thinks in quality terms, its
                                       environment is conducive to this idea.

                                       The notion of continuous incremental improvement, another general
                                       tenet of quality management, also agrees with existing initiatives at GAO.
                                       In the last 10 years, GAO has started many operational improvement
                                       efforts, although in many cases they have not realized their full poten-
                                       tial. The existence of such efforts has created a culture, however, condu-
                                       cive to change at the operational level.

Skill and Loyalty of GAO’s Work        Most people recognize that GAO is one of the premier places to work in
Force to the Operational Mission       the federal government. GAO hires selectively-generally, less than 5
                                       percent of the more than 6,000 yearly applicants-and offers a chal-
                                       lenging intellectual environment for its work force. GAO employees are
                                       skilled and Ioyal to the organization. This creates an atmosphere condu-
                                       cive to quality management for two reasons:

                                   .   GAO employees tend to see GAO as an attractive career choice, which
                                       makes them willing to go along with a long-term cultural change effort;
                                   l   newer GAO empIoyees, most possessing nontraditional (that is, nonac-
                                       counting) backgrounds, can be catalysts for change. Organizational
                                       change is required to accommodate the new GAO work force, if for no
                                       other reason.

GAO Employees’ Familiarity             GAO  evaluators customarily work in small teams during the course of a
W ith Small, Cross-Functional          project. They also draw on the expertise of colleagues in other func-
Teams                                  tional areas or in different regions. Consequently, they are well suited to
                                       adapting to the small, cross-functional process improvement teams that
                                       most practitioners recommend for implementing a quality management

                                       Page32                                                      GAO/ACGOps-91-l
                                      Chapter   4
                                      Quality Management Implementation   Issues
                                      at GAO

Significant Cultural Changes          During the current Comptroller General’s tenure, several systemic and
Occurring During the Tenure of        cultural changes have occurred. These changes-in hiring, training,
the Current Comptroller General       organizational structure, compensation, broad banding, report
                                      processing, and so on- have reinforced the notion that change is pos-
                                      sible. In effect, a groundwork for large-scale cultural change is already
                                      in place. Quality management would build on these diverse efforts, uni-
                                      fying them under the umbrella of a more focused, customer-oriented,
                                      long-term approach to our work.

GAO Attributes Averse to
Quality Management
Excessive Layers of Hierarchy         Empowerment is the essence of every successful quality management
and Review                            implementation. Organizations in both the private and public sectors are
                                      radically changing their traditional approaches toward human resource
                                      management. The rigid, top-down organization is becoming obsolete.

                                      At GAO, however, several trends are working against empowerment of
                                      the work force:

                                  l   Attempts to build in quality at the end of the report development pro-
                                      cess through excessive post-evaluation review reduce accountability and
                                      pride of workmanship among the report preparers.
                                  l   Traditional staffing and organizational constraints leave employees with
                                      significant unproductive time, which erodes pride and self-esteem.
                                  l   Evaluating employees on the basis of measurable output makes them
                                      focus on production to the exclusion of value-enhancing analysis and
                                      team building, which ultimately erodes their confidence in the organiza-
                                      tion. The true dimensions of someone’s contribution-analyzing,
                                      thinking, motivating others-are often unknowable and unmeasurable.

                                      The energies and abilities of GAO'S people are its core strength. To the
                                      extent that a sense of disempowerment leads to alienation or dis-
                                      enchantment of the work force, GAO is failing to achieve its organiza-
                                      tional potential.

Insufficient Upward Flow of           Formal and informal barriers can inhibit the flow of information within
Information                           organizations. Organizations that have adopted a quality management
                                      philosophy strive to abolish these barriers. In particular, these organiza-
                                      tions encourage a healthy flow of information up the organizational
                                      structure, recognizing that employees closest to the customers and work

                                      Page 33                                                     GAO/AC%-Ops-91-1
                                 Chapter 4
                                 Quality Management Implementation   Issues
                                 at GAO

                                 processes are the best source of ideas to improve quality and produc-
                                 tivity. One company uses the phrase “every problem is a treasure.” This
                                 captures the notion that it is only through discovering and addressing
                                 problems that an organization improves itself. In such an environment,
                                 employees perceive an opportunity to influence decisions that will
                                 directly affect them. This openness is manifested through such practices
                                 as allowing employees to contribute to their supervisors’ performance
                                 evaluations and maintaining an effective employee suggestion system. A
                                 strong upward flow of information empowers employees.

                                 A healthy internal information flow is hard to quantify. Practitioners
                                 describe this variously as “breaking down barriers between depart-
                                 ments” (Deming) and “communicating results” and “building aware-
                                 ness” (Juran). Many of the strongest barriers to an effective information
                                 flow are informal, related to an organization’s culture and past

                                 At GAO, a strong perception exists among some employees that they
                                 cannot influence the organizational policies that directly affect them.
                                 This perception exacerbates the disempowerment felt by GAO employees.

GAO’s Cultural Obstacles to      Generally, as employees move up in an organization, they spend an
Technicians Becoming Managers    increasing amount of time on traditional managerial tasks-planning,
                                 directing, and controlling the deployment of resources--and less time on
                                 the technical requirements of their operations. At GAO, however, the
                                 technical demands remain great on managers, who may have to testify
                                 or otherwise demonstrate technical mastery of their issue areas. Conse-
                                 quently, managers have a hard time moving from technician to manager.
                                 The adoption of a quality management approach at GAO requires a keen
                                 focus on the art of management. Managers who are too busy “fighting
                                 fires,” especially those of a technical nature, may not be able to commit
                                 the time and attention required to understand and guide the organiza-
                                 tional shift to a quality management culture.

GAO’s Inability to Satisfy the   Quality management involves getting close to customers, anticipating
Demands of Its Congressional     their needs, and satisfying their expectations. GAO, as a nonpartisan
Customers                        agency working in a politically charged environment, cannot always
                                 provide the answers its congressional customers want. Under a quality
                                 management approach, GAO would strive to improve its understanding
                                 of who its customers are, what their requirements are, and if necessary
                                 work with these customers to shape their expectations. Virtually all def-
                                 initions of quality at the companies we examined refer to customers’
                                 expectations and perceptions. GAO will also ultimately have to define

                                 Page 34                                                    GAO/ACG-Ops-91-l
                                        Chapter 4
                                        Quality Management Implementation      Issues
                                        at GAO

                                        quality based on the view of its customers, which may require a signifi-
                                        cant change in the way it sees itself.

Extensive Regional Structure            About 40 percent of all GAO employees work outside of headquarters,
                                        complicating efforts to implement a quality management system at GAO.
                                        But a regional structure does not preclude a successful implementation.
                                        The companies we reviewed all have international operations and have
                                        nonetheless implemented a quality management philosophy on a com-
                                        panywide basis.

Cultural Change Needed                  GAO’S  culture is based on the accounting and auditing disciplines and has
                                        evolved for many years. Most of GAO’S newer employees, however, have
                                        different training and attitudes. GAO must integrate and change these
                                        cultures to meet the new challenges. The following table illustrates sug-
                                        gested cultural changes.

Table 1: Suggested   Cultural Changes
                                        From                                            To
                                        Hierarchical style                              Participative style
                                        Achieving quatity through inspection            Building qualrty Into the process
                                        Top-down information flow                       Top-down, lateral, and upward Information
                                        Inward focus on quality                         Customer-defined quality
                                        Intuitive and subjective plans and              Planning based on validated measures of
                                        assessments                                     quality
                                        Short-term p&kg                                 A vlslon for the future
                                        Competition among dnisions and between          One team pulling together
                                        headquarters and the field
                                        Episodic tmprovements                           Comprehenslve and continuous
                                        Top-down initiatives                            All staff involved and engaged


                                        Page 35                                                                   GAO/ACG-Ops-91-l
Chapter 5

GAO Quality Management
Implementation Strategy

                                 No single formula can successfully implement quality management in all
                                 organizations. The best plan tailors an implementation strategy to the
                                 individual organization. Quality management requires more than
                                 training; it is a full-scale redirection of an organization’s focus.

                                 Instead of sporadic productivity improvements mandated by top man-
                                 agement, quality management involves every employee’s taking respon-
                                 sibility for meeting the needs of external and internal customers.

                                 Implementing quality management requires a total commitment from
                                 the top levels of an organization and total acceptance from the lowest
                                 levels. It calls for a clearly defined action plan and the development of
                                 technical expertise in the organization to facilitate the change. And the
                                 change will happen only to the extent that managers in the organization
                                 are willing and able to set the example for open communication, partici-
                                 pative planning, and decision-making based on statistical process

                                 A few basic approaches should be part of any implementation strategy:

                             . initial quality assessment,
                             l top-level management awareness training,
                             l formation of a quality council,
                             l establishment of a participative environment that fosters teamwork,
                             l development of prototypes,
                             l celebration of successes in meeting quality objectives,
                             . organizationwide implementation, and
                             9 annual quality review.

                                 This chapter discusses these approaches as applied to   GAO   quality man-
                                 agement efforts.

Initial Quality Assessment       The main function of the initial quality assessment is to create aware-
                                 ness of the need to revitalize GAO'S culture. This assessment includes
                                 evaluation of data from a variety of sources but is mainly related to the
                                 perceptions of GAO’scustomers.

                                 Before collecting specific data, GAO must identify its customers. As
                                 stated in an April 11, 1990, memo from the Comptroller General, GAO
                                 must recognize multiple external customers and establish priorities to
                                 better meet customers’ needs. GAO must also develop the notion of
                                 treating others in the agency as internal customers.

