BACHELOR OF BUSINESS ADMINISTRATION Quality and Customer Relations Management III

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1 BACHELOR OF BUSINESS ADMINISTRATION Quality and Customer Relations Management III Contact details: Regenesys Business School Tel: +27 (11) Fax: +27 (11)

2 Version Control: 5.2_f Date of Publication: July, 2014 Publisher: Regenesys Management Place of Publication: Sandton Document Change History Date Version Initials Description of Change 22 August _f FVS Formatting 18 December _f FVS Updating template and readings 14 July _f SK Updating articles to Emerald Final Formatting 29 July _f SK Updating guide as per SME recommendation This study guide highlights key focus areas for you as a student. Because the field of study in question is so vast, it is critical that you consult additional literature. Copyright Regenesys, 2014 All rights reserved. No part of this publication may be reproduced, stored in or introduced into a retrieval system, or transmitted, in any form, or by any means (electronic, mechanical, photocopying, recording or otherwise) without written permission of the publisher. Any person who does any unauthorised act in relation to this publication may be liable for criminal prosecution and civil claims for damages.

3 CONTENTS 1 WELCOME TO REGENESYS INTRODUCTION ALIGNING ORGANISATIONAL, TEAM AND INDIVIDUAL OBJECTIVES TEACHING AND LEARNING METHODOLOGY ICONS USED IN THIS STUDY GUIDE STUDY MATERIAL FOR THE MODULE RECOMMENDED RESOURCES RECOMMENDED READING RECOMMENDED BOOK RECOMMENDED ARTICLES MULTIMEDIA ADDITIONAL SOURCES TO CONSULT LEARNING OUTCOMES CONTENT SCOPE AND LEARNING GUIDANCE AN INTRODUCTION TO QUALITY AND CUSTOMER RELATIONSHIP MANAGEMENT DEFINE QUALITY MANAGEMENT THE INTERNATIONAL STANDARDS OF QUALITY (ISO) DEFINE CUSTOMER RELATIONSHIP MANAGEMENT THE PRINCIPLES OF CUSTOMER RELATIONSHIP MANAGEMENT CONCLUSION QUALITY AND CUSTOMER RELATIONSHIP MANAGEMENT WITHIN ORGANISATIONS QUALITY MANAGEMENT SYSTEMS AND MODELS QUALITY MANAGEMENT SYSTEMS QUALITY MANAGEMENT THEORIES AND SYSTEMS SOLVE QUALITY PROBLEMS MOVING TOWARD A CLIENT-FOCUSED ORGANISATION CUSTOMER RELATIONSHIP MANAGEMENT THE CONCEPT: CUSTOMER RELATIONSHIP MANAGEMENT MAINTAINING PROFESSIONAL RELATIONSHIPS MANAGING CUSTOMERS IMPLEMENTING CRM PROGRAMMES IN ORGANISATIONS TECHNOLOGICAL IMPLICATIONS COMMUNICATE EFFECTIVELY WITH CUSTOMERS INTRODUCTION HOW TO DEAL WITH IRATE CUSTOMERS HANDLING EXTERNAL COMPLAINTS TALKING TO CUSTOMERS USING A TELEPHONE HOW TO ASSERT YOURSELF LESSONS ON CUSTOMER SERVICE REFERENCES GLOSSARY OF TERMS... 62

4 List of Tables TABLE 1: TABLE 2: TABLE 3: TABLE 4: TABLE 5: TABLE 6: PRINCIPLES OF QUALITY MANAGEMENT PRINCIPLES OF CRM THE ADVANTAGES OF IMPLEMENTING A QUALITY MANAGEMENT SYSTEM EIGHT PRINCIPLES OF TQM JURAN S QUALITY TRILOGY INTERNAL CUSTOMER RELATIONSHIP List of Figures FIGURE 1: FIGURE 2: FIGURE 3: FIGURE 4: FIGURE 5: FIGURE 6: SYSTEMS THINKING TQM PRINCIPLES GROUPING JURAN S QUALITY PLANNING ROAD MAP PROBLEM-SOLVING CYCLE CRM IMPLEMENTATION BUSINESS PROCESSES... 48

5 1 WELCOME TO REGENESYS Have a vision. Think big. Dream, persevere and your vision will become a reality. Awaken your potential knowing that everything you need is within you. Dr. Marko Saravanja At Regenesys, we assist individuals and organisations to achieve their personal and organisational goals, by enhancing their management and leadership potential. We approach education and development holistically, considering every interaction not only from an intellectual perspective but also in terms of emotion and spirituality. Our learning programmes are designed to transform and inspire your mind, heart and soul, and thus allow you to develop the positive values, attitudes and behaviours, which are required for success. Having educated over students based in highly reputable local and international corporations across over 160 countries since Regenesys' inception in 1998, we are now one of the fastest-growing and leading institutions of management and leadership development in the world. Regenesys ISO 9001:2008 accreditation bears testimony to our quality management systems meeting international standards. Regenesys is accredited with the Council on Higher Education. Our work is rooted in the realities of a rapidly changing world and we provide our clients with the knowledge, skills and values required for success in the 21st century. At Regenesys, you will be treated with respect, care and professionalism. You will be taught by business experts, entrepreneurs and academics who are inspired by their passion for human development. You will be at a place where business and government leaders meet, network, share their experiences and knowledge, learn from each other, and develop business relationships. You will have access to a campus, in the heart of Sandton, with the tranquillity of a Zen garden, gym and meditation room. We encourage you to embark on a journey of personal development with Regenesys. We will help you to awaken your potential and to realise that everything you need to succeed is within you. We will be with you every step of the way. We will work hard with you and, at the end celebrate your success with you. Areas of Expertise Regenesys Business School 1

6 2 INTRODUCTION Welcome to the module on Quality and Customer Relationship Management (QCM). In this module we will examine the concepts of quality management and customer relationship management. We will establish the importance of quality management in the transformation of the services provided to the customers of an organisation. In order to implement quality and customer relationship management, we will identify and describe some quality management models and systems. We will conclude the module with a brief description of specific communication strategies used within an organisation to deal with customers. 2.1 ALIGNING ORGANISATIONAL, TEAM AND INDIVIDUAL OBJECTIVES This course will draw on a model developed by Regenesys Management, which demonstrates how the external environment, the levels of an organisation, the team and the components of an individual are interrelated in a dynamic and systemic way. The success of an individual depends on his/her self-awareness, knowledge and ability to manage successfully these interdependent forces, stakeholders and processes. The degree of synergy and alignment between the goals and objectives of the organisation, the team and the individual determines the success or failure of an organisation. It is, therefore, imperative that each organisation ensures that team and individual goals and objectives are aligned with the organisation s strategies (vision, mission, goals and objectives, etc.); structure (organogram, decision-making structure, etc.); systems (HR, finance, communication, administration, information, etc.); culture (values, level of openness, democracy, caring, etc.). Hence, an effective work environment should be characterised by the alignment of organisational systems, strategies, structures and culture, and by people who operate synergistically. Please read through this Study Guide carefully, as it will influence your understanding of the subject matter and the successful planning and completion of your studies. Regenesys Business School 2

7 2.2 TEACHING AND LEARNING METHODOLOGY Regenesys uses an interactive teaching and learning methodology that encourages self-reflection and promotes independent and critical thinking. Key to the approach utilised is an understanding of adult learning principles, which recognise the maturity and experience of participants, and the way that adult students need to learn. At the core of this is the integration of new knowledge and skills into existing knowledge structures, as well as the importance of seeing the relevance of all learning via immediate application in the workplace. Practical exercises are used to create a simulated management experience to ensure that the conceptual knowledge and practical skills acquired can be directly applied within the work environment of the participants. The activities may include scenarios, case studies, self-reflection, problem solving and planning tasks. Training manuals are developed to cover all essential aspects of the training comprehensively, in a user-friendly and interactive format. Our facilitators have extensive experience in management education, training and development. REGENESYS INTEGRATED MANAGEMENT MODEL Regenesys Business School 3

8 3 ICONS USED IN THIS STUDY GUIDE Icons are included in the Study Guide to enhance its usability. Certain icons are used to indicate different important aspects in the Study Guide to help you to use it more effectively as a reference guide in future. The icons in this Study Guide should be interpreted as follows: Definition The definitions provide an academic perspective on given terminology. They are used to give students a frame of reference from which to define a term using their own words. Examples The example icon is used to indicate an extra/additional text that illustrates the content under discussion. These include templates, simple calculation, problem solution, etc. Video clip or presentation This icon indicates a URL link to a video clip or presentation on the subject matter for discussion. It is recommended that students follow the link and listen/read the required sources. Interesting source to consult The source icon is used to indicate text sources, from the Internet or resource centre, which add to the content of the topic being discussed In a nutshell This icon indicates a summary of the content of a section in the workbook and to emphasise an important issue. Calculations This icon indicates mathematical or linguistic formulae and calculations. Self-reflection Students complete the action of selfreflection in their own time. It requires students to think further about an issue raised in class or in the learning materials. In certain instances, students may be required to add their views to their assignments. Tasks The task icon indicates work activities that contact students must complete during class time. These tasks will be discussed in class and reflected upon by students and facilitators. E-learning students can use these tasks simply to reinforce their knowledge. Note This icon indicates important information of which to take note. Regenesys Business School 4

9 4 STUDY MATERIAL FOR THE MODULE You have received material that includes the following: Study guide Recommended reading Assignment These resources provide you with a starting point from which to study the contents of this module. In addition to these, other resources to assist you in completing this module will be provided online via the link to this module. Guidance on how to access the material is provided in the Academic Handbook that you received when you registered for this qualification. 5 RECOMMENDED RESOURCES A number of recommended resources have been identified to assist you in successfully completing this module. 5.1 RECOMMENDED READING The following textbook and articles are recommended and must be used to complete the module. Please ensure you order, or download your textbook, before you start with the module. 5.2 RECOMMENDED BOOK The following book is highly recommended for this module: Davis, S. and Goetsch, D.L. 2013, 'Quality Management for Organisational Excellence: Introduction to Total Quality Management', International Edition, 7 th Edition, New Jersey. Pearson. Regenesys Business School 5

10 5.3 RECOMMENDED ARTICLES EFQM. 2012, 'An Overview of the Excellence Model', EFQM.org, Excellence Model 2013 EN extract.pdf (accessed online 04 March 2013). Fabac, R., and Mance, I. 2011, 'Customer relationship management system in occupational safety and health companies: Research on practice and preliminary design solution', Interdisciplinary description of complex systems, 9(2), nd_health_companies_research_on_practice_and_preliminary_design_solution (accessed 14 July 2014) Levine, D.I., and Toffel, M.W. 2010, 'Quality management and Job Quality: How the ISO 9001 standard for Quality Management Systems affects employees and employers', Harvard Business School: Working Paper Files/ pdf (accessed 14 July 2014) Po-An Hsieh, J.J., Rai, A., Petter, S., and Zhang, T. 2012, 'Impact of user satisfaction with mandated CRM use on employee service quality', MIS Quarterly, 36(4), andated+crm+use+on+employee+service+quality%26hl=en%26as_ (accessed 14 July 2014) Additional articles that may prompt discussions and further assist you in completing this course will be saved on Regenesys Online under the relevant course. Please visit the site regularly to access these additional sources. 5.4 MULTIMEDIA CQIWebManager. 2011, 'The handy Guide to Quality- CQI- Quality Management', Youtube.com., (assessed online 28 March 2013). Rational Tester. 2008, 'Quality Management in 3 Minutes', Youtube.com, (assessed online 28 March 2013). Sakol, T. 2012, 'PDCA', Youtube.com, (assessed online 28 March 2013). Spetz naz , 'Modern Chairs- A Total Quality Management Training Video' Youtube.com, (assessed online 28 March 2013). Torres. R. C. 2010, 'Total Quality Management', Youtube.com, (assessed online 28 March 2013). Regenesys Business School 6

