Total Quality Management in

Service Organizations

Enrico C. Mina
What is a Service
Organization?
The answer to this question is surprisingly
ambiguous.
Some have tried to define service employment as
non-farming and non-manufacturing employment;
others have also excluded government
employment.
This approach includes operations such as hotels,
restaurants, repairs, amusements, health,
education, real estate, wholesale and retail trade,
transportation, and professional services like law,
engineering, architecture, finance and advertising.
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What is a Service
Organization?
Some public utilities companies have service in
their name, yet in many ways power generation is
more manufacturing than service.
As technology advances, more and more labor will
be driven out of manufactured products.
Labor will shift to services.
Even now, some high technology companies have
overhead rates that are six to ten times the direct
labor component, mainly because of the substantial
indirect labor in these companies.
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What is a Service
Organization?
Service operations management affects more
than just service companies per se.
Furthermore, the service sector will continue
to grow.

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Difference between
Manufacturing and Service
Manufacturing organizations are those that produce
physical .
Service organizations produce non-physical outputs,
such as medical, educational, or transportation services
provided for customers.
Services also include the sale of merchandise. Although
merchandise is a physical good, the service company
does not manufacture it but merely sells it as a service
to the customer. Retail stores such as SM and
Robinsons are service organizations.

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Difference in Manufacturing
and Service
Services differ from manufactured products in
two ways:
First, the service customer is involved in the actual
production process.
Second, manufactured goods can be placed in
inventory whereas service outputs, being intangible,
cannot be stored.

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Difference in Manufacturing
and Service
Despite the differences between manufacturing
and service firms, they face similar operational
problems
Each kind of organization needs to be concerned
with scheduling.
Both manufacturing and service organizations must
obtain materials and supplies.
Both types of organizations should be concerned
with quality and productivity in order to compete.

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Characteristic of a Service
Organization
The service provided is often something that the
consumer cannot touch or feel.
The service is often created and delivered on the
spot, in many cases with significant involvement of
the customers in the service process.
Because of the visibility of the service process in
many instances and the intangibility of many
services, operations management and marketing
are more interdependent than in manufacturing.

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Characteristic of a Service
Organization
Frequently, the consumption of a service is
nearly simultaneous with its production.

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Types of Operations for a
Service Organization
Line (or flow) operation
The activities are arranged in a sequence of operations to
produce a desire service or products.
In the true line process, no steps are skipped, and usually a
substantial amount of attention is devoted to the physical
layout of the process to minimize the confusion and
movement necessary in passing from activity to activity.
It is relatively inflexible to accommodate major changes in
volume handled or service performed.

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Types of Operations for a
Service Organization
Job Shop
A job shop is usually characterized by the large variety of
goods and services it produces by using different
combinations and sequences of activities.
While job shops are desirably flexible, in terms of variety of
services performed and the capacity to cope with changes in
volume, there are several negative aspects.
There are usually fewer opportunities for substitution of
capital for labor. It is often difficult to estimate the capacity of
a job shop because of the degree of uncertainty as to what
will be required in it.

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Types of Operations for a
Service Organization
Job Shop
The job shop is often very difficult to schedule because it may
be difficult to forecast the demand for certain parts of a shop,
such as the broiler in a kitchen or the x-ray machine in the
hospital.
In the comparison of the job-shop and line shop approaches
to the same tasks, consider the case of alternative
approaches to producing a car wash. The conventional hand-
wash operation is a job-shop. It is highly flexible, but usually
has little division of labor. On the other hand, the automated
or semi-automated car wash system that has substituted
technology for labor and divided the task into simple and
repetitive job is relatively inflexible.
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Types of Operations for a
Service Organization
Intermittent Operations
Line and job shops are on-going process. However,
there are many situations that are project process,
even if they are infrequently repeated.
Service firms are frequently involved in the
managements of projects of an intermittent nature.
Service firms such as architects and consultants
often find that most of their activities are projects
being managed for others.

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Types of Operations for a
Service Organization
Intermittent Operations
As the scale of the project grow, it becomes
increasingly difficult to manage all the interrelations
of parts of the project.
Project control and scheduling system such as
PERT (Program Evaluation and Review Technique)
and the closely related CPM (Critical Path Method)
find excellent applications in the management of
service industry projects.