                                 Page 36                                                       GAO/AfX-Ops-91-l
                             Chapter   5
                             GAO Quality Management
                             Implementation Strategy

                             The criteria on which to assess the data are the quality of GAO products
                             and services as perceived by customers, the timeliness and responsive-
                             ness of those products, and the costs of GAO products.

                             One aspect of cost is the cost of quality or how much time and money is
                             used to achieve the desired quality. “Cost of quality” is a term fre-
                             quently used by quality management practitioners to refer to the hidden
                             costs caused by poor quality:

                         l   multiple reviews,
                         l   rewrites,
                         l   recycling of changes back to reviewers, and
                         l   lost hours that could have been applied to other projects.

                             These costs decrease as quality is increased.

                             GAO  must also conduct a cultural values survey as part of the initial
                             quality assessment. This survey would extract and compare the various
                             perceptions of GAO'S culture held by employees throughout the

                             Interviews of external customers will reveal their perceptions of GAO,
                             This assessment should also address quality management issues raised.

Top-Level Management         Awareness training should stress the relevance of quality management
Awareness Training           for GAO by using the results of the initial quality assessment as a cata-
                             lyst for discussion.

                             All GAO senior executives should receive awareness training, which
                             introduces the philosophy of quality management and suggests tech-
                             niques for its implementation. Management must understand that
                             quality management is a philosophy or an approach to management-
                             not a program.

Formation of a Quality       After awareness training is completed, GAO should form a quality council
Council                      consisting of top management and employees from all levels of GAO who
                             are interested in and knowledgeable of the principles of quality manage-
                             ment. This council, which will be responsible for the long-term imple-
                             mentation of a quality management approach, should report directly to
                             the Comptroller General. In particular, the council should coordinate

                             Page 37                                                      GAO/ACG-Ops-91-l
                      GAO Quality Management
                      Implementation Strategy

                      training, monitor and support prototypes, and study other organiza-
                      tions’ approaches to determine the most successful practices.

                      The quality council should demonstrate a commitment to excellence in
                      the way it conducts its business to set an example for the rest of the
                      organization. The council should also demonstrate participative plan-
                      ning, open communication, and analytical problem solving. GAO divi-
                      sions, regions, and staff offices can also establish quality councils.

Team Building         In the 1950s Professor Eric Trist coined the term “socio-technical sys-
                      tems” to describe the patterns and systems of human interaction neces-
                      sary to carry out any complex task in an organization. The principal
                      finding of his work at the Tavistock Institute in England was that these
                      systems of human interaction must be developed just as carefully as the
                      technical or mechanical aspects if the system is to operate effectively. In
                      quality management terms, employee involvement and team building are
                      essential for successfully implementing quality management and should
                      be carefully designed into every aspect of the strategy.

Prototype Quality     John Adams and other practitioners of change management contend
Initiatives           that only 25 percent of the people in a typical organization are willing to
                      experiment with new ways of doing things. Another 50 percent will
                      watch to see which way the wind is blowing before joining in, and the
                      remaining 25 percent will remain resistant to the end.

                      Prototype or pilot efforts are one way of dealing with this aspect of
                      organizational life in America when attempting to introduce major
                      changes. In recent years both private- and public-sector organizations
                      have succeeded in demonstrating the practical value of new ways of
                      organizing work with highly visible prototype quality and productivity
                      initiatives. Successful prototypes come close to offering the thoroughly
                      tested and proven innovations demanded by more cautious people in an

                      The quality council at GAO might stimulate the development of several
                      prototype quality management efforts in the following ways:

                    . After completion of quality awareness training, some of the managers of
                      program divisions, technical divisions, field offices, and support func-
                      tions would be able to volunteer to have their organizations selected for
                      a prototype TQM effort.

                      Page 38                                                     GAO/ACG-Ops-91-l
                               Chapter 5
                               GAO Quality Management
                               Implementation Strategy

                           l Interested managers would be able to apply for early prototypes to
                             address a particular problem, issue, or work process in their organiza-
                             tions, or individual managers might describe a cross-functional process
                             in which their organization is one of the key players. A special evalua-
                             tion team from the quality council would visit managers who apply and
                             evaluate the applicant organization according to predetermined criteria.
                           . The quality council would select several prototypes from among the
                             applicant organizations and might also select one important cross-func-
                             tional process that seems to have support from several key managers
                             whose organizations are involved. Establishing selection criteria might
                             involve asking some of the following questions:

                               l Is this an important strategic quality issue‘?
                               . Can GAO anticipate a payoff to justify the resources invested in this
                               l Does this have the support of GAO'S top management?
                               l What is the likelihood of early success for this prototype?

                                   Steps to implement the prototypes should be the same as those used in
                                   the overall quality management effort:

                           l       awareness training, including some basic analytical tools and
                           l       selection of specific quality management objectives;
                           l       analysis of the existing process;
                           l       establishment of measurement standards;
                           l       implementation of a model for continuous improvement, such as the
                                   Deming “Plan-Do-Check-Act” cycle; and
                           l       benchmarking to establish interim goals for performance.

Celebration of Successes           GAO  should widely publicize successesachieved by prototype organiza-
                                   tions. This will help to encourage those units that are in the early stages
                                   of implementing quality management and should help to satisfy those
                                   who said, “It can’t be done here.” Recognition and celebration of suc-
                                   cessful quality improvements are essential to quality management
                                   efforts. Such recognition not only credits and rewards the people
                                   involved but also reinforces the organization’s commitment to quality

                               Recognition should be given primarily at the group or team level, dem-
                               onstrating that quality management is a team effort. Of course, citing

                               Page 39                                                         GAO,‘ACGOps-91-I
                        Chapter 5
                        GAO Quality Management
                        Implementation Strategy

                        individuals is also appropriate, and this can be done under existing pro-
                        grams or in special recognition of those who make notable quality
                        improvement contributions. Individual recognition, however, should not
                        detract from quality team efforts.

Annual Quality Review   The annual quality review is an effective technique for implementing
                        the quality management process throughout an organization. A custom-
                        ized interview process and rating system, this review is designed to
                        examine how well quality management principles are implemented
                        throughout an organization.

                        One possible approach at GAO would be to use the criteria established for
                        the Malcolm Baldrige National Quality Award to determine how well GAO
                        has adopted quality management principles. Knowledgeable and objec-
                        tive individuals who can bring an outside perspective to the effort
                        should conduct a self-initiated diagnostic process. Other organizations
                        have found such a technique to be invaluable in assessing their quality
                        management implementation.

                        Another possibility for ti~o would be to apply for the President’s Award
                        for Quality and Productivity. This award is based on criteria similar to
                        the Baldrige Award. (See app. V for further descriptions of national
                        quality awards.)

                        Page 40                                                    GAO,‘ACGOps-91-l
Chapter 6

Proposed First-Year Steps to Implementing
Quality Management at GAO

                                 As discussed in the previous chapters, American industry and more
                                 recently government entities have dramatically improved their perform-
                                 ance through a focus on customer service and employee empowerment.
                                 Increased quality management efforts by federal agencies and the
                                 recent Deming visit to GAO have stimulated much interest in quality
                                 improvement at GAO. The time appears right for GAO to adopt a major
                                 quality management strategy to help it carry out its responsibilities
                                 more effectively and keep the agency in the forefront of federal man-
                                 agement improvement efforts.

                                 IJltimately, all GAO employees will have a role in implementing quality
                                 management at GAO. The following proposed work plan, however, lays
                                 out the initial steps toward implementing quality management, most of
                                 which are directed to senior GAO management. Full implementation
                                 involving all employees will take place during several years. Total
                                 quality is a never-ending journey toward continuous improvement.

Comptroller General              Comptroller General leadership is essential for GAO to implement a suc-
                                 cessful quality management improvement effort. The Comptroller Gen-
Leadership                       eral should not only support quality management but direct the
                                 implementation personally. This will require a familiarity with the prin-
                                 ciples of quality management and a willingness to persuade GAO per-
                                 sonnel to adopt quality management principles and practices.

                                 The Comptroller General has already taken the first steps. (See app. IX
                                 for a copy of a memo written by the Comptroller General on guidelines
                                 for setting work priorities.) We recommend, however, that he take the
                                 following additional steps:

                             l participate in a quality management CEO awareness program, such as the
                               “World Class” course conducted by the 3M Company; and
                             0 visit additional public- or private-sector organizations that have success-
                               fully implemented quality management.

                                 These steps should be taken within the first 60 days of the process.

Establishment of a Quality       GAO can achieve quality management only through the full participation
Council                          and involvement of all employees, Overall guidance and coordination of
                                 the effort should be the responsibility of a GAO quality council; the
                                 Comptroller General should appoint GAO employees to the council.

                                 Page 41                                                    GAO/ACGOps-91-l
                          Chapter 6
                          Proposed First-Year Steps to Implementing
                          Quality Management at GAO

                          One of the council’s early tasks would be approving prototype applica-
                          tions of quality management. We have already identified two prototypes
                          as candidates, but their selection should be made after the steps above
                          are carried out to ensure that they will suit the strategy and plan for
                          implementing quality management in GAO.

                          This should take place within the first 90 days of the process.

Awareness Training        GAO  top management must understand the theory, principles, and prac-
                          tices of quality management to get the quality improvement process
                          underway. This can best be achieved by providing awareness training
                          for about 15 top managers, including all Assistant Comptrollers General
                          and other top officials.

                          This should be done during the third and fourth months of the process.

                          Approval for implementing a total quality management philosophy and
                          principles should be made at this time or when awareness training is
                          completed for top officials.