11 5.5 ADDITIONAL SOURCES TO CONSULT As a higher education student, you are responsible for sourcing additional information that will assist you in completing this module successfully. Below is a list of sources that you can consult to obtain additional information on the topics to be discussed in this module: Emerald NetMBA: MindTools: Brunel Open Learning Archive: ProvenModels: 12manage.com: Alliance Online: The Free Management Library: The Charity Village: TEDx This is an online database containing journal articles that are relevant to your modules. Please refer to the attached Emerald manual to assist you to download required articles. Information on how to access Emerald is provided in your Academic Handbook. You will receive access to the database once you register as a student. This is one of several web sites that provide a selection of MBA constructs and discussion. It is one of the better of these addresses. MindTools.com is a very useful source of ideas, constructs, management models, etc with even more useful commentary and description. A Brunel University support-site that provides an easily accessible library of ideas, concepts, constructs techniques, tools, models, etc. ProvenModels' Digital Model Book presents digitalised management models categorised in a clear, consistent and standardised information structure to improve the usability and reusability of management literature. Management models are important generalisations of business situations when applied in context and are powerful tools for solving business issues. This is a website on which one can access numerous models as well as global comments on the models and principles. This could also serve as a place for you to voice your ideas and get feedback from all over the world. The Alliance for Non-profit Management's general introduction to strategic planning is built around 15 questions that cover just about all aspects in brief (click on Strategic Planning.) The Free Management Library can be used to improve your organisation, and for your own personal, professional and organisational development. This is by far the most comprehensive overview of all aspects of strategic planning covering all stages of the process. A series of 12 very short articles by Ron Robinson, an independent Canadian consultant, appeared on Charity Village between November 2001 and October These articles are refreshing in that they do not advocate a one best way for all types of nonprofit organisations. They discuss various ways of approaching the strategic planning process. The TEDx programme (Technology, Entertainment and Design) was created to help communities, organisations and individuals to spark conversation and connection through local TED-like experiences. It includes topics from science to business to global issues in more than 100 languages their mission is to spread ideas ("to make great ideas accessible and spark conversation"). There are many more sites and articles available that can help you to successfully complete this module. You are encouraged to post the website addresses or URLs of any additional interesting sites that you come across on the Regenesys Learning Platform. In this way, you can assist other students to access the same wonderful information that you have discovered. Regenesys Business School 7

12 A word of caution not all information available on the Internet is necessarily of a high academic standard. It is therefore recommended that you always compare information that you obtain with that contained in accredited sources such as articles that were published in accredited journals. 6 LEARNING OUTCOMES Upon completing this course, students should be able to: Explain the philosophy and principles of quality management and customer relations management; Understand the context and content of organisational transformation related to quality improvement; Identify the attitudes required to serve customers effectively; Communicate effectively with clients and relevant stakeholders; Conduct a stakeholder analysis to identify and manage stakeholders appropriately; Apply problem analysis tools, like the fishbone analysis, to separate the root causes from the symptoms; Understand quality management systems and models, such as ISO 9000; Identify and select tools to monitor quality of service; and Advance their understanding of the concept of Customer Relationship Management (CRM) o Identify potential applications of the concept for one s own organisation. Regenesys Business School 8

13 7 CONTENT SCOPE AND LEARNING GUIDANCE A number of topics will be covered to assist you in successfully achieving the learning outcomes of this module. It is important to study each of these sections to ensure that you expand your knowledge in the subject and are able to complete the required assessments. The sections that will be dealt with include: Section 1 Section 2 Section 3 Section 4 An introduction to Quality and Customer Relationship Management Quality management systems and models Customer relationship management Communicate effectively with customers A more detailed framework of what is required for each of these topics follows under each section heading. A number of questions to probe discussion and guide you towards comprehension and insight are also provided. The timetable under each section heading provides guidance on the time to be spent to study each section. It is recommended that you follow the given timetable to ensure that you spend the appropriate amount of time on each section. Following the timetable will ensure that you have covered the required sections relevant to each assignment and have appropriate time to prepare for the examination. Regenesys Business School 9

14 7.1 AN INTRODUCTION TO QUALITY AND CUSTOMER RELATIONSHIP MANAGEMENT Timeframe: Learning outcomes: Multimedia: Section overview: Minimum of 15 hours Explain the philosophy and principles of quality management and customer relations management; and Understand the context and content of organisational transformation related to quality improvement. Rational Tester. (2008) Quality Management in 3 Minutes, Youtube.com, (accessed 28 March 2013) Torres. R. C. (2010) Total Quality Management, Youtube.com, (accessed 28 March 2013) This section serves as an introduction to the concept of quality and customer relationship management (CRM). The relationship between these two concepts is explained and their importance emphasised. The principles and philosophies of quality and CRM are also discussed in order to provide students with a holistic view of the elements related to the concepts Define Quality Management According to ISO: The quality of something can be determined by comparing a set of inherent characteristics with a set of requirements. If those inherent characteristics meet all requirements, high or excellent quality is achieved. If those characteristics do not meet all requirements, a low or poor level of quality is achieved. Quality is, therefore, a question of degree. As a result, the central quality question is: How well does this set of inherent characteristics comply with this set of requirements? In short, the quality of something depends on a set of inherent characteristics and a set of requirements and how well the former complies with the latter. According to this definition, quality is a relative concept. By linking quality to requirements, ISO 9000 argues that the quality of something cannot be established in a vacuum. Quality is always relative to a set of requirements. (Praxiom Research Group, 2013) Regenesys Business School 10

15 Quality Management is defined as: All the activities that organisations use to direct, control, and coordinate quality. These activities include formulating a quality policy and setting quality objectives. They also include quality planning, quality control, quality assurance, and quality improvement. (Praxiom Research Group, 2013) It may be deduced from the definitions above that quality and quality management encompass all activities involved in delivering a certain product/service according to specific standards. For the purpose of this guide, this holistic view of quality and quality management should be implemented. Quality can be assessed based on the following concepts: Performance: This is about getting the job done. Performance embraces three aspects behaviours or processes, outputs or services, and outcomes or valueadded and impact. Economy: Efficiency: Effectiveness: Benchmarking: This is about the measurement and regulation of inputs or resources. How are they utilised? How are outputs produced related to inputs utilised? Effectiveness is difficult to assess. It is often intangible and relies on perceptions. This is the process of continuously measuring and comparing an organisation against leading organisations in order to improve performance. In any productive situation, an employee receives an input. That employee then adds value through his/her action to eventually pass that benefit on to a user. The string of those activities that enhance value is called a process. The user is called a customer. If the user is within the organisation, s/he is an internal customer. If the user is outside, then s/he is called an external customer. Ultimately, each process should contribute to the satisfaction of the customer. Observing a process over time shows that there are variations in how well a service or product is produced. If these variations are outside an acceptable standard, the production of a service can be considered faulty, disappointing a customer s expectations. Quality management therefore seeks to reduce these variations. Contrary to some managers beliefs, most problems do not occur due to employees errors. Generally, employees want to, and succeed in carrying out, a process correctly. A poor process design (poor organisation of work) is the most common source of quality defects. Regenesys Business School 11

16 Special structures such as quality teams are set up to investigate how to bring about change. These teams are made up of staff from across all levels of an organisation and comprise of people who possess different types of skill sets. The quality team s first step involves a careful, information-driven analysis of what could cause a failure of a process, with what frequency problems occur, and to what extent problems vary over time. Such analysis is termed a quality audit. However, simply understanding the current state of operation is not enough. An organisation should also check how it compares against others. Comparing one s operating targets with those of the best in the industry is called benchmarking. This process not only points to areas that need improvement, but benchmarking an organisation s performance also highlights differences in the way things are done amongst leading companies. Such innovative management procedures and systems are called best practices. These practices can be copied, adapted and integrated from one organisation to another. Understanding one s own performance in comparison to the best performing companies, allows an organisation to set new and higher standards. Once these standards are reliably met, the organisation can raise its standards even further. This is called continuous improvement. The concept of quality management is based on eight principles defined by ISO They are illustrated in Table 1 below: TABLE 1: PRINCIPLES OF QUALITY MANAGEMENT Principle Key Benefits Application of the principle leads to: Customer Focus Organisations depend on their customers and therefore should understand current and future customer needs, should meet customer requirements and strive to exceed customer expectations. Increased revenue and market share obtained through flexible and fast responses to market opportunities; Increased effectiveness in the use of the organisation s resources to enhance customer satisfaction; and Improved customer loyalty leading to repeat business Researching and understanding customer needs and expectations; Ensuring that the objectives of the organisation are linked to customer needs and expectations; Communicating customer needs and expectations throughout the organisation; Measuring customer satisfaction and acting on the results; Systematically managing customer relationships; and Ensuring a balanced approach between satisfying customers and other interested parties (such as owners, employees, suppliers, financiers, local communities and society as a whole). Regenesys Business School 12

17 Principle Key Benefits Application of the principle leads to: Leadership Leaders establish unity of purpose and direction of the organisation. They should create and maintain the internal environment in which people can become fully involved in achieving the organisation s objectives. Involvement of People People at all levels are the essence of an organisation and their full involvement allows their abilities to be used for the organisation s benefit. Process Approach A desired result is achieved more efficiently when activities and related resources are managed as a process. People will understand and be motivated towards the organisation s goals and objectives; Activities are evaluated, aligned and implemented in a unified way; and Miscommunication between levels of an organisation will be minimized. Motivated, committed and involved people within the organisation; Innovation and creativity in furthering the organisation s objectives; People being accountable for their own performance; and People eager to participate in and contribute to continual improvement. Lower costs and shorter cycle times through effective use of resources; Improved, consistent and predictable results; and Focused and prioritized improvement opportunities. Considering the needs of all interested parties including customers, owners, employees, suppliers, financiers, local communities and society as a whole; Establishing a clear vision of the organisation s future; Setting challenging goals and targets; Creating and sustaining shared values, fairness and ethical role models at all levels of the organisation; Establishing trust and eliminating fear; Providing people with the required resources, training and freedom to act with responsibility and accountability; and Inspiring, encouraging and recognising people s contributions. People understanding the importance of their contribution and role in the organisation; People identifying constraints to their performance; People accepting ownership of problems and their responsibility for solving them; People evaluating their performance against their personal goals and objectives; People actively seeking opportunities to enhance their competence, knowledge and experience; People freely sharing knowledge and experience; and People openly discussing problems and issues. Systematically defining the activities necessary to obtain a desired result; Establishing clear responsibility and accountability for managing key activities; Analysing and measuring of the capability of key activities; Identifying the interfaces of key activities within and between the functions of the organisation; Focusing on the factors such as resources, methods, and materials that will improve key activities of the organisation; and Evaluating risks, consequences and impact of activities on customers, suppliers and other interested parties. Regenesys Business School 13