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Total Quality Management in
Services (1)
A user of service has a few characteristics and
attributes in mind that he or she uses as a basis
for comparison among alternatives.
Lack of one attribute may eliminate a specific
service firm from consideration.
Quality also may be perceived as a whole
bundle of attributes where many lesser
characteristics are superior to those of
competitors.
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Total Quality Management in
Services (2)
Extensive interviews with consumer focus
groups identified the following conclusions:
Consumers perception of service quality results
from a comparison of their expectations before the
service vs. their actual experience with the service
Quality perceptions are derived from the service
process as well as from the service outcome.

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Total Quality Management in
Services (3)
The research also indicated that customers, across a
broad range of service businesses, have the following
expectations in descending order of importance:
1. Reliability (consistency)
2. Responsiveness (speed)
3. Assurance (competence)
4. Empathy (customer orientation)
5. Tangibles (what he/she can see, feel, smell, hear,
and taste)
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Total Quality Management in
Services (4)
Service quality is of two types, normal and
exceptional
Normal: the quality level at which the regular service
is delivered
Exceptional: quality level at which exceptions or
problems are handled
This implies that a quality control system must recognize
and have prepared a set of plan Bs for less-than-optimal
operating conditions.

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Total Quality Management in
Services (5)
There are five TQM tools:
Taguchi method
Pareto charts
Process charts
Cause-and-effects diagrams
Statistical process control.

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Total Quality Management in
Services (6)
Three concepts are important to understanding Taguchi
approach and method
Quality Robustness quality robust products/services are
outputs that can be produced with uniform consistency in
adverse operating and environment conditions.
Quality Loss Function identifies all costs connected with
poor quality and shows how these costs increase as the
output moves away from being exactly what the customer
wants.
Target Value is a philosophy of continuous improvement to
bring the product exactly on target.

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Total Quality Management in
Services (7)
Pareto Charts- method of organizing errors, problems,
or defects to help focus on the critical few factors in
problem-solving efforts.
Process Charts are designed to help us understand a
sequence of events through which a product travels.
The process chart graphs the steps of the process and
their relationships.
Cause and Effect Diagrams One of many available
tools helpful in identifying possible causes of quality
problems.
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Total Quality Management in
Service (8)
Statistical process control is concerned with
monitoring standards, making measurements
and taking corrective actions as a product or
service is being produced

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Methods in Achieving TQM

There is a quality plan known as Quality

Journey. It is called the quality journey for two
reasons:
To ensure that the processes are continuously
meeting specific requirements in terms of standards
and measures and;
To ensure that all customers are satisfied even when
their expectations change over time.

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Methods in Achieving TQM

Standards are yardsticks for measuring

performance, quality, and duration.
Normally companies are concerned with two
types of standards: output standards and
process standards.

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Methods in achieving TQM

Phase One - Define Vision and Mission

Phase Two - Document Processes
Phase Three - Establish Measurements
Phase Four - Control Processes Based on
Measurements
Phase Five - Implement Continuous
Improvement

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Phase 1- Define Vision and
Mission
A company must get buy-in from its management and
its employees, before getting involved in the quality
journey.
Methods of getting management buy-in include
obtaining support from the top, strategic planning,
keeping managers informed, providing networking
systems, and providing rewards and recognition.
Methods of getting employee buy-in include providing
proper tools and training, keeping them informed,
providing networking systems, and providing rewards
and recognition.
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Phase 1- Define Vision and
Mission
The first step is to develop vision and mission
statements for the company or to revisit existing ones to
ensure that they still fit the company and where it is
going.
These statements help solidify the goals and objectives
and provide a common focus point.
One key advantage of a common focus point is that it
gives direction to all personnel and helps them
determine how to prioritize their activities.

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Phase 1- Define Vision and
Mission
With input from all employees, these two
statements are used as guides for the rest of the
quality journey.
It is important to tie quality into the overall
company vision so that each department or area
of the company realizes that quality is important
to the company.