Development of a Vision   The Comptroller General’s guidelines of April 11, 1990, are a good start
                          toward developing a vision statement for GAO. The vision statement
for GAO                   should be based upon a review of our customers’ needs and should give
                          some general priorities for meeting those needs.

                          It should describe the GAO of the future and inspire action toward real-
                          izing the new vision. It should address the role of the major components
                          of GAO, including headquarters, regional offices, and staff functions.

                          The vision statement should be reviewed at a management workshop,
                          after which the statement should be widely circulated for comment.
                          After a statement is adopted, it should be disseminated to all GAO per-
                          sonnel. The vision should then be translated into a set of time-phased 5-
                          year objectives for the agency.

                          This should be accomplished during the fourth and fifth months of the

                          Page 42                                                   GAO,‘ACG-Ops-91-l
                               Chapter 6
                               Proposed First-Year Steps to Implementing
                               Quality Management at GAO

Training for the Quality       The quality council needs expertise in the practice and theory of quality
                               management. Council members, as well as other employees helping to
Council                        facilitate implementation, should be trained in techniques and applica-
                               tions. This training may include an introduction to using statistical pro-
                               cess controls, Pareto analysis, flow charting, cause-and-effect diagrams,
                               and effective team-building techniques.

                               Team building is a hallmark of quality management. The quality council
                               should include that objective in its planning. Its own performance can
                               serve as a role model for the agency.

                               This should be done during the fifth through seventh months of the

Development of the GAO-        The quality council should develop a quality plan, which should estab-
                               lish implementation milestones and include comprehensive quality
W ide Quality Plan             assessment and organizationwide and training-related changes.

                               Comprehensive quality assessment involves

                           . identifying GAO'S various customers and their needs,
                           l assessing the attitudes of GAO staff and relationships among major units,
                           . assessing the quality of GAO'S products and services, taking into account
                             the new perceptions about customers’ needs; this is the starting point
                             for designing quality improvements.

                               Organizationwide changes involve

                           9 establishing cross-functional quality improvement teams for groups
                             selected for prototype applications and ongoing improvements for which
                             a need is revealed,
                           . implementing annual quality reviews, and
                           l developing/acquiring technical resources or expertise. Training-related
                             change involves
                           l preparing a “blueprint” for quality management training, for example,
                             skills for personnel in prototype groups and quality management aware-
                             ness training for all personnel;
                           . preparing training materials that reflect techniques and approaches to
                             process improvements, such as Deming’s “Plan-Do-Check-Act” model for
                             process improvement; and

                               Page 43                                                     GAO/ACG-Ops-91-l
              Chapter 6
              Proposed First-Year Steps to Implementing
              Quality Management at GAO

          l   providing critical management and technical training identified by
              quality improvement teams.

              This step should begin once the approval to implement total quality
              management has been given. It should be completed between the eighth
              and tenth month of the process.

              Guidelines for developing a GAO-wide quality implementation plan
              should parallel the criteria for the Malcolm Baldrige Award.

Summary       There are critical steps to be taken in the first year that will largely
              determine whether GAOwill successfully continue and adopt a quality
              management philosophy. These include

          l   the quality assessment,
          .   the setting of priorities,
          9   equipping staff and organizational units to carry out the work,
          9   changing the ways work is performed, and
          9   evaluating results to see if objectives have been met.

              Quality management in both the public and private sectors has resulted
              in significant improvements in quality and employee morale. In addition,
              there have often been dramatic cost savings that have more than offset
              the initial investment required to implement quality management.

              In Dr. Deming’s words, this is a “win-win” situation.

              Page 44                                                     GAO,‘ACG-Ops-91-l
Chapter 6
Proposed First-Year Steps to Implementing
Quality Management at GAO


Page 45                                     GAO/ACGOps-91-l
Appendix I

Dr. Deming’s GAO Presentation

               This appendix summarizes the key points of Dr. W. Edwards Deming’s
               lecture given at GAO on the morning of June 9,199O.

Background     Eighty-nine years young, Dr. Deming is perhaps the most widely recog-
               nized management expert in the world. In Japan the most prestigious
               award a company can win is the Deming Prize, awarded only after a
               company’s practices and methods are rigorously studied for many years
               by a team of examiners. Although Dr. Deming is perhaps best known for
               his development of statistical quality control measures to improve man-
               ufacturing operations, his overarching philosophy is that all organiza-
               tions need to do a much better job of managing people. Dr. Deming’s
               humanistic vision is that people have intrinsic strengths and values-
               self-esteem, enthusiasm, a willingness to learn-but that organizations
               in general have adopted practices that crush these attributes to the det-
               riment of organizations and society at large.

               Dr. Deming first made his mark in Japan in the late 1940s. After being
               rebuffed in his efforts to work with American firms to improve the
               quality of their products, Dr. Deming traveled to Japan to assist the
               post-war recovery efforts. U.S. firms at the time were expanding in mar-
               kets and worldwide dominance and did not see the need to improve their
               operations. His ideas met a ready audience in Japan, and in the close-
               knit Japanese industrial community, his ideas quickly spread. Through
               the Japanese Union of Scientists and Engineers, Dr. Deming gained a
               platform for delivering a basic message: by focusing on and consistently
               improving the quality of their manufactured products, the Japanese
               could eventuahy achieve world-class status.

               Forty years later, it is the United States that needs to learn Dr. Deming’s
               lessons. But today his message has broadened. Dr. Deming’s lessons are
               as much about how to relate to other people as they are about business
               management. Dr. Deming’s favorite saying, “there’s no substitute for
               knowledge,” highlights his key point: we are being undercut by best
               efforts conducted in the absence of a firm knowledge base. He sees per-
               vasive ignorance in the way employees and managers relate to each
               other, and he has now dedicated his life to teaching his lessons.

Key Points     Following are the key points of Dr. Deming’s lecture:

               Page 46                                                     GAO,‘ACGOpe91-1
    Appendix I
    Dr. Deming’s GAO Presentation

. Dr. Deming began by asking where quality originates. Needless to say, it
  is not on the shop floor. Quality originates in the boardroom, as does
  failure. He noted that “banks don’t fail because a teller fills out a form
  improperly. They fail because of bad management decisions.” Dr.
  Deming stated that the systems put into place by management deter-
  mine the quality of an organization’s performance.
. Dr. Deming said several times, “we are being ruined by best efforts.” He
  argued that there is no substitute for knowledge and that this knowl-
  edge must come from the outside. Dr. Deming noted, “I learned so much
  in the last week that it would take me hours to write it all down” and
  emphasized the need for maintaining openness to new ideas and
. Dr. Deming said that the size of an organization is irrelevant to its crea-
  tive capacity. He cited Bell Labs as an example of a creative monopoly
  and said that the true determinant of creativity is “the freedom that
  people have to create things.” Managers in all organizations can provide
  this freedom.
l Dr. Deming criticized managers who spend their time “stamping out
  fires, but never improving things.” He described the approach of many
  managers who use measures of past performance to guide their deci-
  sions as “driving a car by looking only at the rear view mirror.”
. On at least three occasions, Dr. Deming eviscerated the concept of
  annual appraisals and performance-rating systems. He dismissed annual
  appraisals as “nonsense,” noting that variation is inevitable, and added,
  “you can only measure the unimportant.” He described appraisal sys-
  tems as “destroyers of people.” Dr. Deming argued, “everything should
  be measured by its contribution to the system.” He compared organiza-
  tions to orchestras and pointed out the chaos that would result if indi-
  vidual performance was stressed in a 130-piece orchestra.

    Dr. Deming attributed the use of appraisal systems to a pervasive igno-
    rance of statistical variation, In a nutshell, his philosophy is that the use
    of any one indicator to measure performance would be as meaningful as,
    for example, ranking a work force according to height and that manage-
    ment’s persistent efforts should be directed at improving the system to
    enhance everyone’s efforts. At one point in his discussion, Dr. Deming
    noted, “if there is one word that I can barely utter, it is ‘ranking.’ Why
    create an artificial shortage of winners?”

9 Dr. Deming noted, “perhaps 2 of every 100 managers and 12 of every
  100 employees,” are happy at work. He asked rhetorically, “How are we
  doing?” and then pointed out that his Japanese-made microphone,

    Page 47                                                      GAO/ACGOps-91-l
        Appendix I
        Dr. Deming’s GAO Presentation

        which “contains 18 cents worth of American-made raw materials, prob-
        ably cost GAO $2,000 or maybe $1,800 on sale.” Dr. Deming argued, “we
        have an obligation to improve the way we do things.*’ His recommended
        solution is to improve our knowledge about optimizing systems. He con-
        sistently returned to the need to improve our system of management.
        “Only foolishness and ignorance holds us back,” he said.
l       Returning to appraisal systems, Dr. Deming challenged GAO. “You are
        the General Accounting Office, so tell me, where do you record the costs
        of your appraisal system? Where do you record the losses?”He con-
        tinued by noting that the most important figures are never on the bal-
        ance sheet, The most important figures are unknowable. Dr. Deming
        added that he would refuse to refine instruments of measure, implicitly
        setting the process on a higher conceptual plane.
l       Dr. Deming outlined his “System of Profound Knowledge for Manage-
        ment in Industry, Education, and Government.” He described this
        system as the interdependent mastery and usage of four activities:

        l    Develop an appreciation for the importance of having a system in
        l    Develop an understanding of the theory of variation.
        n    Develop a practical theory of acquiring and using knowledge gained
             from outside sources.
        l    Develop an understanding of psychology.