18 Principle Key Benefits Application of the principle leads to: System Approach to Management Identifying, understanding and managing interrelated processes as a system contributes to the organisation s effectiveness and efficiency in achieving its objectives. Continual Improvement Continual improvement of the organisation s overall performance should be a permanent objective of the organisation. Factual Approach to Decision Making Effective decisions are based on the analysis of data and information Mutually Beneficial Supplier Relationships An organisation and its suppliers are interdependent and a mutually beneficial relationship enhances the ability of both to create value. Integration and alignment of the processes that will best achieve the desired results; Ability to focus effort on the key processes; and Providing confidence to interested parties as to the consistency, effectiveness and efficiency of the organisation. Performance advantage through improved organisational capabilities; Alignment of improvement activities at all levels to an organisation s strategic intent; and Flexibility to react quickly to opportunities. Informed decisions; An increased ability to demonstrate the effectiveness of past decisions through reference to factual records; and Increased ability to review, challenge and change opinions and decisions. Increased ability to create value for both parties; Flexibility and speed of joint responses to changing market or customer needs and expectations; and Optimization of costs and resources. Structuring a system to achieve the organisation s objectives in the most effective and efficient way; Understanding the interdependencies between the processes of the system; Structured approaches that harmonize and integrate processes; Providing a better understanding of the roles and responsibilities necessary for achieving common objectives and thereby reducing cross-functional barriers; Understanding organisational capabilities and establishing resource constraints prior to action; Targeting and defining how specific activities within a system should operate; and Continually improving the system through measurement and evaluation. Employing a consistent organisation-wide approach to continual improvement of the organisation s performance; Providing people with training in the methods and tools of continual improvement; Making continual improvement of products, processes and systems an objective for every individual in the organisation; Establishing goals to guide, and measures to track, continual improvement; and Recognizing and acknowledging improvements. Ensuring that data and information are sufficiently accurate and reliable; Making data accessible to those who need it; Analysing data and information using valid methods; and Making decisions and taking action based on factual analysis, balanced with experience and intuition. Establishing relationships that balance short-term gains with long-term considerations; Pooling of expertise and resources with partners; Identifying and selecting key suppliers; Clear and open communication; Sharing information and future plans; Establishing joint development and improvement activities; and Inspiring, encouraging and recognising. (ISO.org, 2012) Regenesys Business School 14

19 Watch the clip below, it provides a brief overview of quality management: Rational Tester. (2008) Quality Management in 3 Minutes, Youtube.com, (accessed 28 March 2013) Total quality management Recent investigation into the topic of quality management has led theorists to a new field: Total Quality Management. Previously, quality management systems focused on quality standards and achieving those quality standards was their objective. Total Quality Management focuses more on the philosophy of continuous improvements throughout all functional areas of the organisation (Hashmi, 2010). Total Quality Management (TQM) is defined by The American Society for Quality (2013) as: A management approach to long term success through customer satisfaction. In a TQM effort, all members of an organisation participate in improving processes, products, services, and the culture in which they work. In defining quality, quality management and Total Quality Management, the connection they have to customer relations and satisfaction becomes more clear. Customers are satisfied when they receive products and services of a high quality. The clip below describes Total Quality Management in more detail. Please click on the hyperlink below and follow the argument of Torres (2010). Torres. R. C. (2010) Total Quality Management, Youtube.com, (accessed 28 March 2013) The International Standards of Quality (ISO) The ISO 9000 collection addresses various aspects of quality management and contains some of ISO s best-known standards (ISO.org, 2012). The standards provide assistance and tools for organisations that want to ensure that their products and services consistently meet customers requirements, and that quality consistently progresses. Regenesys Business School 15

20 There are many standards in the ISO 9000 family: ISO 9001: sets out the requirements of a quality management system; ISO 9000: covers the basic concepts and language; ISO 9004: focuses on how to make a quality management system more efficient and effective; and ISO 19011: sets out guidance on internal and external audits of quality management systems. (ISO.org, 2012) The content of the ISO documents will be discussed in the next section of this study guide. Before we continue any further with the topic of total quality management, you need to understand the concept of Customer Relationship Management Define Customer Relationship Management This section serves as an introduction to the concept of Customer Relations Management. The concepts will be further unpacked in the last two sections of this Study Guide. We will therefore only discuss the key terminology attached to customer relationship management and the principles related to the concepts. A customer is defined as: Anyone who receives products or services from a supplier organisation. Customers can be people or organisations and can be either external or internal to the supplier organisation. For example, a factory may supply products or services to another factory (customer) within the same organisation. According to ISO 9000, examples of customers include clients, consumers, end-users, purchasers, retailers, and beneficiaries. (Praxiom Research Group, 2013) CRMforecast.com (n.d) defines Customer Relationship Management (CRM) as: A business strategy directed to understand, anticipate and respond to the needs of an enterprise's current and potential customers in order to grow the relationship value. It is apparent from this definition that customer relationship management is a field that ensures that organisations focus on customer satisfaction. Regenesys Business School 16

21 CRM therefore, enables organisations to: Understand their customers; Retain their customers through a better customer experience (higher levels of satisfaction); Attract new customers; Win new clients and contracts (increasing profitably); and Decrease costs related to customer management. (CRMforecast.com, nd) Please refer to Appendix A for a glossary of terms related to quality and customer relationship management The Principles of Customer Relationship Management Customer relationship management embraces the philosophy that, An organisation s goals can be best achieved through identification and satisfaction of their customers known and unknown needs and wants, retaining continued patronage, and obtaining new customers in all aspects of business operations (Businessdictionary.com, 2013). This philosophy is built on the notion of an organisation being customer-focused. This means that all strategies, systems, policies and procedures of the organisation have customer satisfaction as their primary objective. Table 2 below highlights the principles of a CRM system. TABLE 2: PRINCIPLES OF CRM Involve top management from day one Restructure employee compensation to reinforce CRM priorities Manage cultural change and people Issues Concentrate on customer lifecycle value Push the project if you are serious. And keep pushing! Top management needs to be involved in every stage of a CRM programme. Two critical components are required for it: a vision embedded within the organisation and the motivation to make it work. When a change in organisational priorities occurs, such as a shift to a more customer-centric focus, the compensation structure also needs to be adjusted. Organisations serious about CRM attach incentives to customer indicators, such as customer retention and satisfaction. This serves as a motivation tactic to promote CRM. When organisations implement changes, employees are exposed to a range of emotions such as fear, insecurity, confusion, etc., and management needs to ensure that they keep the communication lines with employees open. Employees should be asked for feedback and management should listen and take note of their comments. An important point is to remind employees of what they stand to gain from the changes. For a CRM strategy to be successful, all employees need to support it. The entire organisation needs to understand the importance of positive customer relationships. A useful tip is to analyse which customers the organisation wishes to keep for a lifetime and maintain the relationships with these customers efficiently. Try not to be too diplomatic as your organisation s existence is at stake. Make it clear that the CRM strategy is not optional and ALL employees need to comply with it. Try to implement the CRM strategy as a condition of employment. Try not to get discouraged by unpredictable obstacles, rather focus on the solution and move forward. Discipline non-performers. Regenesys Business School 17

22 Provide training and support. Prepare for continuous improvement. CRM is an on-going process. Once a strategy has been selected and approved, management needs to shift their focus to training. All new employees will need training for CRM so that they will realise the importance of CRM in the organisation. Management needs to constantly support staff encountering any challenges. Due to the rapid pace of technological change, the chances of a CRM programme being updated in a short period is very high. These enhancements and updates must be communicated to staff and the necessary training catered for. Organisations need to include enhancements in their CRM programme into their budget. (Thompson, n.d) Conclusion A manager is not just concerned about working within time and financial constraints. S/he wants to ensure that the task at hand is of a particular quality in that it meets desired customer expectations. These desired expectations should be described in plans where the output is qualified. This is crucial because many people have different ideas of quality standards or expectations. Furthermore, management has a responsibility to ensure the behaviours that will deliver quality customer/client service, and this involves ensuring that customer and client requirements are determined and are met with the aim of enhancing customer/client excellence. In the next section we will look at different models/systems of quality management Quality and Customer Relationship Management within organisations As you know by now, this module draws on a model developed by Regenesys Business School, which demonstrates how the delivery of quality services is the result of successfully aligning the client s needs with an institution s internal organisation, the way its people work together as a team and, finally, the individual s ability to serve clients (see the Regenesys Integrated Management model in Section 1). FIGURE 1: SYSTEMS THINKING Regenesys Business School 18

23 Figure 1 illustrates the connections between the different elements in an organisation. How does this link with quality management and the Regenesys Integrated Management model? Recap Questions 1. Explain the link between quality and CRM. 2. Explain the significance of TQM. 3. Critically analyse the principles of quality management. 4. Discuss the benefits of applying the quality management principles in organisations. 5. Discuss the philosophy of CRM. 6. Explain the benefit of adapting the principles of CRM in your organisation or an organisation with which you are familiar. Regenesys Business School 19

24 7.2 QUALITY MANAGEMENT SYSTEMS AND MODELS Timeframe: Learning outcomes: Recommended reading: Multimedia: Section overview Minimum 15 hours Understand quality management systems and models, such as ISO 9000; and Apply problem analysis tools, like the fishbone analysis, to separate the root causes from the symptoms. EFQM. (2012) An Overview of the Excellence Model. EFQM.org. Excellence Model 2013 EN extract.pdf (accessed 14 July 2014) Levine, D.I., & Toffel, M.W. (2010) Quality management and Job Quality: How the ISO 9001 standard for Quality Management Systems affects employees and employers. Harvard Business School: Working Paper Files/ pdf (accessed 14 July 2014) CQIWebManager. (2011) The Handy Guide to Quality- CQI- Quality Management, Youtube.com, (accessed 28 March 2013) Spetz naz1. (2009) Modern Chairs- A Total Quality Management Training Video, Youtube.com, (accessed 28 March 2013) Sakol, T. (2012) PDCA. [Accessed online] Youtube.com. Viewed 28 March This section analyses various quality systems and models related to organisational success. The implementation of these models and the characteristics thereof are also highlighted. The advantages of implementing these systems are discussed to highlight the benefits associated with focusing on quality products/services Quality Management Systems A Quality Management System (QMS) is defined by the Businessdirectory.com (2013b) as: A system by which an organisation aims to reduce and eventually eliminate non-conformance to specifications, standards, and customer expectations in the most cost effective and efficient manner. An effective quality management system should be: Systems based; People-based; Process-based; and, The emphasis should be on prevention in all spheres. (Fasset, 2004) Regenesys Business School 20