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Phase 1- Define Vision and
Mission
When a company collaboratively decides to express its
vision, beliefs, goals, values and mission in words, it will
give direction to everyone in the company.
The way that the vision and mission are communicated
is important.
This requires full commitment from senior management
and may result in several changes depending on where
the company presently is and how well it presently
represents its vision.

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Phase 1 Define Vision and
Mission
Quality must be recognized not as a separate
entity but as an integral part of a person's overall
job.
This communication process can take time and
much effort but does become easier as people
see that the company truly uses these
statements in their decision process and refers
to them for guidance on a regular basis.
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Phase 1- Define Vision and
Mission
Once the direction is defined, then it will impact such
things as strategic planning, objectives and goals
Strategic planning includes reviewing the vision and
mission of the company and then determining what has
to be done in order to achieve the goals of these
statements.
The company determines how it will know when the
statements have been achieved.

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Phase 1 Define Vision and
Mission
From the measures, each department can set
goals, objectives and measures that will help the
company achieve its strategic objectives.

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Phase 2 Document Process
Now that the company knows what it is and where it
wants to go, the next step in the quality journey is to
determine how it presently does its business.
It must know how it presently does things and be able to
measure its ability to be consistent in meeting customer
requirements.
Customers remember a company's name under two
conditions: When the company provides extremely
poor products or service, or when the company
provides surprisingly good products or service.

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Phase 2 Document Process
In order to provide surprisingly good products or service
(output), companies must look at what is involved in
delivering that output. It is the business processes that
deliver the output.
Companies must focus on the process in order to keep
customers coming back and staying loyal to the product
or service.

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Phase 2 Document Process
Companies must start focusing on the processes
that control the customer interfaces, rather than
the organizational structure.

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Phase 2 - Document Process
Organizational Focus Process Focus
Employees are the The process is the
problem. problem.
Employees People
Doing my job Help to get things done
Understanding my job Knowing how my job fits
Measuring individuals into the total process
Change the person Measuring the process
Change the process

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Process 2- Document Process
Organization Focus Process Focus
Can always find a better
employee
Motivate people
Controlling employees
Don't trust anyone
Who made the error?
Correct errors
Bottom line driven
Can always improve the
process
Remove Barriers
Developing people
We are all in this together
What allowed the error to
occur?
Reducing variation
Customer driven
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Process 2 Document Process
Companies that focus on delivering surprisingly
good output and building their reputations will be
more successful than companies that just focus
on the bottom line as the bottom line will not
bring customers back.
The only way to determine how to consistently
deliver this type of output is by focusing on
processes within your company/business.
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Process 2 Document Process
Every product/service (output) is the result of a process.
A process can be defined as any activity or group of
activities that takes an input, adds value to it, and
provides an output to an internal or external customer.
The key elements of a process are: inputs, activities,
outputs, customers, resources (materials, pesos and
person/processing time), and cycle time (how long does
it take). SIPOC
6 Ms: man, machines, materials, methods,
measurement, Mother Nature (environment)
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Process 2 Document Process
A company must first document the current state
Define what the company does, who does it, and
how and why it is done
Procedures that are critical to the process need
to be documented.

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Process 3-Establish
Measurements
The next step in the quality journey is to set
standards and measures for each process,
product, and service.
The focus must be on improving the customer's
perception of the company, its products and
services.
To do this the company must measure customer
satisfaction.

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Process 3- Establish
Measurements
Companies need to determine precisely where they
stand in their customer's eyes by engaging in ongoing
information-gathering activities to measure customer
satisfaction.
Listening to customer complaints, identifying and
measuring critical processes that are responsible for
generating poor service or products, and implementing
corrective action are integral in developing a quality
management philosophy.

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Process 3- Establish
Measurements
What Gets Measured, Gets Managed and Never
Assume You Know What The Customer Wants
Companies need to: know on an ongoing basis what
their customers are thinking, analyze their own
structures and processes to ensure that they do not
hinder or interfere with customer satisfaction, and,
implement measures to monitor the effectiveness of all
critical processes that impact customer satisfaction.