            He asked and then answered his own rhetorical question: “Is gaining the
            knowledge of variation difficult? Nonsense.”

    . Dr. Deming was sharply critical of the government’s mismanagement of
      its relationship with business, He views deregulation and blind faith on
      competition as “pure nonsense” and asked the audience, “How many
      different airlines fly from Washington, D.C., to Detroit. One. St. Louis?
      One. What are you doing about this ?” He described the deregulation of
      the U.S. telephone system as a disgrace. “Do people learn?” Dr. Deming
    l Dr. Deming said that consensus decision-making does not automatically
      lead to a better decision. He noted that enlargement of a decision process
      doesn’t necessarily lead to optimization and again returned to his main
      premise: knowledge always comes from the outside. In a line Spike Lee
      would appreciate, Dr. Deming said, “just to do something is not right-
      do the right thing.”
    l Dr. Deming spoke briefly on the differences between .Japaneseand
      American society. He pointed out, “I don’t want to hold Japan out as a

            Page 48                                                  GAO,‘ACGOps-91-l
  Appendix I
  Dr. Deming’s GAO Presentation

  model; five of the most horrible examples in my book deal with Japa-
  nese companies,” but he stressed the differences in outlook. “In Japan,
  someone is assumed to be good until he demonstrates beyond doubt that
  he is a scoundrel.” He said that cooperation is natural in Japan and that
  the Americans and ,Japaneseshould work together for the benefit of

  Dr. Deming illustrated differences in the way children are raised and
  schooled by citing a story about his friend’s daughter, who was thrilled
  with the costume she had designed for a Halloween party at school and
  was having a great time until someone decided to award a prize for the
  best costume. The little girl didn’t win and was devastated-another
  “loser” artificially created. Dr. Deming noted that American society,
  little by little, erodes self-esteem.

9 As he ended his discussion, Dr. Deming reiterated his belief that there is
  no substitute for knowledge and warned that “everyone doing their
  best” is inadequate if they are doing the wrong things. “Does anybody
  give a hoot?” he asked.

  Page 49                                                    GAO/ACGOps-91-l
Appendix II

Key principles of W. Edwards Deming

                        Deming’s primary thesis is that organizations thrive by releasing the
                        power of intrinsic motivation, creating joy, pride, and happiness in work
                        and learning for all employees. Principles, such as the importance of
                        leadership, attainment of profound knowledge, application of statistical
                        methodologies, understanding and harnessing the sources of variation,
                        and adoption of a cycle of continuous quality improvement, are at the
                        heart of Deming’s philosophy.

Deming’s 14 Points of   1. Create constancy of purpose for improvement of products and
Management Obligation
                        2. Adopt the new philosophy; we are in a new economic age.

                        3. Cease dependence on mass inspection to achieve quality.

                        4. End the practice of awarding business on the basis of price tag alone.
                        Instead, minimize total cost and improve quality by working with fewer

                        5. Improve constantly and forever every process for planning, produc-
                        tion, and service.

                        6. Institute training on the job.

                        7. Adopt and institute leadership.

                        8. Drive out fear.

                        9. Break down barriers between staff areas.

                        10. Eliminate slogans, exhortations, and targets for the work force.

                        11. Eliminate numerical quotas for the work force and numerical goals
                        for management.

                        12. Remove barriers that rob people of pride of workmanship. Eliminate
                        the annual rating system.

                        13. Institute a vigorous program of education and self-improvement for

                        Page 50
Appendix El
Key Principles of W. Edwards Deming

14. Put everybody in the company to work to accomplish the transfor-
mation. Establish a management system to continually focus on the pre-
ceding 13 points.

Page 51                                                 GAO,‘MX+Ops-91-l
Appendix III

Key principles of Joseph M. Juran

                               Dr. Juran focuses on strategies to attain and hold quality leadership,
                               define roles of management for leading organizations, and enable upper
                               level management to sustain leadership in achieving its vision.

The Quality Trilogy            .Juran developed the Quality Trilogy, which provides a universal way of
                               thinking about quality. The trilogy consists of

                       l       quality planning, the process for preparing to meet quality goals;
                       l       quality control, the process for meeting quality goals during operations;
                           l   quality improvement, the process for breaking through to superior,
                               unprecedented levels of performance.

10 Steps to Qua1.ity           “When it comes to quality, there is no such thing as improvement in
                               general. Any improvement in quality is going to come about project by
Improvement                    project and no other way,” notes Juran in his book, Upper Management
                               and Quality. Dr. Juran’s 10 steps to quality promote a project-by-project,
                               problem-solving team method of quality improvement, in which upper
                               management must be involved.

                               1, Build awareness of opportunities to improve

                               2. Set goals for improvement.

                               3. Organize to reach the goals (establish a quality council, surface
                               problems, select quality improvement projects, appoint teams, and des-
                               ignate facilitators).

                               4. Provide training.

                               5. Carry out projects to solve problems.

                               6. Report progress.

                               7. Give recognition.

                               8. Communicate results.

                               9. Keep score.

                               Page 52
Appendix III
Key Principles of Joseph M. Juran

10. Maintain momentum by making annual improvement part of the reg-     1
ular systems and processes of the company.                             t9

Page 53                                              GAO/ACG-Opw91-1
Appendix IV

Key principles of Philip B. Crosby

                      At about the time that Deming’s quality and productivity principles
                      attracted interest in this country, Crosby, an International Telephone
                      and Telegraph (I~) executive in quality control services published a
                      book, Quality is Free, based on his application of the total quality man-
                      agement philosophy and principles while at ITT. After years as a quality
                      control pioneer, he realized that focusing on behavior of people in orga-
                      nizations and involving them in solving quality problems leads to
                      employee empowerment and commitment, which in turn leads to con-
                      tinual improvement in work processes and service to external and
                      internal customers,

                      In 1979, after 29 years with ITT, Crosby formed Philip Crosby Associ-
                      ates. His first significant customers were the Tennant Company and
                      International Business Machines (IBM), with whom he maintains a con-
                      sulting relationship today. Tennant wanted a quality program that could
                      be adapted throughout the organization in manufacturing and adminis-
                      tration. Today Tennant has more than 60 people capable of instructing
                      80 different topics related to Crosby’s total quality management

Four Absolutes        Crosby believes quality must be initiated through deliberate manage-
                      ment action. The philosophical basis for the desired quality culture
                      change is found in his Four Absolutes of Quality Management:

                      1. Quality is defined as conformance to requirements.

                      2. The system for causing quality is prevention.

                      3. The performance standard is zero defects

                      4. The measurement of quality is the price of nonconformance.

14 Steps to Quality   The 14-Step Quality Improvement Process is designed to structure and
                      position the organization for operational improvements and improved

                      1. Make it clear that management is committed to quality.

                      2. Form quality improvement teams with representatives from each

                      Page 54                                                     GAO/ACGOps-91-1
                Appendix IV
                Key Principles of Philip B. Crosby

                3. Determine where current and potential quality problems lie.

                4. Evaluate the quality awareness and personal concern of all

                5. Raise the quality awareness and personal concern of all employees.

                6. Take actions to correct problems identified through previous steps.

                7. Establish a committee for the zero defects programs.

                8. Train supervisors to actively carry out their part of the quality
                improvement program.

                9. Hold a “zero defects day” to let all employees realize that there has
                been a change.

                10. Encourage individuals to establish improvement goals for them-
                selves and their groups.

                11. Encourage employees to communicate to management the obstacles
                they face in attaining quality goals.

                12. Recognize and appreciate those who participate.

                13. Establish quality councils.

                14. Do it all over again to emphasize that the quality improvement pro-
                gram never ends.

Relationships   According to Crosby, relationships and quality are two keys to suc-
                cessful leadership. A management team must exercise care to avoid
                viewing relationships and quality as overhead functions that do not con-
                tribute directly to profitability. Crosby said, “The ecology of an organi-
                zation is as delicate and vulnerable as that of a forest, Nothing happens
                without having an effect on something. The key to all these things
                within a company, as within a forest, is relationships.”

Quality         According to Crosby, “Quality is the result of a carefully constructed
                culture; it has to be the fabric of the organization-not part of the fabric
                but the actual fabric. It is not hard for a modern management team to

                Page 55                                                     GAO,‘ACGOps-91-l
 Appendix IV
 Key Principhs of Philip B. Crosby

 produce quality if they are willing to learn how to change and


Page 56                                                   GAO,‘ACXWps-91-l
Appendix V

National Quality Awards

                                Interest in the principles and applications of quality management is
                                spreading rapidly. Reflecting this interest, several prestigious award
                                programs now recognize organizations that have achieved superior
                                levels of quality in their operations.

The Deming Prize                The oldest and most prestigious quality award, the Deming Prize, is
                                sponsored by the Japanese Union of Scientists and Engineers and was
                                created to honor Dr. Deming’s work in Japan. To win this award, compa-
                                nies must submit to a rigorous, multiyear examination by independent
                                examiners. Thus far, only one American company has received this
                                award-Florida    Power and Light. Officials of severa leading U.S. com-
                                panies, however, reported that they do not want to apply for the
                                Deming Prize because of their apprehension about exposing internal
                                business operations to teams of examiners representing a Japanese
                                industrial association.

Malcolm Baldrige National       The Malcolm Baldrige National Quality Award was established in 1987
Quality Award                   and is gaining widespread acceptance among US. companies. This
                                award is designed to promote quality awareness, recognize quality
                                achievements of U.S. companies, and publicize successful quality strate-
                                gies. The U.S. Department of Commerce’s National Institute of Stan-
                                dards and Technology sponsors the award, which is administered by the
                                Malcolm Baldrige National Quality Award Consortium, Inc., a joint effort
                                of the American Productivity and Quality Center and the American
                                Society for Quality Control.