25 In order for an organisation to guarantee quality products/services, a quality management system must be developed and implemented in each functional area at critical control points. The system should define what people, actions and documents are going to be employed in order to carry out the work in a consistent manner, providing evidence of what has happened (Handy and RQA Outreach Working, Party, 2013). There are several reasons why organisations implement quality management systems. A few of them are that quality management systems: Define and convey the provider with quality objectives, policies and practices; Facilitate uniformity in practice; Reduce, eliminate and prevent quality deficiencies; Facilitate training of new employees; Expedite the interchange of employees between various jobs; Eliminate important system changes being made without due consideration; Assist in maintaining good organisational practices; Eliminate unnecessary informal instruction; Provide a basis for audits to be conducted; and Provide assurance to the client. (Fasset, 2004) ExpertResource.net (2013) goes further and highlights the following advantages in terms of ISO 9000, as illustrated in Table 3: TABLE 3: THE ADVANTAGES OF IMPLEMENTING A QUALITY MANAGEMENT SYSTEM Customer/Marketing Benefits Internal Benefits Greater focus on customer requirements and customer service; Conveys commitment to quality and partnering; Promotional credibility to an international standard; Provides access to markets and bids; and Employees become more responsive to customer needs and requirements. Continuous Improvement Cycle of a management system results in savings; Guarantees that new and existing products and services satisfy customers; Provides a universal approach to quality and business; Assists in establishing operational baselines and enterprise alignment; Operationalises and procedralises quality; Encourages self-assessment and maintains internal consistency; Controls process and systems and establishes operational controls; Makes internal operations more efficient and effective; Corporate walls come down and people communicate better; Ensures product development and design changes are controlled; Reduced customer quality audits reduce your business disruptions; Creates awareness of the need for training and encourages operational problem solving; and Provides insights on organisational interrelationships, encourages internal focus, facilitates internal operational control, and assists employees in understanding and improving operations. Regenesys Business School 21

26 Customer-Supplier Partnering Benefits Internal Benefits External Benefits Forms the basis for a common language of quality; Ensures a minimum level of quality; Facilitates development of seamless operations; Reduces supplier base and assists in selecting suppliers; Facilitates just-in-time delivery; and Assists in monitoring suppliers. Improves: Management efficiency; Planning; Problem-solving; Supplier control; Communications; Ability to change; Discipline; Staff morale; and Employee training. Reduces: Duplicate effort; Re-work; Waste; Costs; and Staff Turnover Improves: Product and service quality; Customer satisfaction; Repeat sales; Company image; and Marketability Reduces: Complaints; and Warranty claims. The importance of quality management systems Organisations need to develop their own quality management systems because they provide a feedback loop in which: Policies define purposes and set the standards an organisation wants to meet. Procedures are implemented to put these policies into practise. Policies and procedures are reviewed to make sure that organisations actively improve their effectiveness and efficiency. (Fasset, 2004) Abahe.co.uk (n.d) argues that quality management systems are needed in all areas of activity, whether large or small businesses, in the manufacturing industry, or in the service or public sector. Regenesys Business School 22

27 Abahe.co.uk (n.d) state that a good QMS will: Set direction and meet customers expectations; Improve process control; Reduce wastage; Lower costs; Increase market share; Facilitate training; Involve staff; and Raise morale. Therefore, it becomes clear that implementing a quality management system enables an organisation to achieve the goals and objectives set out in its policy and strategy. The quality management system provides consistency and satisfaction in terms of methods, materials, equipment, etc., and facilitates interaction with all activities of the organisation; beginning with the identification of customer requirements and ending with their satisfaction, at every point. The clip below provides guidance on quality management: CQIWebManager. (2011) The handy Guide to Quality- CQI- Quality Management, Youtube.com, (accessed 28 March 2013) Quality management Theories and Systems Organisations employ different quality management theories in order to select a quality management system. In this section, we will discuss different quality management systems and theories. The International Organisation for Standardisation (ISO) ISO is a worldwide federation of national standards bodies (ISO member bodies). The work of preparing International Standards is carried out through ISO technical committees, in liaison with international organisations, governmental and non-governmental bodies (ISO.org, 2013). The ISO Series (as discussed in the previous section) can form the means by which a holistic management system can be implemented, into which quality, health and safety, and environmental responsibility can be integrated, with audits carried out either separately or in combination with one another (Abahe.co.uk, n.d). An organisation that would like to have ISO certification needs to meet all the criteria stated in the ISO standards and pass a detailed audit performed by an ISO auditor. In some industries, ISO certification has become necessary; for example, some large manufacturers require all suppliers to be ISO certified. While ISO certification is highly respected, if it is not a trend in your specific industry, the additional cost of certification can be a deterrent to most managers. Regenesys Business School 23

28 It is possible to reach the desired quality level within an organisation with a well-planned quality system and without going through all the additional steps for ISO certification (Abahe.co.uk, n.d). Read the article below for a more comprehensive understanding of ISO: Introduction ISO 9000 and Organisational Culture B. Fairbairn, MSc The ISO 9000 Quality Management system makes no specific reference to the cultural environment within which it will operate. It is clear however that the standard will be applied to a wide range of differing organisations and styles. In this paper the author reviews some of the possible difficulties, both for the operation of the standard and its likely impacts on various company cultures. To illustrate these points the author uses the Cultural models proposed by Charles Handy but accepts that this will in most instances be a simplification, as elements of more than one culture will be present in any real organisation. Reference is also made to the culture in Japan and the fact that they have been successful without ISO 9000 ISO 9000 ISO 9000 is a series of documented standards representing a basic model for Quality Assurance. In its most basic form it requires that you: Say what you do Have documented procedures for performing the work that affects product or service quality. Do what you say Work according to the written procedures Record what you do Retain records of the activities to provide objective evidence of compliance (audit trail). Improvement Compare what you actually achieve with what is planned and use the information to correct any shortcomings. The overall objective can be described as MEETING REQUIREMENTS although it does not set these requirements or define the method of meeting them. The design of the standard is such that a considerable degree of flexibility can be achieved within a wide range of environments and cultural types. A number of special sector specific guides are available to assist the interpretation for specialist areas, for example, construction, electronics, service, and software. Regenesys Business School 24

29 Western Culture In considering the possible effects of culture we first need to define the context and our understanding of the term. Management theory can seem confused on this issue with texts like Johnson and Scholes describing culture as a web of interlinking entities, all of which influence the Cultural paradigm of the organisation. Stories Symbols Rituals and Routines Paradigm Power Structure Control Organisational Structure ISO 9000 Cultural Web impact The model suggests six elements which are predominant features of an organisational culture (fig. 1). While this model may explain a number of cultural features which fit observed facts it is too general to predict any but the most widespread of effects of a Quality Management System. It is reasonable to assume however that there will be an effect. The controls imposed by a quality system are likely to influence areas such as rituals and routines, organisational structure, and controls. All of these can be expected to exert some change on the overall organisational paradigm. An alternative view of culture is given by Charles Handy who suggests that there are four basic cultural variants or types which can be found to a greater or lesser extent in western organisations and it is these which will be examined. Role Culture The Role Culture is perhaps the most readily recognised and common of all the cultural types. It is based around the job or role rather than the personalities and is epitomised by what we tend to think of as the traditional hierarchical structure. Its strengths are in its predictability and stability while its obvious opposites of inflexibility and slowness of reaction are its weakness. For the implementation of a Quality Assurance System such as ISO 9000 this structure has many advantages, and it can be argued that ISO 9000 was originally designed for this type of environment with its layers of procedures and instructions mapping the general hierarchy. Regenesys Business School 25

30 Quality Policy Quality Procedure Workplace Reference Organisational Process Job level Quality System Quality and Organisational Fit Organisational Structure Implementation is therefore likely to be relatively straight forward with little difficulty in documenting activities and defining responsibilities since they are for the most part already in place. The overall structure of the system aligns well with the hierarchy levels found in this culture. The very rigidity of this type of organisation can provide difficulties when it comes to the effectiveness of such a system and the structure can develop a projectionist environment where individuals have a myopic view of their jobs. Care is therefore necessary when writing procedures to ensure that the cross functional processes are properly analysed before hand. Barriers often form between departments creating "white space" for which there is no responsibility or management. Attempts to rectify the situation often lead to more procedures and a tightening of control, so the circle continues. Because of the focus on the role this culture tends to be impersonal, and by implication restrictive, suppressing individuals attempts at system improvements. It doesn t take much thought to work in a role culture. Change is therefore relatively slow and is often only brought about by fear. This is hardly the best atmosphere for a progressive quality movement. Task Culture The task culture is one where management is basically concerned with the continuous and successful solution to problems. Performance is judged in terms of results and problems solved. Although a structure exists it is flexible and capable of being formed and reformed depending upon the task in hand. Handy likens it to a net where the power comes from the junctions or interstices. The organisation is therefore a more loosely bound than the role model. Power and respect come from individual knowledge rather than rank or position the power being influenced from various positions depending upon the current task. At first site an ISO 9000 system would seem a poor fit to this open and self motivating environment, and would be seen by some to be an unacceptable restraining influence. In practice however ISO 9000 can work extremely well in this environment by providing a backbone structure to build the various projects and tasks. The key to this is the realisation that IOS9000 only requires that you maintain records of elements that affect quality and that it does not have to be sliced up in a divisional structure. This is pointed out by Waller et al who give guidance on representing this structure in the Quality Policy Manual. It should be realised that having taken this approach each individual project needs a structure designed for that individual task and this will need to be defined. Unlike the role model where in general the structure is static this culture is very flexible and will need to have procedures which reflect this. Regenesys Business School 26

31 An ISO 9000 system at the lower levels (work instructions) may be able to integrate into the existing structure common in this culture. Little work may therefore be necessary if the organisation is already using structured methods for its Project Management such as PRINCE/PROMPT or SSADM which will already have well defined procedures and records. These records in many cases will meet the requirements of a Quality system. The essence is therefore to recognise this and not attempt to "reinvent the wheel" by overlaying already existing procedures and records. Most project-based environments, particularly those with established procedures, should blend well with a Quality System such as ISO It is possible that by focusing attention on records (quality) and existing processes have the benefit of reducing the overall administration burden. Organisational Quality Policy Quality Procedure Process Workplace References Job level While the previous two cultural models have focused on the role or task the next two place the focus on the emphasis on individuals Power Culture This culture tends to rely on a central figure for its strength and has lines of communication which not only radiate out from this centre but link side ways across the organisation. The dominant influence of the centre results in a structure that is able to move quickly and respond to change and outside threats. This ability is gained not by formal methods but by the selection of like minded individuals who in key positions are able to guess what the Boss would do without the need for conformist systems. This culture is often found in small entrepreneurial organisations but will frequently breakdown as they grow since the web is more difficult to maintain with size. Alternatively the culture may spawn subsidiary webs. As might be expected attempts to implement a structured system into this culture are likely to be vigorously resisted both on the grounds of constraining flexibility and unnecessary cost. Politics is important here and the ability to anticipate the actions of the "Boss" essential for survival. While there is always a cost associated with gaining control it can be argued that this type of organisation is by its very nature able to exercising quite strict internal control. It is often a case of conform or go! Regenesys Business School 27