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Process 3- Establish
Measurements
The focus should be on indicators of
performance and customer service standards
that measure the quality of service to the
customers. Standards must be realistic.
Standards are not set in stone, they must be
adjusted to reflect changes in customer
requirements, processes, technology, or
competitive offerings.
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Process 3 Establish
Measurements
Find out why the key
customers (the ones that
account for a large portion of
the company's sales) keep
coming back instead of going
to the competition.
Find out how good the entire
company must be - not just
your products or services.
Use surveys, interviews,
point of sale/service and
follow-up calls.
Determine the obstacles to
excellent service for external
and internal customers.
Look at company structure,
work flows, and evaluate
personnel
abilities/skills/knowledge.
Use tools such as employee
attitudinal surveys and exit
interviews and develop
formal/informal feedback
mechanisms.
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Process 3- Establish
Measurements
Determine which processes
are critical to the delivery of
products or services to the
customers or the ones that
affect the criteria that the
customer uses to evaluate
the company's performance.
Develop measurements that
strike a balance between
cost, quality and cycle time.
Quality of the process must
receive priority ahead of cost
and delivery.
Use as many proactive
measurements as possible
because they provide
immediate feedback and
allow time for corrective
action before problems have
any impact on the customer.
Use some reactive measures
to take advantage of
feedback after the product or
service has been purchased
by the customer.
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Process 3 Establish
Measurements
Pareto Charts Control Charts
Fishbone or Cause and Check Sheets
Effect (Ishikawa) Stratification
diagrams
Histograms
Scatter Diagrams
Run (Trend) Charts

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Process 4- Control Process
using Measurements
Use the measurement results to fine tune processes
and align them with the desired outcomes and
standards.
Processes, standards. and measures need to be
controlled and aligned to ensure that the company is
serving its customers and supporting the people who
are serving the customers or producing the products or
services.
Measurement allows management to "Manage by Fact"
rather than managing by intuition or judgment by
providing data about the operating environment and
performance. 48
Process 4- Control Process
using Measurements
There are two primary uses of "Management by Fact".
They are
Manage service quality - Manage the processes and the
deliverables to make sure they meet customer
requirements/specifications.
Manage process improvement - Identify opportunities for
process improvement, and then implement them.
The obstacles of "Management by Fact" include:
Unreliable, invalid measures
Reliance on gut feel, intuition, or past experience
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Process 4 Control Process
using Measurements
If the measures are not reliable and are not valid, they
are not believable and will not be used.
Measuring individuals instead of groups/teams or
projects
When measurements are thought to be individual
performance indicators, the tendency is to manipulate those
measures to make personal performance look better.
Process improvement will have an affect on systems.

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Process 4- Control Process
using Measurements
Systems are basically the vertical and horizontal
organization of a company such as human resources,
shipping/receiving or distribution, customer complaints
or customer relations, purchasing, and accounting.
As processes are controlled, improved and aligned,
other parts of the company (such as systems,
organizational structures, and personnel competencies)
will be effected and may need to change and realign to
ensure that the company vision goals and objectives
are met.
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Process 4- Control Process
using Measurements
Teams will need training in statistics and the various
tools as needed to ensure that they are kept up-to-date
with new methods.
Plan-Do-Check-Act (PDCA)
The PDCA cycle ensures that changes are introduced in a
controlled manner
You PLAN what has to happen. You DO the change in a
controlled manner (small scale), CHECK the result. If the
result is good, you ACT to implement and standardize the
change. If it is not, you go back to PLAN to refine it.
The cycle can apply to process problem solving or to
company strategic planning.
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Process 5-Implement
Continuous Improvement
The company continues doing what it has been doing;
that is mapping its processes, establishing standards
and measures and then controlling the processes based
on the measurement data
The company starts expanding what is has been doing
to all aspects of its business.
The company needs to continue its focus on customer
requirements and improving value to customers and
improvement of the overall company performance and
capabilities.

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Process 5- Implement
Continuous Improvement
But the company must also start learning from
others and assessing its progress
Using benchmarking or comparing the company
to World Class quality standards (e.g., the
Malcolm Baldrige National Quality Award, the
JCIA Standards, etc.) are ways to assess the
improvement progress.

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End

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