                                In the first 3 years of the award’s existence, 30 companies or divisions
                                of companies qualified for site visits by Baldrige examiners. Nine com-
                                panies have won the award: Motorola; Globe Metallurgical, Inc.; West-
                                inghouse Corporation, Nuclear Fuels Division; Xerox Corporation,
                                Business Products and Services Division; Milliken & Co.; IBM’S AS-400
                                Division; Cadillac Division of General Motors; Federal Express; and Wal-
                                lace and Company.

                                The Baldrige Award is based on an examination of a company’s quality
                                performance in the following areas:

                            l leadership,
                            l information and analysis,
                            * strategic quality planning,
                            . human resource utilization,

                                Page 57                                                    GAO/ACGOp@-9-91-l
                                     Appendix V
                                     National Quality Awards

                                 l quality assurance of products and services,
                                 . quality results, and
                                 . customer satisfaction.

Federal Government                   En 1988 President Reagan issued an Executive Order calling for the
                                     establishment of “a governmentwide program to improve the quality,
Quality Initiatives                  timeliness, and efficiency of services provided by the federal govern-
                                     ment.” In that year the Federal Quality Institute (FQI) was established in
                                     the Office of Personnel Management (OPM) to stimulate quality aware-
                                     ness and educate government leaders about an organizational culture
                                     that emphasizes excellence, continuous improvement, strong customer
                                     service, and “doing the right thing right the first time.”

President’s Award for Quality        Sponsored by the FQI, the President’s Award for Quality and Produc-
and Productivity Improvement         tivity Improvement is given annually to an agency that has implemented
                                     T & M in an exemplary manner and is providing high-quality services to its
                                     customers. So far, only the Naval Air Systems Command has won this
                                     award. Only agencies that have received a Quality Improvement Proto-
                                     type Award are eligible to win, Examiners review applicants’ quality in
                                     the following areas:

                                 . top management leadership and support,
                                 l strategic planning,
                                 l focus on the customer,
                                 9 employee training and recognition,
                                 l employee empowerment and teamwork,
                                 l measurement and analysis,
                                 . quality assurance, and
                                 l quality and productivity improvement results.

Quality Improvement Prototypes       Federal agencies that are achieving high standards of quality, effi-
                                     ciency, and timeliness in service delivery can win Quality Improvement
                                     Prototype awards. Thirteen such prototypes have been designated to
                                     date, There are 34 applications pending for recognition in 1991 at FQI,
                                     which has assumed this responsibility from OMR.

                                     Page 58                                                    GAO/ACGOps-91-l
Appendix VI

Case Studies

Defense Industrial Supply
Mission                                The Defense Industrial Supply Center (DISC) in Philadelphia is one of six
                                       supply centers of the Defense Logistics Agency. It buys and manages
                                       927,308 hardware items to support the military departments, federal
                                       civilian agencies, and foreign governments.

Quality Improvement   Objectives       In 1985, after thousands of new items had been assigned to the Center,
                                       supply availability was suffering, product quality was inadequate, back
                                       orders were accumulating, and many feared that the Center would
                                       merge with another supply center. Although a quality circles program
                                       was in place, management realized that it would have to take responsi-
                                       bility for quality and established a three-part command goal to

                                   . support customers by being responsive and efficient;
                                   l take care of its people; and
                                   . become a high-quality, cost-conscious center.

Scope of TQM Application               Top management actively participated in quality improvement. The
                                       Center initiated a series of environmental assessments, and 22 top man-
                                       agers attended a Deming seminar. Using a TQM council as a steering com-
                                       mittee, the center launched efforts in five major areas:

                                   . employee involvement through quality circles/task teams;
                                   l quality improvement planning keyed to long-term goals;
                                   . training, including the principles and techniques of process
                                   0 evaluation of participative environment and measurement of the effec-
                                     tiveness of work processes; and
                                   l recognition for both groups and individuals.

Status and Accomplishments             The program is ongoing and includes regular evaluations of the Center’s
                                       status and the involvement of all employees. OMB designated the Center
                                       as a 1990 Quality Improvement Prototype. Specific accomplishments

                                   l tangible savings of more than $3 million,
                                   9 reduction of contract processing time from 175 to 147 days,
                                   . a 39 percent reduction in procurement backlog,
                                   0 a 25 percent reduction in the complaint-handling backlog, and

                                       Page59                                                     GAO/ACGOpsBl-I
                                     Appendix VI
                                     Case Studies

                                 .   a reduction in turnaround time required to test products (from 120 days
                                     to 3 weeks).

NASA Lewis Research
Mission                              The Lewis Research Center in Cleveland, Ohio, is NASA'S leader in
                                     research and technology development in aircraft propulsion and space
                                     power. It also plays a major role in space science and applications

Quality Improvement Objectives       A decade ago, the Center had no major role in the space shuttle program
                                     and was in danger of closing. A new director set out to revitalize the
                                     center, using the principles of total quality management. Specifically, he
                                     initiated efforts to

                                     develop a strategic plan that identifies and anticipates customer needs;
                                     encourage employee participation, creativity, and teamwork; and
                                     seek ways to provide top quality to all customers.

Scope of TQM Application             Key elements are

                                     strategic planning,
                                     emphasis on customer needs and satisfaction,
                                     “flattening” the organizational structure,
                                     quality circles and productivity and quality enhancement teams,
                                     expansion of the employee suggestion program,
                                     contractor incentives, and
                                     vigorous, visible senior management support for productivity and
                                     quality improvement.

Status and Accomplishments            Current management has enhanced and expanded the Center’s commit-
                                      ment to excellence, teamwork, and customer satisfaction. The Center
                                      won the Collier Trophy for the year’s greatest achievement in aeronau-
                                      tics or astronautics. OMR designated the center a 1989 Quality Improve-
                                      ment Prototype. Following are specific accomplishments:

                                      about a 40 percent increase in technical publications by staff;
                                      a nearly 50 percent increase in disclosures of invention;
                                      substantial growth in research quality, as measured by peer reviews and
                                      professional organization recognition;

                                      Page 60                                                   GAO/ACGOpt+91-1
                                     Appendix Vl
                                     Case Studies

                                 . the introduction of numerous process improvements, including com-
                                   puter-aided design, engineering, and manufacturing;
                                 . streamlining of procurement methods, resulting in a customer satisfac-        r
                                   tion index of about 90 percent; and
                                 l energy conservation efforts that saved an estimated $500,000 annually.

USDA Forest Service
Mission                              The primary responsibility of the Forest Service is the effective manage-
                                     ment of the country’s national forest lands. The Forest Service also has
                                     duties involving research and state and private forestry issues.

Quality Improvement Objectives       The Forest Service set out to improve the agency’s management. It
                                     launched the 5-year National Pilot Test in 1985 to revitalize the agency
                                     and inject a people-oriented management philosophy. The agency intro-
                                     duced efforts to

                                 l loosen constraints on people and eliminate bureaucratic red tape,
                                 . empower the work force through increased freedom and authority at all
                                   levels, and
                                 9 improve customer service and enhance quality and productivity.

Scope of TQM Application             Key elements are

                                 l   encouraging and rewarding risk-taking, learning to accept failures as
                                     learning experiences;
                                 l   pilot testing new and creative ideas;
                                 l   allowing managers greater autonomy in the budget process, moving
                                     from a management-of-the-budget approach to management by the
                                     budget; and
                                 l   creating a quality management charter for distribution to the entire
                                     work force to communicate the agency’s quality, customer, and
                                     employee-oriented values.

Status and Accomplishments           The National Pilot Test has just concluded, and the Forest Service is
                                     beginning to institutionalize the quality management philosophy
                                     organizationwide. Special programs promoting teamwork, creativity,
                                     innovation, and a customer focus have begun across the agency. The          r
                                     new management-by-the-budget approach has been received favorably
                                     and has allowed managers to spend more time on supervision, moni-
                                     toring performance, and assessing forest needs through on-site visits.

                                     Page 61                                                   GAO/ACGOps-91-l
                                     case Stndies

                                     Employee morale of those in the pilot test units has improved; the
                                     agency hopes to expand this throughout the organization with the new
                                     management philosophy.

Standardization Program
and Documents Division
Mission                              The Standardization Program and Documents Division develops, main-
                                     tains, and coordinates all military and federal specifications, standards,
                                     handbooks, and bulletins. NAVSEA uses these materials in procurement
                                     documents for components, equipment, and systems.

Quality Improvement Objectives       The Ship Design and Engineering Directorate and the Specification Con-
                                     trol Advocate General initiated a program to develop a strategic plan for
                                     implementing TQM. A team of experts studied the problems associated
                                     with the standardization process, developed initial plans for solutions,
                                     and constructed a broad strategy for implementing TQM in the standardi-
                                     zation process.

Scope of TQM Application             Key elements are to

                                 l   generate a list of roadblocks, strategic goals, and tactical objectives;
                                 l   conduct process flow analysis;
                                 l   determine amount and cause of outdated specifications and standards;
                                 l   use Pareto analysis to determine time-consuming steps;
                                 l   develop control charts for the 13 key steps of the standardization pro-
                                     cess; and
                                 l   develop a performance measurement system.