32 Quality Policy Organisational Quality Proceedures Process Workplace Reference Job level Centre Control If an ISO 9000 system is to be successful in such a culture, it is clear it must be fully supported by the "Power Authority" (the boss), and care taken that this influence is not overbearing. Person (Star) Culture With its focus solely on the individual this type of culture perhaps offers the most challenging environment for the implementation of an ISO 9000 system. Although not a common culture for an entire organisation to be based, it is none the less found in small areas of large companies. The culture is that of educated and articulate individuals, specialists who have come together because of common interests lawyers, academic researchers, consultants, etc. They may use some common office services but generally operate independently. Charles Handy describes attempting to control this type of organisation as: "like trying to herd a group of tomcats" Clearly a structured system such as ISO 9000 is likely to face considerable difficulties in this mainly "academic" atmosphere. There is little in the way of effective influence that can be brought unless in the unlikely event that they all agree. Much of the output of this type of organisation may be provided by an office or support function, and it is here where we need to look for the initial implementation of the Quality system. Experience in the USA suggests that although not willing to accept the constraints of a formalised system such as ISO 9000 these individuals are more likely to accept the more philosophical approach offered by TQM Conclusion ISO 9000 can be an adaptable system but care must be exercised in its application if maximum benefit is to be gained in any particular situation. The system can be seen as constraining to the more freewheeling organisational styles, but it does have the benefit of requiring control all too necessary as companies grow, and can therefore represent a prudent move for the future. Regenesys Business School 28

33 Culture Cultural Fit Challenges Benefits Role Good Few over procedural risk? Task Fair/Good Fitting with any existing systems Power Poor Structure and executive dominance Person? Acceptance Need Consistent quality and control Standardisation and consolidation of existing systems Can produce a compact system. Stability and ability to grow organisation Doubtful (use other Quality Approach) It is clearly not the ideal solution in all situations as some companies have been very successful without any form of formalised systems.. The rise of Japan in recent years has been achieved in a culture where such systems did not exist although it could be argued that in this case their culture itself places an emphasis on conformity. ISO 9000 has proved effective in the west and is gaining in recognition; its achievement however should not be seen as an end in itself but as the starting point on the longer and never ending journey to Total Quality. REFERENCES Handy, C. The Gods of Management. Video. Handy, Charles Gods of Management 3rd Ed. Century Business: London. Handy, Charles Gods of Management. 3rd ed. Century Business: London. Johnson, G. and Scholes, K Exploring Corporate Strategy. 3rd ed. Prentice-Hall: London. Wagner, L Inside Total Quality Management. "Does teamwork buck America s tradition of individual achievement?" Landmark Communications. Waller, J., Allen, D and Burns, A The Quality Management Manual. Kogan Page: London. Page 52. Read more about the impact of ISO standards on Quality Management Systems in the article below: Levine, D.I., Toffel, M.W. (2010) Quality management and Job Quality: How the ISO 9001 standard for Quality Management Systems affects employees and employers. Harvard Business School: Working Paper Files/ pdf (accessed 14 July 2014) Regenesys Business School 29

34 Deming s fourteen points for quality management William Edwards Deming was a leading innovator and thinker of quality management. For over fifty years, Deming devoted his time and research to quality management. His most profound addition to quality management was his theory the System of Profound Knowledge. This theory reflected an understanding of systems thinking, statistics, the theory of knowledge and the understanding of psychology. The system of profound knowledge therefore has four parts: Theory of optimization; Theory of variation; Theory of knowledge; and Theory of psychology. (Cengage, 2006) Read more about the four phases in the extract below: THEORY OF OPTIMIZATION The objective of an organization is the optimization of the total system and not the optimization of the individual subsystems. The total system consists of all constituent customers, employees, suppliers, shareholders, the community, and the environment. A company's long-term objective is to create a winwin situation for all of its constituents. Subsystem optimization works against this objective and can lead to a suboptimal total system. According to Deming, it is poor management, for example, to purchase materials or service at the lowest price or to minimize the cost of manufacturing if it is at the expense of the system. Inexpensive materials may be of such inferior quality that they will cause excessive costs in adjustment and repair during manufacturing and assembly. THEORY OF VARIATION Deming's philosophy focuses on improving the product and service uncertainty and variability in design and manufacturing processes. Deming believed that variation is a major cause of poor quality. In mechanical assemblies, for example, variations from specifications for part dimensions lead to inconsistent performance and premature wear and failure. Likewise, inconsistencies in service frustrate customers and hurt companies' reputations. Deming taught Statistical Process Control and used control charts to demonstrate variation in processes and how to determine if a process is in statistical control. There is a variation in every process. Even with the same inputs, a production process can produce different results because it contains many sources of variation, for example the materials may not be always be exactly the same; the tools wear out over time and they are subjected to vibration heat or cold; or the operators may make mistakes. Variation due to any of these individual sources appears at random; however, their combined effect is stable and usually can be predicted statistically. These factors that are present as a natural part of a process are referred to as common (or system) causes of variation. Regenesys Business School 30

35 Common causes are due to the inherent design and structure of the system. It is management's responsibility to reduce or eliminate common causes. Special causes are external to the system, and it is the responsibility of operating personnel to eliminate such causes. Common causes of variation generally account for about 80 to 90 percent of the observed variation in a production process. The remaining 10 to 20 percent are the result of special causes of variation, often called assignable causes. Factors such as bad material from a supplier, a poorly trained operator or excessive tool wear are examples of special causes. If no operators are trained, that is system problem, not a special cause. The system has to be changed. THEORY OF KNOWLEDGE Deming emphasized that knowledge is not possible without theory, and experience alone does not establish a theory. Experience only described cannot be tested or validated alone is no help for management. Theory, on the other hand, shows a cause-and-effect relationship that can be used for prediction. There is a lesson here for the widespread benchmarking practices: copying only an example of success, without understanding it in theory, may not lead to success, but could lead to disaster. THEORY OF PSYCHOLOGY Psychology helps to understand people, interactions between people and circumstances, interactions between leaders and employees, and any system of management. Consequently, managing people requires knowledge of psychology. Also required is knowledge of what motivates people. Job satisfaction and the motivation to excel are intrinsic. Reward and recognition are extrinsic. Management needs to create the right mix of intrinsic and extrinsic factors to motivate employees. (Cengage, 2006) Within this framework, Deming identified fourteen principles of quality management. His fourteen principles are discussed below. Point 1: Create constancy of purpose for continual improvement of product and service Investment in preventative maintenance today can prevent major operational problems tomorrow. Continuous improvement and innovation should be a constant in management strategies and plans. Point 2: Adopt the new philosophy for economic stability Traditional management methods are no longer effective for the current management environment. Innovation is needed in order to lead. Quantity is no longer more important than quality. There must be a constant movement towards a philosophy of continuing quality improvement in all systems and processes. Point 3: Stop dependence on inspection to achieve quality Quality must be built into the product at the planning or designing stage, and be maintained or improved further during project implementation though quality control of the processes. Regenesys Business School 31

36 Point 4: End the practice of awarding business on the basis of price alone and minimise total costs by working with a single supplier Organisations should avoid awarding business merely based on the lowest tender contracts and should instead always require a meaningful measure of quality. Point 5: Improve constantly and forever every process for planning, production and service In order to improve quality and productivity constantly and to reduce costs, the organisation (and the project team) must search for problems proactively and continually, they should never be satisfied with only meeting the current standards or specifications. They should try to institute a programme of total quality control for products, processes and services that should take place continually. Point 6: Institute training on the job Appropriate and sufficient training should occur so that employees render better service. The building blocks of consistency and quality are training and education. Point 7: Institute modern methods of supervision and leadership Managers need to be more than just directive, but they should keep abreast of the latest developments. They should be actively involved in improving the system that they and their employees work in. Modern leaders need to ensure quality and productivity by promoting teamwork and mutual trust, and provide innovative methods to achieve improvement. Point 8: Eliminate fear If employees fear management, the result is usually reduced competitiveness and innovation; both positive components for business. A secure work environment needs to be created where uncertainty, ambiguity and randomness in management are removed. Two-way communication needs to be encouraged, and ideas should be actively sought out and listened to. Point 9: Break down barriers between departments and individuals Employees need to work as a team to proactively solve problems before they arise. Destructive competition within the same organisation should be replaced with co-operation. A barrier-free atmosphere of mutual trust should be created in order to achieve the organisation s common objectives. Regenesys Business School 32

37 Point 10: Eliminate slogans, exhortations and targets for the workforce. Unreasonable requests through slogans and posters, without providing the necessary tools or methods for achieving these requests, only create mistrust and adverse relationships between management and employees. Deming believed that people do their best and that the cause of low quality and unsatisfactory productivity belong to the system and can only be solved by changing management practices. Point 11: Eliminate numerical quotas for the workforce and numerical goals for management. Deming believed that organisations should eliminate management by objectives, by numbers or by numerical goals. The achievement of a target should not be seen as the ultimate success, as there is always room for improvement. Institutions should focus on quality not quantity. The only way to increase quality and productivity is to change from work standards to competent leadership. Point 12: Remove barriers that prevent people from workmanship and eliminate the annual rating and merit system. Most serious mental obstacles are those that do not allow pride in workmanship. Do away with the practice of annual merit ratings. It destroys teamwork, leads to mediocrity, increases the variability of employee performance and only focuses on the short term. The appraisal procedure should be replaced by proper leadership and communication and by a counselling and development procedure. Point 13: Institute a vigorous programme of education and self-improvement for everyone. Training and development should be continuous to keep up with new developments and innovative techniques. Things change continuously and managers should be aware of this and be trained to take advantage of it. Retraining is a necessary investment, which also helps to motivate employees towards self-improvement. Point 14: Put everybody in the organisation to work to accomplish the transformation. Senior management must lead the way by committing to continuous quality improvement and innovation, and by practicing what they preach. Management must promote team spirit by removing communication barriers and providing appropriate training in statistical tools so that a common language is established. (Knipe, van der Waldt et al, 2002: ). Regenesys Business School 33

38 Deming s fourteen points for quality management Debate the points you have just read: 1. Do you think that you could apply these points in your organisation? 2. How would they impact on quality delivery? Total quality management We discussed the concept of Total Quality Management (TQM) in the previous section. In this section we will look at this philosophy in more detail. According to Padhi (2011) TQM has eight key principles. These principles are discussed in Table 4 below. TABLE 4: EIGHT PRINCIPLES OF TQM Ethics Integrity Trust Training Teamwork Leadership Communication Recognition Ethics within the framework of TQM is divided into personal and organisational ethics. Personal ethics outlines individual concepts of what is right and what is wrong. Organisational ethics outlines the business s code of ethics and the guidelines provided to employees concerning the standard of performance expected. This principle relates to the expected service customers receive and implies honesty, morals, values, fairness and sincerity. Trust requires holistic participation. This means that employees are to be included on all levels in the framework of quality management systems. This creates empowerment for all employees, as it demands that they take ownership. Through this commitment is essential. Training employees ensures continuous productivity improvement. Training includes the enhancement of employee knowledge, skills and abilities. Teamwork is an essential tool for the implementation of TQM. Through teamwork, productivity increases and training is enhanced as team members learn from their own, as well as their team members, mistakes. As mentioned before, TQM cannot be implemented without sound leadership. Leaders are expected to provide inspiration, strategic direction and instil values. Leaders are therefore responsible for the team s belief and commitment in the implementation of TQM. The ability to communicate binds all aspects of TQM together. Not only should employees be encouraged to communicate successes, but also barriers and possible risks are critical to the overall quality of an organisation. Communication must take place in the downward and upward techniques (we discussed Communication principles and techniques in you Human resource Management and Project management modules). Recognising the efforts of employees is the final element of TQM. Recognition enhances selfesteem, which in turn reflects on employee productivity and the quality of work produced. (Padhi, 2011) Regenesys Business School 34