Status and Accomplishments           The NAVSEA standardizsion process has improved significantly since the
                                     first session in 1989. The team has published a strategic plan to imple-
                                     ment TQM and has focused on streamlining the process. W ith the current
                                     changes, the agency should be able to reduce the entire process time by
                                     58 percent in 1 year. The Command received recognition for achieving
                                     its improvement efforts by winning the 1989 Defense Standardization
                                     Program Outstanding Performance Award.

                                     Page62                                                      GAO/ACGOps-91-l
                                     Appendix VI
                                     Case Studies

IRS Federal Tax Deposit
(FTD) System
Mission                              The IRS is supposed to collect the proper amount of tax revenues at the
                                     least cost to the public. The FTD System is the single largest collector,
                                     responsible for collecting and processing various categories of tax pay-
                                     ments from businesses.

Quality Improvement Objectives       IRS Commissioner Lawrence B. Gibbs committed the IRS to a long-term
                                     quality improvement effort. In the FTD System, 1.5 million transactions
                                     were not posted to taxpayers’ accounts in a timely fashion. In addition,
                                     roughly 40 percent of customers’ requests for forms were not being
                                     processed in a timely manner. Customers were getting frustrated, and
                                     problem cases were becoming unmanageable. The FTD System sought to
                                     solve these problems and improve overall quality and customer

Scope of TQM Application             Key elements are

                                 . formation of a quality improvement team,
                                 l use of Pareto analysis and other statistical techniques to help identify
                                   critical elements of problems, and
                                 4 surveys and interviews of both external and internal customers to
                                   improve products and processes.

Status and Accomplishments           As of February 1987, 157 recommendations were made. After imple-
                                     menting nearly all of these, the agency achieved the following:

                                 . a 2 percent decline in unpostable transactions (errors) in 1 year,
                                   resulting in an annual savings of $250,000 (beginning in 1988, the error
                                   rate was 0.2 percent, down from 3.1 percent in 1986);
                                 . a reduction in errors due to incorrect ID numbers or names (errors
                                   decreased from 34,000 per week in 1986 to 1,572 per week in 1988); and
                                 l a 50 percent reduction in errors associated with a particular form.

                                     OMB  designated the FTD System a Quality Improvement Prototype. In
                                     addition to this organization, three other IRS organizations were desig-
                                     nated by O M Bas prototypes, demonstrating the increasing awareness of
                                     total quality management at IRS.

                                     Page 63                                                    GAO/AC&Ops-91-l
                                     Appendix VI
                                     Case Studies

Xerox Corporation
Business Products and
Systems Division
Mission                              Xerox is the world’s largest provider of copiers, duplicators, and elec-
                                     tronic printers. Business Products and Systems, Xerox’s largest division,
                                     with 50,200 employees and $6 billion in 1988 sales, was one of two win-
                                     ners (along with Milliken & Co,) of the 1989 Malcolm Baldrige National
                                     Quality Award.

Quality Improvement Objectives       In late 1983, Xerox initiated a long-term quality improvement program,
                                     Leadership Through Quality, that had been developed during a 15-
                                     month period. At the time, higher quality, less expensive Japanese
                                     copiers were threatening Xerox’s long-term survival in the copier busi-
                                     ness. As part of Leadership Through Quality, Xerox promoted a quality
                                     policy: Quality improvement is the goal of every Xerox employee.

Scope of TQM Application             Leadership Through Quality specified a 5-year cultural change strategy
                                     that contained six mechanisms:

                                 l management leadership demonstrated through daily practice,
                                 l transition teams to support line management,
                                 l new standards and measurements to help Xerox employees assessand
                                   perform their work,
                                 . triining to provide every Xerox employee an understanding of Leader-
                                   ship Through Quality,
                                 l recognition and reward for both individuals and groups who assist the
                                   quality improvement effort, and
                                 l communication to keep all Xerox people informed of the progress of
                                   Leadership Through Quality.

                                     Xerox also pioneered the technique of benchmarking performance in all
                                     operational areas according to outside standards.

Status and Accomplishments           According to Dataquest, an independent market analysis firm , five of
                                     the six highest quality copiers in the world today are built by Xerox.
                                     Xerox’s 1075 copier won the Japanese Ministry of International Trade
                                     and Industry’s 1989 grand prize for industrial design. Xerox performs
                                     well above industry standards in customer service, manufacturing pro-
                                     ductivity, and employee relations and safety. Xerox is also gaining
                                     market share in all key worldwide markets.

                                     Page 64                                                    GAO,‘ACG-Ops-91-l
                                 Appendix VI
                                 Case Studies

3M Corporation
Mission                          3M is a highly diversified company that markets more than 50,000 prod-
                                 ucts worldwide. Tom Peters, in Thriving in Chaos, described 3M as the
                                 only truly excellent U.S. corporation today. Forbes cited 3M as one of
                                 America’s three most highly regarded companies. 3M has 82,000
                                 employees worldwide and had 1989 sales of almost $12 billion.

Quality Improvement Objectives   In 1980 the company established a Corpc;ate Quality Department to
                                 define quality objectives and design a strategy to implement continuous
                                 quality improvement throughout the corporation. 3M sought to rein-
                                 force its innovative culture with a sharpened focus on meeting customer

Scope of TQM Application         3M defined five essentials of quality.

                                 Quality is defined as consistently meeting customers’ expectations and
                                 has three elements: consistency, expectation, and the customer.
                                 Quality is measured through indicators of customer satisfaction.
                                 Customer expectations should be met 100 percent of the time.
                                 Quality is attained through prevention-oriented improvement projects.
                                 The quality process starts with management commitment.

                                 3M’s implementation strategy had the folIowing key elements:

                                 defining 3M’s quality vision,
                                 changing management perceptions through specialized training,
                                 empowering employees to focus on and satisfy customer expectations,
                                 sustaining the process through an ongoing culture change.

Status and Accomplishments       3M’s approach to quality is now so highly regarded that executives from
                                 leading U.S. companies regularly travel to St. Paul to attend monthly
                                 briefings sponsored by 3M. Quality indicators tracked by 3M’s quality
                                 office-cost of poor quality, defect rates, cycle times-are well ahead of
                                 industry standards. 3M’s return on equity and profits hit record highs in
                                 1989. And, most importantly, 3M’s culture is seen as a model for large
                                 organizations! fostering innovation and teamwork.

                                 Page 65                                                   GAO/ACGOps-91-l
                                    Appendix   VI
                                    Case Studies

Motorola, Inc.
Mission                             Motorola is a leading manufacturer of electronic equipment, systems,
                                    components, and service. Products include tw -way radios, cellular tele-
                                    phones, semiconductors, defense and aerospace electronics, automotive
                                    and industrial electronics, computers, data communications, and infor-
                                    mation processing and handling equipment. Motorola was a 1988 winner
                                    of the Malcolm Baldrige National Quality Award.

Quality Management Objectives       In 1981 Motorola established a fundamental goal of impri ;rir:; its
                                    quality by 10 times by 1986. All Motorola employees became members
                                    of a participative management program (PMP) team and were empow-
                                    ered to assess and improve their work processes. The Motorola culture
                                    assisted the process-Motorola was seen as a caring, loyal company. For
                                    example, no employees with 10 years of service can be released without
                                    the explicit approval of the CEO.

                                    In 1987 after successfully meeting its 1981 quality objectives, Motorola
                                    restated its quality goal: to improve 100 times by 1991 and to achieve
                                    six sigma capability by 1992.

Scope of TQM Application            Motorola applied TQM to every aspect of its operations and six sigma to
                                    every significant business process. To focus its quality improvement
                                    efforts, Motorola adopted a common metric to every process: a defect is
                                    anything that causes customer dissatisfaction; a unit is any unit of

                                    Motorola’s      TQM   implementation had the following key elements:

                                .   establishment of “Motorola UnivelGty,” a $150 million investment to
                                    teach state-of-the-art TQM principles;
                                l consistent focus on quality by the CEO and Chairman;
                                . annual CEO quality awards to recognize superior quality achievements
                                  by Motorola employees;
                                . regular contacts between all Motorola managers and customers; and
                                . consistent emphasis on cycle time reduction.

Status and Accomplishments          Six sigma capability is used as a benchmark metric for an increasing
                                    number of U.S. companies. Motorola has received more awards for
                                    excellence as a supplier than any other U.S. company and is widely
                                    acknowledged as a quality leader. Sales and profit margins were at
                                    record highs in 1989.

                                    Page 66                                                        GAO/ACGOps-91-l
                                    Appendix Vl
                                    Case Studies

North American
Automotive Group of Ford
Motor Company
Mission                             Ford is the world’s second largest industrial corporation and the second
                                    largest car and truck concern, The North American Automotive Group is
                                    the only U.S. automobile manufacturer increasing its market share in
                                    North America and was a finalist for the 1989 Malcolm Baldrige
                                    Kational Quality Award.

Quality Management Objectives       In 1981 when it was losing $1,000 on every automobile it sold, Ford
                                    began shifting to a total quality culture. Ford engaged Dr. W . Edwards
                                    Deming to facilitate the change. Ford’s objective was to change the fun-
                                    damental way in which its 300,000 worldwide employees interacted
                                    with each other.

Scope of TQM Application            Ford focused on five major areas:

                                l   using new methods to improve its manufacturing process and establish a
                                    continuous improvement culture,
                                l   empowering its employees through a program called employee involve-
                                    ment (El),
                                l   benchmarking world-class performance standards and using these as
                                    fundamental targets in developing new products,
                                l   establishing partnerships with its dealers and suppliers, and
                                l   restructuring the organization to become more efficient and cost

                                    EIwas critical to Ford’s turnaround. Ford established a new relationship
                                    with the United Auto Workers to build teamwork into the production
                                    process. EI has been in place for 10 years, driven by team building and
                                    education. Communications and an active employee suggestion system
                                    are other key elements.

Status and Accomplishments          Quality improvement is a never-ending process. In 10 years, however,
                                    Ford has made remarkable improvements in the quality of its products
                                    and its culture. Ford earns $600 profit on every automobile it sells; GM
                                    earns $25, Chrysler earns $225. Ford is gaining market share, and in
                                    1988 had a higher net income than GM with only two-thirds the amount
                                    of gross revenues. Ford is also the leading foreign producer in the com-
                                    petitive Japanese market.

                                    Page 67                                                   GAO,‘ACGOps-91-l
Appendix VII

GAO Prototypes/Pilots

Ongoing Quality
Management Prototype of
the National Security and
International Affairs
Division (NSIAD) Trade,
Energy, and Finance (TEF)
And Economic Analysis
Groups (EAG)
Overview                        NSIAD'S  TEF and EAG Groups are developing a new approach to their work
                                based on the continuous quality improvement management model. TEF'S
                                and EAG'S objectives are to adapt quality management principles to GAO
                                to create a process yielding continuous improvement in the quality of
                                products and a reduction in costs and to create a work environment of
                                greater employee involvement and job satisfaction. For the effort to suc-
                                ceed, it requires a change in the corporate culture, an identification of
                                customer expectations, a consensus-oriented human relations strategy,
                                employee empowerment and involvement, and a redefinition of work
                                processes and products. The effort is designed to build quality into all
                                work processes, rather than at the end of jobs.

Description                     The focal point of TEF'S and EAG'S prototype will be a quality council
                                comprised of the Director and Assistant Directors and elected represent-
                                atives from Bands I and II and the administrative staff. The council will
                                identify and establish priorities for key quality and productivity-related
                                issues and designate continuous improvement teams (CITS). These CITS,
                                staffed by interested employees and operating under the purview of the
                                quality council, will address specific issues.

                                This pilot will require a considerable investment in training-the entire
                                staff will be trained in quality management principles-and in time
                                because of the work of the CITS.

Issues to Be Examined           Following are the tentative issues that have been identified:

                            l defining the mission and purpose of TEF'S and EAG'S work and creating a
                              structure conducive to this work;
                            . identifying all of TEF'S and EAG'S external and internal customers and
                              surveying them to determine how well their expectations are being met;

                                Page 68                                                     GAO/ACG-Ops-91-1
                                 Appendix VII
                                 GAO Prototypes/Pilots

                             . designing an alternative approach to appraising, recognizing, and com-
                               pensating TEF and EAG staff that creates a pride of workmanship, self-
                               esteem, and enhanced dignity;
                             4 defining TEF'S and EAG'S full range of products and services and identi-
                               fying opportunities for improving the work processes in developing
                             l evaluating the prototype’s impacts on TEF'S and EAG'S interactions with
                               other GAO units; and
                             . identifying opportunities for eliminating unnecessary administrative
                               and other tasks that add no value to TEF'S and EAG'S work processes.

                                 The quality council will determine the scope of all efforts by the CITS.

Status and Accomplishments       Quality council elections were held in late September 1990. On October
                                 1, 1990, all TEF and EAG staff received a full day of awareness training in
                                 the principles and philosophies of quality management. Following this
                                 basic awareness training, employees will begin shaping the CITS and out-
                                 lining approaches to problem solving. A continuous training and educa-
                                 tion program will be implemented for all staff. TEF and FAG want to
                                 achieve two seemingly outrageous goals during the pilot:

                             l reduce the time between the end of audit work and the issuing of the
                               report to 1 month, while improving quality; and
                             9 adopt a new appraisal, recognition, and compensation system consistent
                               with continuous quality improvement principIes,

                                 TEF   and EAG will share their experiences on an ongoing basis with other
                                 GAO   units.

Proposed Organizational
Restructuring Prototype of
the General Government
Division (GGD)
Overview                         GGD  has spent the last 9 months carefully analyzing its current organiza-
                                 tional structure and procedures to see how it might better respond to the
                                 conditions and challenges of the 1990s. Specifically, GGD found that

                             l   many staff members (and the newer ones in particular} felt they were
                                 not being fully challenged by their assignments,

                                 Page 69                                                     GAO/ACGOps-91-l
                  Appendix VII
                  GAO Prototypes/Pilots

              . the organizational structure reinforces the inefficiencies of a peaks-and-
                valleys approach to individual assignment management,
              . we are losing strategic thinking and perspectives that come from
                focusing on an integrated body of work rather than on a loosely coupled
                set of individual jobs,
              . the pressures for timeliness and quality will continue to grow even
                though our current organizational structure has reached its limits to
                respond, and
              . diffuse accountability in the regional structure works against timeliness
                and quality.

Description       To respond in a more timely way to the changing environment in which
                  policy is developed and reformulated by the Congress, GGD decided that
                  organizational arrangements did not meet its needs anymore. The con-
                  gressional timeframe for policy analysis and decision-making has been
                  greatly compressed. Consequently, GAO has less time in which to develop
                  and present its analysis to the Congress if the information is to be
                  useful. To ensure that GAO continues its role as an active participant in
                  the policy dialogues on the nation’s pressing issues, we must develop
                  new and improved ways of doing our work-ways that improve our
                  timeliness, enhance our product quality, and best use staff skills and

                  To that end, GGD has developed two models as alternative ways to
                  restructure how it does its work. Three design teams in the division
                  developed these models. While the structures proposed in the two
                  models vary (see figs. VII-l, VII-2, and VII-3), the underlying purpose
                  for both remains the same-to achieve the five objectives listed above.

                  An emphasis in each issue area on the Assistant Directors’ managing a
                  body of work is critical to the organizational changes proposed in the
                  GGD models. Each Assistant Director would be assigned staff and a
                  cluster of assignments. The strategy followed in each model presumes
                  that staff would be on multiple assignments simultaneously and that
                  team assignments and responsibilities would replace traditional hierar-
                  chical decision-making. The staff working for an Assistant Director
                  would come from both headquarters and the regions. Like the headquar-
                  ters staff, regional staff would be assigned to a team, report to the GGD
                  Assistant Director, and be part of the GGD appraisal and compensation

                  Both models retain permanent pay and bonuses as key elements of the
                  compensation system. In Model #I, permanent pay would be based on

                  Page 70                                                    GAO,‘ACG-Ops-91-l
                            Appendix W
                            GAO Prototypes/Pilots

                            judgments about individual performance, while the bonus money would
                            all be allocated to teams; the team members would decide the amount
                            each person would receive. In Model #2, permanent pay would also be
                            based on judgments about individual performance, while the bonus
                            money would be split and offered to both individuals and teams,
                            Changes in models are proposed for the Behaviorally Anchored Ratings
                            Scales (BARS) system, both in content and in the number of dimensions
                            under which any staff member would be assessed.

                            Enhancing the technology used in the division would also be emphasized
                            to better meet the customized information needs of the specific issue

Issues to Be Examined       By restructuring the organization and the way it does its work,     GGD
                            wants to achieve the following explicit objectives:

                        l   create a more challenging work environment for staff by letting them
                            choose those areas where they can make their best contributions;
                        l   achieve greater timeliness in work by having staff work on multiple
                            assignments simultaneously;
                        l   achieve the higher quality that comes from the flexibility to marshal1
                            the necessary resources from the beginning of a study;
                        l   establish clear lines of authority and responsibility for all staff involved
                            in the work through new performance management and compensation
                            arrangements; and
                        l   achieve both a substantive and policy integration of our work that
                            comes from shared knowledge, information, and responsibility among

                            Page 71                                                      GAO/ACG-Op+9l-1
                                                   GAO Prototypes/Pilots

Figure VII-l:   Issue Area Organization      for Model #I

                           Assistant Director


    Assistant                       Assistant                         Assistant                   Assistant
     Director                        Director                          Director                    Director

   Core Staff                      Core Staff                         Core Staff                  Core Staff

                                                            General Staff Assignment   Pool

                                                        lBand I and II Evaluators (GGD)
                                                        @Regional Evaluators
                                                        OResearch AssistantsIParaevaluators   I

                                                    Page 72
                                    Appendix M
                                    GAO Prototypes/Pilots

Figure W-2: Revised Pay and Bonus
System for Model #2

                                                          Assistant   Comptroller    General

                                                    Pay       a Sets budget guidelines
                                                              . Makes final decisions
                                               Bonuses        l Assesses  performance of issue areas
                                                              @Distributes bonus money to issue areas

                                               Bonuses      l Assesses relative performance    of teams

                                                                 Assistant   Directors

                                                    Pay *Makes pay increase recommendations
                                               Bonuses aTeam members establish amounts
                                                         for each member                                  I

                                     Page 73                                                                  GAO,‘ACG-Ops-91-l
                                                 Appendix VII
                                                 GAO Protutypes/Pilots

Figure VII-3   Issue Area Organization     for Model #2

                Administrative                                   Issue Area



                                                                                               Strategic Planning

                                                    I                                 I
                                            Assistant Director                Assistant Director                    Assistant Director

                                                 Page 74                                                              GAWACG-Ops-91-l
Appendix VIII

Glossary of Key Terms

Benchmarking                  A process used to identify the best practices from industry and govern-
                              ment that may be directly or indirectly related to an organization to con-
                              tinually improve and achieve the best in all efforts or work methods,

Constancy of Purpose          A principle used by Dr. W. Edwards Deming to look at improvement of
                              product and service. It promotes a plan to stay in business and con-
                              stantly improve to remain on the leading edge through innovation and
                              research in the mission of the organization.