39 These principles are divided into four groups (which are illustrated in Figure 2). The groups include the elements in the following way: Foundation: ethics, integrity and trust; Building bricks: training, teamwork and leadership; Building mortar: communication; and Roof: recognition. (Padhi, 2011) FIGURE 2: TQM PRINCIPLES GROUPING (Padhi, 2011) Watch the clip below for an overview of TQM. Spetz naz1. (2009) Modern Chairs- A Total Quality Management Training Video, Youtube.com, (accessed 14 July 2013) Regenesys Business School 35

40 Continuous quality improvement Continuous quality improvement (CQI) is an approach used to improve process performance in organisations. The approach attempts to improve the quality of an organisation s outputs and reduce waste and activities that do not add value to the organisation (Murray, 2013). CQI practitioners aim to identify improvement opportunities, analyse these opportunities and implement specific solutions. This requires knowledge of tools such as Six Sigma, Total Quality Management and the four-step Plan-Do-Check-Act (PDCA). Initiating change to enhance quality is essential, together with the alignment of strategic goals and processes, before the improvement plan can be activated. Tyndall (2013) provides the following summary of the four-step PDCA model in the article below: Plan Define your processes--what sequence of steps takes you from request to output? If your processes are not documented, document them. Seeing your process on paper is a powerful way to see what is going on, and often the problems bubble right up to the surface. Next, identify the problem or improvement opportunity in the process (if there are more than one, pick the one to address first). Bring the right people in the room to brainstorm possible causes for the problem and determine which is the likely root cause (or biggest, if more than one are contributors to the problem). Then brainstorm on potential workable solutions. Finally, outline the action plan and targets for improvement. Do You have an action plan with targets for improving the process. Now you execute that action plan. Check your progress against the action plan. Strong action plans list owners, tasks, target dates, and measurements of success or milestones. As the action plan is being executed, compare progress to what was initially set. Sometimes milestones are added or changed if the execution reveals new information or circumstances. When this happens, update the action plan and monitor accordingly. Check Once the actions have been implemented, it is time to determine if the improvement actions were successful. Before you can do this, you must define how the process performance is measured. The Check step requires that a way of measuring process performance is established, and that the measurement(s) is valid and repeatable. This frequently requires the use of common business graphs, such as Pareto and Run charts, as an example. Compare the data from the process before the changes to data from the process as it is currently performing. Has the process improved? Is the improvement at the level initially targeted during the Plan phase? Has the change revealed or created any new or unintended impact? Act The Check step provided data and possible lessons learned. Now is a good time to evaluate whether the initial improvement enabled the process to perform at the required level or if more is needed. If more than one improvement was identified in the Plan step, now is the time to determine if a new action plan is warranted. If not, standardize the improvements as the new process. And don't forget to celebrate your success! Regenesys Business School 36

41 Joseph Juran s theory Joseph Juran s theory is based on a traditional quality system and supports Strategic Quality Management. The philosophy is divided into the quality trilogy and a quality planning roadmap (Cengage, 2006). The quality trilogy focuses on the role of quality planning, quality control and quality improvement. These elements are described in Table 5. TABLE 5: JURAN S QUALITY TRILOGY Quality planning Quality control Quality improvement The focus of quality planning is to provide the organisation with the ability to meet customer needs in the production of services/products. Organisations are required to establish customer needs and develop processes to develop the products and services, which answers the needs. If quality planning is poor, waste is inevitable. Controlling quality in organisations involves evaluating whether actual performance of employees and processes aligns with plans made. Control then resolves the differences between the two. Quality improvement then revolves around improving the efforts made to meet the needs of customers and producing products and services without waste. (Cengage, 2006) The quality planning road map is used to understand customer requirements, establishing measurements based on customer needs, optimising product design and developing processes to meet customers requirements (Cengage, 2006). Juran (1988:14-15) illustrated the road map as follows: FIGURE 3: JURAN S QUALITY PLANNING ROAD MAP Exis&ng Product and process Iden&fy customer Discover customers' needs Establish units of measure Establish measurement Develop product Op&mize product design Develop process Op&mise: prove process capability Transfer to opera&ons (Juran, 1988:14-15) Regenesys Business School 37

42 Within the framework (quality planning road map) and process (quality trilogy), organisations are required to include a quality steering team, which is supported by top management. Quality management must also be a part of the strategic plan and all employees must be involved (Cengage, 2006). According to Bowen (2012), Juran further developed ten steps to quality improvement. These steps are: 1. An awareness of the opportunities and needs for improvement must be created 2. Improvement goals must be determined 3. Organisation is required for reaching the goals 4. Training needs to be provided 5. Initialize projects 6. Monitor progress 7. Recognize performance 8. Report on results 9. Track achievement of improvements 10. Repeat EFQM model The European Foundation for Quality Management (EFQM) developed a model consisting of nine criteria for quality management. This model allows an organisation to understand the cause and effect relationship between the tasks the organisation performs and the results they achieve. The EFQM further outlines eight fundamental concepts of excellence. You can read more about them in the article presented below: EFQM. (2012) An Overview of the Excellence Model, EFQM.org. Excellence Model 2013 EN extract.pdf (accessed 14 July 2014) The implementation of a specific model/system is required to drive the successful implementation of quality management in an organisation. In this section different models and systems were described. Each organisation applies these systems and models in manners that suit them the best. It is however important that quality is evaluated and assessed in organisations to ensure that customer needs are met. In the next section we will be evaluating methods used to solve quality problems. Regenesys Business School 38

43 7.2.3 Solve quality problems In order for an organisation to function effectively, its strategy, structure, culture and systems and work processes all need to support each other. All these factors are, however, rarely aligned; there is almost always scope for improvement. Quality development initiatives typically start out by measuring the current state and standard of service delivery. Thereafter, they proceed to set the desired status and standards they want to achieve. It is important to note that certain indicators are initially determined and then traced as the improvement initiative progresses. Problem-solving cycle Once standards are set, the question arises How can we overcome the gap between our current condition and the desired goal? The answer is found using a participatory problem-solving approach. The different levels of workers in the organisation come together and ask themselves, What shortcomings do we have? ; What is the cause of these problems? ; What potential options exist to resolve the issues? ; How do we choose the best one? ; and, How do we implement the selected solution? (Davis and Goetsch, 2013: 282). One of the primary problem solving techniques implemented is the problem solving cycle. The problem solving cycle has been discussed in previous guides. For the purposes of the module a diagram will be provided (Figure 4), however, please refer to previous modules for the theory related to the problem solving cycle. FIGURE 4: PROBLEM-SOLVING CYCLE (Adapted from Davis and Goetsch, 2013: 282) Regenesys Business School 39

44 You have studied problem-solving methods in previous modules. Research different methods and modules (by using previous modules - Human Resource Management, Project management - and other sources) to answer the questions presented below. Recap Questions 1. Discuss the relevance of questions asked when attempting to understand a problem. 2. Identify the difference between analysing root causes and symptoms. 3. Explain how brainstorming and mind mapping assist in generating solutions to problems. 4. Explain how you would develop criteria to assist you in selecting the most feasible solution. 5. Discuss the significance of developing SMART objectives Moving Toward a Client-Focused Organisation An inwardly-focused organisation is one that is concerned mainly with pleasing itself rather than its clients. They are fixated on achieving internal goals such as cutting costs and budgeting. Client service excellence goals are low on the list or even non-existent. Staff are focused on making their managers, rather than their clients happy. Units who do not deal directly with the external client do not see themselves as responsible for client service excellence. Decisions that affect the client are made at the top, and then pushed down without consulting those at the front line. In contrast, according to Leland and Bailey (1999), the following are the qualities that characterise a client-focused organisation: Recognition is earned by staff who balance job efficiency with client satisfaction; Managers focus their attention on supporting staff in doing their jobs well so that the staff can focus their attention on taking care of client needs; Promotion is based on good service skills as well as on performance; Training staff is a high priority, with a focus on both the technical skills to complete the job, and on interpersonal skills to manage relationships; All staff know who their clients are and see how they are part of the client chain; A participative management style is common, and staff feedback is sought on key client issues before decisions are made; and Keep the big picture in mind and do not try to fix everything all at once. Select one specific service problem and resolve it completely before going on to the next. When all systems are running well, becoming complacent is easy. At this level, the biggest danger is the tendency to rest on your laurels, thinking that you have reached the end. Instead, you should look for ways to innovate. Ask yourself, how can we move our existing services to the next level? In the next section we will be focussing on Customer Relationship Management. Regenesys Business School 40

45 Recap Questions 1. Explain the focus areas of quality management. 2. Discuss the importance of quality management systems in relation to your working environment. 3. Critically analyse the following statement: Quality is not absolute. 4. Discuss the characteristics of an effective quality system and examine the advantages of implementing quality systems for: The internal environment of the organisation. The external environment of the organisation. 5. Research and critically discuss the following quality systems: ISO TQM CQI Six Sigma 6. Research and explain the following quality models: Deming s Fourteen points Crosby s Theory Juran s Theory EFQM 7. Critically explain the problem solving cycle in relation to quality management. Regenesys Business School 41

46 7.3 CUSTOMER RELATIONSHIP MANAGEMENT Timeframe: Learning outcomes: Recommended reading: Section overview: Minimum 15 hours Identify and select tools to monitor quality of service; and Advance understanding of the concept of Customer Relationship Management (CRM). Fabac, R., Mance, I. (2011) Customer relationship management system in occupational safety and health companies: research on practice and preliminary design solution. Interdisciplinary description of complex systems. 9(2), pp ational_safety_and_health_companies_research_on_practice_and_preliminary_design_sol ution (accessed 14 July 2014) Po-An Hsieh, J.J., Rai, A., Petter, S., Zhang, T. (2012) Impact of user satisfaction with mandated CRM use on employee service quality. MIS Quarterly. 36(4), pp isfaction+with+mandated+crm+use+on+employee+service+quality%26hl=en%26as_ (accessed 14 July 2014) This section analyses the concept of CRM. The implementation and development of a CRM programme is highlighted. The importance of managing customers is emphasised, as the importance of the co-existent relationship between the organisation and customers is explained The Concept: Customer Relationship Management Despite the fact that companies have successfully raised the quality of service over the years, customer surveys are showing that clients are less satisfied than ever before. This phenomenon has been called the customer paradox. The reason for this is that as companies increase their standards, customers raise their expectations even higher. In many countries and industries, quality is no longer seen as the factor that differentiates one company from the next, but has become a must-have for any company to survive. In an age where the customer has more choices than ever, when competitors try to woo clients away with ever better offers, it is difficult for companies to keep their customers loyal. Competitive success hinges increasingly on using customer-level information and interaction to create longterm, profitable relationships. Realising that it is five to ten times cheaper to retain a customer than to acquire a new one, companies are increasingly investing in a new concept called Customer Relationship Management. Regenesys Business School 42