Cross-Functional              A term used to describe individuals from different business units or
                              functions who are part of a team to solve problems, plan, and so on to
                              develop a solution or product affecting the organization as a system.

Culture                       The pattern of shared beliefs and values that give the members of an
                              organization rules of behavior or accepted norms for conducting opera-
                              tional business.

Empowerment                   A term used to create ownership at all organizational levels. It includes
                              involving staff in problem identification and solving, planning, and so on
                              to enable individuals to have implicit power and motivation to carry out
                              authorities and responsibilities to achieve the highest in product or ser-
                              vice quality.

Pareto Analysis               A statistical method of measurement to identify the most important
                              problems through different measurement scales, for example, fre-
                              quency, cost, and so on. It directs attention and efforts to the most
                              important problems.

Six Sigma                     A statistical term that indicates a defect level of not more than 3.4 parts
                              per million units produced used as a target by Motorola and others.

Statistical Process Control   The use of statistical techniques, such as control charts, to analyze a
                              work process or its outputs. This data can be used to identify deviations
                              to take appropriate actions to achieve and maintain a state of statistical
                              control (predetermined upper and lower limits) and to improve the capa-
                              bility of the process.

                              Page 75                                                     GAO/ACGOps-91-l
Appendix IX

Memo: Guidelines for Setting Work Priorities

                  Date:         April   11,   1990

                  To:           Heads of Divisions and Offices A


                  Subject:      Guidelines for Setting GAO Work Priorities

                  At this year’s Management Conference, I stressed our need to have clear and
                  consistently applied criteria or guidelines which we can use to help set our work
                  priorities. Such guidelines can serve as a useful reminder of our assignment
                  philosophy as we face the difficult assignment decisions which continually
                  confront us.

                  Since the conference, the Office of Program Planning has held discussions with
                  members of the Job Starts Group as well as each division Assistant ComptrolIer
                  General and Director for Planning and Reporting to develop these guidelines
                  and identify an appropriate implementation strategy. The resuIting guidelines
                  and some implementation considerations are attached. As you will notice,
                  there are no surprises or new assignment policies contained in the guidelines+
                  For the most part, these are a restatement of the philosophy we have been
                  emphasizing for some time. By reinforcing this philosophy, however, I am
                  hopeful we will be able to “tone up” our workload and maximize the support
                  we provide the Congress and the contniutions we make to the American

                  The focus for implementing these guidelines resides with GAO managers.
                  However, successful implementation requires that all staff involved in
                  assignment planning and negotiating have a thorough understanding of the
                  guidelines and how they are to be used. To facilitate this understanding, I
                  encourage our senior managers to meet with their staff to discuss the guidelines
                  and the context in which they are to be used. Concurrent with these efforts,
                  the Office of Congressional Relations is meeting with key congressional
                  committees to discuss the guidelines and our strategy for implementing and
                  using them in future assignment negotiations.

                Page 76                                                                       GAO/AN-Ops-91-l

  Appendix IX
  Memo: Guidelines for Setting Work Priorities

ATTACHMENT                                                          ATTACHMENT

                    U.S. GENERAL     ACCOUNT’WG      OFFICE



Since the early 19f@s, GAO has seen its congressional request workload increase
dramatically to a point where more than 80 percent of GAO’s work is in response
to congressional requests. To meet the reporting challenges posed by this level of
request activity, we have taken a number of steps to increase our responsiveness
to Congress including the introduction of new product lines, greater emphasis on
testimony and the devolvement of report review and signature authority.

The recent “Indicators” report shows that we have indeed been successful in
better managing our workload --we are completing more assignments, issuing
more reports, and providing more testimony and doing so with essentialiy the
same resources we had a decade ago.

Along with this success, comes the new problem of meeting the ever increasing
demand for our work while anticipating and preparing for the important issues of
the future.

As we enter the decade of the 19!Ws, significant events are unfolding in the
United States and around the world which w-ill impact heavily on GAO’s
workload. The political and economic restructuring in Europe raises important
issues related to U.S. competitiveness in world markets and to defense force
reduction and realignment.

At the same time, problems with the budget deficit create challenges in our ability
to provide adequate programs and services in areas such as health care,
education, energy, transportation, and the environment. Finally, the
professionalism and management of government itself requires urgent attention.

To be in a position to effectively address these issues, we must make prudent
choices regarding the work we do, both that which is congressionally requested
and that which we undertake on our own initiative. Consequently, GAO’s
assignment planning and negotiation process should be driven by a set of
principles or guidelines designed to provide an appropriate mti of work and
optimize GAO’s usefulness to the Congress and to the people of the United

   Page 77                                                                       GAO/MG-Ops-91-l
    Memo: @%idelines for Setting Work Priorities

GAO’s fundamental responsibility is to support the Congress+ This support
should, to the eztcnt possible,emphasize assignments which mazimize the
effectiveness of the Congress as a whole and which have the potential to make
major impacts on programs and issuesof national significance and importance.
To do so, GAO must maintain a broad governmental perspective and the
expertise to work on a wide variety of topics. Moreover, GAO resources should
be focused on assignments having the potential to achieve at least one, and
preferably more than one, of the following objectives:

l    Contribute to congressional decisionmaking on significant public policy issues.

l    Fulfill statutory and legislative requirements and commitments.

l    Identify and eliminate serious mismanagement, fraud or abuse.

l    Realize large dollar savings to the government and the taxpayers.

l    Change policies, procedures and management structure of major government
     programs to better achieve desired program results and/or achieve objectives
     at lower cost.

l    See that major government programs comply with applicable laws and
     regulations and funds are spent legally.

l    Ensure that funds of major government programs are accounted for

l    Enhance GAO’s methodological and technical skills.

GAO is required to do work requested by committee chairmen and our policy is
to assign equal status to requests from ranking minority members. In addition,
many of the requests from individual members will, undoubtedly, fit the criteria.
Consequently, when determining the timing of a particular request assignment, or
the resources needed, the following questions should also be considered:

l    Could another entity more appropriately or effectively satisfy the request?

l    Are we performing the assignment in the most efficient way which will meet
     the customers’ needs?

The answers to these questions may lead us to suggest other ways for some
requesters to satis@ their needs, such as through our congressional support sister
agencies or the inspectors general, We should also attempt to reach agreements
on scheduling, prioritizing, and scoping that enable us to most efficiently complete
jobs with a minimum of disruption to other important ongoing and planned work.

    Page 78                                                                        GAO/ACG-Ops-91-l
   Appendix IX
   Memo: Guidelines for Setting Work Priorities




These guidelines are intended to serve as a framework or set of principles which
can be used to assessself initiated job proposals and incoming requests and to
guide negotiations with congressional staff. To alleviate arty misunderstandings or
false expectations among the staff, it should be clear that these guidelines are not
intended, nor should they be used, as a set of “hard and fast rules” for
mechanically making “go/no go” decisions about a particular assigmnent.

We must keep in mind that the Congress has a wide diversi of interests and
needs, and that we operate in a pluralistic society with a complex form of
government. Thus, each assignment and resource decision must be made after
fully considering current and anticipated workload, the nature and history of the
assignment area, and the individual assignment’s policy context. These decisions
will often be difftcult, and will continue to be made by our ACGs and Issue Area
Directors using discretion and good judgment.

Overall, our leaning toward or away from certain kinds of work should be
discussed with congressional staff and members in terms of a best approach to the
work, workload considerations and trade -offs. Discussions and negotiations of
individual jobs should be likewise approached in terms of committees’ needs or
our long term planning horizon, rather than searching for sponsors for a specific
GAO project or assignment.

Where an individual request is not consistent with these guidelines and we believe
that other work is likely of greater value to the Congress as a whole, we should
make every effort to advise the requester of alternative methods for getting
needed information or satisfying the requirements in more efficient ways.

    Page 79                                                                         GAO/ACG-OpsBl-1
Appendix X

Major Contributors to This Report

               h-a Goldstein, Assistant Comptroller General for Operations
               Gilbert M. Mayhugh, Project Director
               Craig A. Anderson, Project Assistant

               The following individuals also contributed to this project:

                Austin Acocella, ACG-OPS
                3eth Blevins, Technical Library
                Liz Gilmore, Writer-Editor, PCC
                Joan M. Hollenbach, OGC
                Sarah F. Jaggar, HRD
                Nancy Hamilton, Administrative Support
                Maureen D. Machisak-Herndon, Publication Director
                Allan Mendelowitz, IWAD
                Ray C. Rist, GGD
                Brenda J. Thomas, Technical Support
                Robert G. Wanschura, Assistant to Publication Director
                McManis Associates, Inc., Project Consultants

               Page 60                                                       GAO/ACGOpa-91-l

               Asterisks mark the key references for those readers who have a limited
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               Page 81                                                   GAO/ACG-Ops-91-l


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Garvin, David A. Managing Quality. New York: Free Press, 1987.

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*Juran, <JosephM . Juran on Leadership for Quality: An Executive Hand-
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Page 82                                                    GAO/ACGOps-91-1


*Juran, Joseph M. Juran on Planning for Quality. New York: Free Press,
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              and Nancy Austin. A Passion for Excellence: The Leader-
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Page 83                                                  GAO/ACG-Ops-91-l

*            Thriving on Chaos: Handbook for a Management Revolu-
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*Walton, Mary. Deming Management at Work. New York: Putnam, 1990.

Page 84                                                   GAO,‘ACGOps-91-l

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Page 86                                                  GAO/ACGOps-91-l
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