47 Customer Relationship Management entails three ideals: 1. Establish a single view of each customer; gain insights into their behaviours and needs; and apply those insights to deliver a completely personalised customer experience. 2. Configure services and delivery into differentiated solutions that meet customer and citizen needs and intentions. Communicate broadly about these services rather than waiting for the customer to seek them out. 3. Promote the ease with which your customers can access your services. Offer multiple access points to accommodate the individual preferences and needs of those you service Maintaining Professional Relationships The term professionalism can best be explained by considering the characteristic behaviours of professionals in any field: They are highly skilled experts in their field; They are constantly looking for ways to improve their performance; They learn, train and practise their skills both with the team and on their own; They accept that they are role models, and behave accordingly in their professional and private lives; They are supportive of their colleagues; They get involved in the training and development of newcomers to the team; They are respectful of their internal and external customers under all circumstances; They always treat their clients respectfully, even in the face of disrespectful behaviour towards themselves; and They do not speak disrespectfully of their clients behind their backs; knowing that disrespect influences the behaviour of colleagues and subordinates towards these clients. Establishing a professional relationship with internal customers Internal customers are your colleagues and subordinates. Building good relationships with people you interact with at work is critical to a successful business operation so endeavour to apply the following practices: Regenesys Business School 43

48 TABLE 6: INTERNAL CUSTOMER RELATIONSHIP Step 1: Greet colleagues with warmth and friendliness. Do not get into issues of who should greet whom first these are cultural differences which cause unnecessary unhappiness because people do not understand one another. Everyone should attempt to greet everyone else first. Step 2: When colleagues request your help, it is so that they can do their work properly. We all rely on assistance from one another in order to get our work done to the required standard. So give colleagues whatever assistance you can in order to make it easier for them to do their work. If you are unable to help, apologise, explain why, and offer an alternative suggestion. It is particularly important to remember that your subordinates are your customers. In fact, they might best be considered your primary customers for the following reasons: Step 3: They may have more continuous direct contact with clients, whereas you tend to manage the service they provide; Your subordinates can only do a good job if they are receiving service from you in the form of support, training, information and feedback; and If your subordinates are not receiving adequate service from you, they cannot deliver high standards of service to clients. In terms of your relationships with colleagues and subordinates, this means: Step 4: Always treating your colleagues and subordinates respectfully no matter what the circumstances. Do not raise your voice or use bad language, and never reprimand them in front of anyone else; Do not speak disrespectfully or gossip about colleagues. You will negatively influence the behaviour of your subordinates towards your colleagues, and this will cause conflict resulting in a negative impact on teamwork and overall service. You will also lose the respect and trust of not only the specific subordinate, but also of your team, and you will damage the self-esteem of the subordinate. If you have a problem with the work performance or behaviour of a subordinate, handle it with that subordinate in a professional manner. Step 5: Take some highly visible action that clearly demonstrates commitment to customer service walk the talk Regenesys Business School 44

49 7.3.3 Managing Customers According to Gifford (2002) managing customers entail: Comprehending customer demands enabling organisations to focus on production and service efforts; Identifying the products or services that have the most growth potential which enables organisations to focus on developing these products to their highest potential; Knowing which products or services are most or least profitable which enables you to focus on maximising profit; and Knowing which customers will be advocates and supporters which enables you to provide references, case studies, and to safely test new products and services. Gifford (2002) emphasis the following two points: Traditional Customer Service is something you 'do to' the customer; and Modern Customer Relationship Management is 'done with' the customer. Gifford also argues that organisations relationships with their customers should be on going, cooperative, and built for the long term. Organisations that have many transitory relationships with customers consequently have to spend a lot of money on finding new customers. The cost of keeping existing customers is a tiny fraction of the cost of acquiring new customers Implementing CRM programmes in Organisations Implementing a CRM programme entails four steps. These are graphically presented in Figure 5. FIGURE 5: CRM IMPLEMENTATION Iden&fy Differen&ate Interact Customise (Berndt, Herbst, and Roux, 2005) Regenesys Business School 45

50 The figure is explained in more detail below: 1. Identify It is critical to know one s customers in as much detail as possible. This means not just knowing their contact details, but also their habits and preferences. Information on each individual customer should be consistently captured, across the whole organisation, throughout the duration of a customer relationship. As easy as that sounds, most organisations do not do this. 2. Differentiate Not all customers are the same. Some are more valuable to the organisation, while each has his/her own preferences about what they like or how they wish to be contacted. Differentiating your customers will help you to develop strategies on how to interact with them and how many resources to allocate to different customers. 3. Interact Once you know the preferences of your customers and once you understand his/her value, the most appropriate form of serving this customer can be determined. To make interactions more efficient, drive your customers into the most appropriate communication channels. A bank, for example, may wish to encourage low-value customers to do their banking over the Internet because it costs the least. On the other hand, it may assign a personal advisor to high-value customers in their private bank. 4. Customise A company must adapt some aspects of its behaviour to meet their customers individually expressed needs. By doing this, a customer becomes involved in a relationship that s/he will find hard to break, even if it would only be because of the hassle involved in changing to another service provider. As these four points have illustrated, merely knowing about customers is not sufficient: the knowledge must be put into practice to be of any use at all. (Berndt, Herbst, and Roux, 2005) Regenesys Business School 46

51 For more information on customer relationship management system and their implementation, read the articles presented below: Fabac, R., Mance, I. (2011) Customer relationship management system in occupational safety and health companies: Research on practice and preliminary design solution. Interdisciplinary description of complex systems. 9(2), pp _Safety_and_Health_Companies_Research_on_Practice_and_Preliminary_Design_Solution (accessed 14 July 2014) Po-An Hsieh, J.J., Rai, A., Petter, S., Zhang, T. (2012) Impact of user satisfaction with mandated CRM use on employee service quality. MIS Quarterly, 36(4), pp Technological Implications Having personal relationships with customers used to be easy when the grocery store was just around the corner. The shopkeeper would have a relationship with each of his customers, and know their preferences and backgrounds. But with the arrival of the supermarket and the proliferation of large enterprises, the relationship between a company and its customer has become depersonalised. You may remember how you got the run-around the last time you tried to get some help from your local municipality, telephone company or even your bank. The chances are that the person you initially reached was the wrong person. You were given a new number to call. You had to hang-up, redial and wait in a telephonic queue. By the time you had done that several times, you may still have been no further or you may have received conflicting advice. Among the reasons for such poor service are inadequate work processes, people being compartmentalised in departments that do not work together, or outdated, fragmented technological solutions. On the other hand, with the advancement of technology, asemblance of personalisation has become possible again. You may be greeted on an internet site by name. The site could suggest you buy a book that it thinks you may like because of your previous buying behaviour. At the very least, you may find a direct mail letter that is addressed to you personally in your post box. Regenesys Business School 47

52 These advances have become possible because of: Advances in the ability to link different programmes; New designs of specialist customer relationship management databases that can be accessed by multiple users in multiple locations at the same time; The ability to link multiple communication channels into one picture of the client. All letters, s, internet interactions or conversations can be attached to the contact records of a person and recalled instantly; The arrival of sophisticated web technology which can track repeat visitors, observe their surfing behaviour, or remember all their previous transactions. If desired, each visitor can even configure the way they want a website to present itself to him/her when returning the next time; and Call centres that are able to see in advance who is calling automatically and pop up all the previous contact history and personal details from the database. The modern consumer does not care about how a company organises itself. S/he has the expectation to get exactly what s/he wants as quickly as possible. S/he wants the sales person to answer a question regarding a service complaint lodged five weeks ago immediately. All of that requires that a company integrates its various processes and communication channels into one coherent picture as illustrated below. Developing an integrated approach to servicing, marketing and selling has multiple benefits as illustrated in Figure 6 below: FIGURE 6: BUSINESS PROCESSES Business Processes Marketing Selling Servicing Customer Interaction/ Communication Channels Internet Mai l Field Personnel Agents/Distributors Call Center Retai l Broadcast Back Office Process / Systems Regenesys Business School 48

53 The figure is explained in more detail below. Customer Service: First and foremost, an integrated approach should result in more satisfied consumers that are more likely to remain loyal. It also reduces costs, as less time is needed to serve one customer. Having information available also helps to predict the peaks and troughs of demand, which allows a company to deploy enough people and therefore to reduce waiting time. Marketing: Selling: Detailed knowledge of the preferences and needs of customers helps a company to develop the right offerings. It can decide how much effort and how many resources should be devoted to which customers. It assists the company in determining how to contact its customers. It can also measure what campaign produced what results at what costs. The essence of sales management has changed with the introduction of the internet. Customers can click on a webpage to find information needed for a purchase. This, however, does not make a salesperson obsolete as these individuals provide additional information and answers detailed questions concerning a product or service. Salespersons are also in a better position to make an offer that suits the clients needs. As mentioned before, technology allows organisations to connect with their customers on a personal level. This requires that employees understand effective communication in order to ensure successful customer relationships. This is discussed in the next section. Recap Questions 1. Why has CRM become a priority in organisations? 2. Explain the inter-dependant relationship between organisations and their customers. 3. How does CRM reduce costs, waste and complaints? 4. Discuss the characteristics of a modern customer. 5. What does managing customers entail? 6. Explain the central focus of organisations implementing CRM programmes. 7. Discuss the characteristics of an excellent CRM programme. 8. Analyse the advantages of an effective CRM programme. 9. Evaluate the steps in implementing a CRM programme. Regenesys Business School 49

54 7.4 COMMUNICATE EFFECTIVELY WITH CUSTOMERS Timeframe: Learning outcomes: Section overview: Minimum 10 hours Identify the attitudes required to serve customers effectively; and Communicate effectively with clients and relevant stakeholders. Communication is a critical skill, whether it is it for interacting with your customers or with your colleagues. As an employee, quality service depends on your ability to communicate effectively, convincingly, and credibly with customers Introduction Communication, as mentioned above, is a critical skill when dealing with customers. In this section we will look at different aspects of communication within the framework of customer relationships How to deal with Irate Customers Very often, one is confronted with customers who need to report their dissatisfaction with a specific product or service. Using the HEAT approach can be a useful tool when a customer/client is irate, upset and emotional about an issue or has a complaint. (H) Hear them out, and listen let them give off steam. Make an effort to be physically alert. Mental alertness is critical, and you will need to remain calm. The person may be trying to put into words a feeling or attitude which is difficult for them to express. If you interrupt, it will immediately cut the lines of communication. You may need to ignore insults and wait for the person to calm down. Insults or forms of rudeness should not be taken personally. Rather listen carefully and show that you are taking the person s comments seriously. (E) Empathise: It must be very frustrating... Encourage a sense of caring by giving verbal support. Paraphrasing shows that you are listening. Show that you can understand the difficulties being experienced (disappointments or frustrations). Specify feelings and situations for example, I know how this must feel and I do agree that it must be disappointing. Thank the client for expressing their point of view. (A) Apologise: I m sorry for the inconvenience... expresses concern for and understanding of the customer/client. Use the open-questioning technique. Open questions encourage customers to relate the full extent of their problem beyond just a yes or no answer. The following is useful to remember how, why, when, where, who, what and which? Ask questions, and search for common ground for agreement. Regenesys Business School 50

55 (T) Take responsibility Take responsibility for putting things right and begin active problem-solving. Always finish on a friendly note, whatever the outcome. The client must always leave or end the conversation with the impression that they have been heard and will be actively attended to. Of all the emotions, anger is the one you are most likely to take personally, because anger is such an in-your-face emotion. Anger is always looking for someone or something to blame. Even if the customer/client s anger may appear to be directed at you, remember that you are simply the person to whom they are expressing it, and you should not take it personally. (Adapted from Development Dimensions International, 2012) Read the tips below on strengthening your customer/client skills: PERFECTING YOUR CUSTOMER/CLIENT SKILLS A client may not always be right, but a client is always a client and that means the most important person in your job. Reflect on the following points, some of which we have already encountered: You never get a second chance to make a good first impression Nurture special relationships Invest time in both customers and clients Deliver more than you promise Deliver the truth Speed up response times Be specific Make your division a showroom Create elements of uniqueness every day Tell clients and team members that you care Act on what you hear Speak the client s language Handling External Complaints Generically a complaints procedure includes the following: Provides a clear approach when a complaint occurs; Engenders understanding and confidence on how to tackle complaints; Helps to remove employee s personal feelings of guilt when they receive a complaint; Leads to recognition of complaints as valuable feedback, not criticisms; and Can produce records for analysing possible service improvements. (Adapted from Traut, 2002) Regenesys Business School 51

56 When clients complain, they like to be listened to and they also like to be aware of who is dealing with the complaint. The need to be treated fairly and efficiently and kept informed of the progress will be uppermost in the client s mind. A complaint form should contain the following details: Receipt details (date received, received by, division); Client details (name, address, connection to your organisation); and Complaint details (action to be taken, date completed, sign-off or line superior s signature). An employee who receives a complaint should look at it as a second chance to satisfy the client. Be courteous, empathise with the client, and ensure that all relevant details are obtained and recorded. Do not admit liability or fault at this stage. This is subject to getting more information and establishing the facts first (Traut, 2002). Assessment of the complaints Staff should be empowered to take appropriate action if the complaint is clearly justified, falls within their jurisdiction, and can be rectified immediately. Minor complaints may result from misinterpretation, misunderstanding, detail errors, or straightforward carelessness. Major complaints may involve breach of criminal law or have health and safety or financial implications. The client should be told who is dealing with the complaint nothing is more frustrating than dealing with a faceless corporation or being passed endlessly from one person to another. In the case of major complaints, the line manager should decide on an appropriate action. For example: Consulting a more senior member of staff; Producing a detailed report on the events; and Contacting the legal department. (Kile, 2012) Regenesys Business School 52

57 Deciding on internal corrective action Having dealt with the complaint, decide whether any system, equipment, or personnel-related improvement needs tackling. For handling complaints, DO: Make client service part of your divisional culture Empower staff to deal with complaints Maintain contact with the client to ensure that the complaint is dealt with satisfactorily Analyse the pattern of complaints and take action to make improvements Treat complaints positively Deliver courtesy, speed of response and a personal touch. For handling complaints, DON T: Take the complaint personally or defensively Blame the computer or a third party Say it s not your division s concern Use paperwork to block a fast response to complaints. Achieving desired service levels regarding complaints 1. Do you know what to do when your division receives a complaint? 2. Does your division receive many complaints? 3. Does it receive many different kinds of complaints? Is there a pattern in the complaints? 4. Are they recorded? 5. What happens to the records? 6. When you last complained to a company, how was the problem handled? Have you dealt with that company again? Talking to Customers Using a Telephone The minute that you pick up the phone, physical body language disappears and your tone of voice becomes 86% of the story as the person on the other side of the line cannot interpret the physical body language. (Leland and Bailey, 1999). It does not take long for customers/clients to pick up on your attitude towards them. Some people you speak to only have to say Hello before you find yourself thinking, I don t want to speak to this person. Regenesys Business School 53

58 The following guidelines will help you to be more client service sensitive over the telephone: Inflection in your voice; Volume of your voice; and Pacing the conversation with the customer. Inflection: Volume: Pacing: Is the wave-like movement of highs and lows in the pitch of your voice. The peaks and lows add interest and appeal to your voice, which is infinitely more attractive than a monotone, which displays a tedious sameness to the customer/client. One way to positively affect the inflection in your voice is to smile, especially at the outset of the telephone call. Smiling helps your voice to sound friendly, warm and receptive. Is a powerful means to control conversations. If a client is angry and speaking loudly, do not attempt to speak back at the same volume. Instead, start out by speaking at a somewhat lower volume than the client, gradually bringing the client s volume down to yours. Means matching your rate of speech and intensity of feeling to the rate of speech and intensity of your customer/client. This technique is the best tool you have for creating rapport with your client. Through focusing on the similarities between you and your client, you meet the client at their level and make him/her feel at ease. (Leland and Bailey, 1999) How to Assert Yourself You can unintentionally create conflict by applying an inappropriate balance between straightforwardness and tact. If you fly off the handle and become aggressive, you force your coworkers into a defensive posture that makes hearing what you have to say difficult for them. Alternatively, through being too tentative when presenting your point, you may result in a co-worker not taking you seriously. Try these six important ideas in asserting yourself effectively: Be specific: Don t fidget: Make eye contact: Make sure that you describe the situation in very specific terms so that the other person knows exactly what you are talking about. Fidgeting detracts from the impact of what you need to say. Use direct eye contact, without staring down the co-worker, to let him/her know that you mean what you are saying. Regenesys Business School 54

59 Let your face reflect your feelings: If you are serious about a matter, a look of concern is appropriate. Never say never : Stick to the facts: When talking about a person s behaviour avoid absolute terms like never and always, as they are always exaggerations of the facts (for example, You always ignore me is not as effective as saying, You did not do what I asked you to do ). You are not a mind reader, and cannot assume to know the reasons attitudes or motives behind your co-worker behaving as he/she did. Your co-worker will become defensive if you make incorrect assumptions about his/her feelings. (Adapted from Beckham and Beckham, n.d.) Before we end this session a final note on the client A client is the most important person to contact your organisation, whether in person or by other means. They are not someone with whom you should argue as Dale Carnegie says, The only way to get the best of an argument is to avoid it. The client is someone with whom you must learn to be patient, even though they may not appear patient with you. It is no secret that a client can make or break your day. But this is largely within your control, depending on how you react to their comments. Above all do not offend clients they may be a challenge, but are a challenge that you can overcome Lessons on Customer Service The lessons presented below are thought provoking. Ten Lessons from Fifteen Years By Aki Kalliatakis, Managing Consultant Exactly fifteen years ago, I started our little business on my dining room table, and I can t believe how quickly that time has passed. But what really delights me is to see how far many businesses have come in terms of looking after their customers. There is still a long way to go, however, and there are the key learning that we have had that I d like to share with you. (This newsletter will be a bit longer that most, but I know that you will find it useful.) Regenesys Business School 55

60 1. Customer service is not enough anymore I get good, even great service just about everywhere that I spend my money. Today it s about sustainable customer loyalty, and that comes not only from managing the moments of truth, but also from continuously and innovatively adding value for customers. Today, it is the maverick companies like Virgin Atlantic, Discovery, Outsurance, Exclusive Books, Mr. Delivery, Avis Car Rental, Nando s, and Momentum that are growing successfully, and it s mostly because they continuously find new ways to add value for customers. Instead of trying to trap customers, to make them hostages, to make it difficult to switch to competitors, rather spend your time and money to give them irresistible experiences and a quantum leap in value. 2. Stick with the basics It s the simple things that count the most. Yes, I know that every management consultant since Tom Peters has been saying this, but there are no magic wands. For example, every time I discover something new about Woolworths, every time I hear about their secrets, I m disappointed: there aren t any! But there is an obsession with getting the basic, small, detailed things right: Look after your customers like they were your friends, make sure we never run out of stock, speed up the queues and payment, train staff often and much, and respond to customers needs however weird they may be. 3. It s all about your people Survey after survey shows that motivated and empowered people look after their customers. Forget about expensive CRM systems and the other costly customer care technology available today: if your people are angry and frustrated with their managers, and feel abused and disrespected by the company, they will take it out on the safest target the customer. You cannot neglect your people. (And by the way, the more you encourage them to be fussy about the service that they get, the more likely it will be that they give good service.) 4. Saying Thank you and being nice to customers Doing these things in a meaningful manner is rare in most large businesses today. I ll spend R financing my car with my bank and receive a standard computer-generated letter. This is the same bank where I have three home loans totalling hundreds of thousands of Rand, and the only paperwork I can find is legal documents and an insurance policy. And it is the same bank where I have been a customer since I was nine years old (that is for thirty-eight years now!) and where nobody more senior than a bank-teller has ever said thank you. I do occasionally get a telephone from a more senior person but only to warn me that I have exceeded the overdraft limit. Not good enough. I really believe that you can get away with murder by showing warmth, care, and courtesy to people. 5. Companies are generally awful at keeping and using meaningful information about customers My local supermarket has no idea that I spend on average about R3000 per month there, have been doing so for nineteen years, and have never been specially acknowledged. My cell phone provider sends me a Valentine s Day SMS computer generated of course and wonders why I am ungrateful. (If you don t understand why, it s because this day of showing love is not about standard, computer-generated messages, and because at the age of 47 I don t do Valentine s Day anymore.) Regenesys Business School 56

61 The airline I used to travel with regularly approximately 1000 economy-class flights in the past fifteen years still doesn t use my name, nor do they know how I hate fish, nor do they offer me the seat-belt extension even though I must have asked hundreds of times, and still have to ask me if I want to sit in the window or aisle. Of course, they assume that I will be happy when I get one free flight to Durban after having to fly there and back 37,5 times to earn my free flight. On the other hand, Discovery recently found out that my wife was pregnant, and responded personally to both of us with information and warm messages. 5. Why do we find it so difficult to say sorry? In my opinion, the poorest customer service skill in companies today is recovery from poor service. Is it because we have too many big (male) egos? Is it that we fear we will lose face by apologising? Perhaps it s because we think that it will cost too much, or that if we ignore unhappy customers they will forget about it. A genuine apology, correctly timed, can work wonders, and may turn an unhappy customer into a loyal customer. 7. Customers are very willing to talk about their experiences if asked Why is it that companies spend a fortune to pay other companies to find out about their customers when you should be doing this yourself? And you may as well forget about CSI scores. These measure customer s perceptions of how they feel about your business but are not a true indicator of loyalty. Your business probably has a whole bunch of unhappy customers that are trapped like hostages, and also an even bigger group of customers who express satisfaction, even delight, but who act like mercenaries. They want the best possible deal no matter who they deal with. It is much better to measure loyalty behaviour (for example, repeat business, propensity to recommend, and lack of price sensitivity) if you want to get a true picture of your success. It is only when executives get knee-to-knee and jaw-to-jaw with customers, especially lost customers, that the most important information is shared. And if those customers have got a few beers in their bellies, they will probably be more honest too! 8. Today, customers make the rules Rules, systems, policies, and procedures are all usually created to benefit the company, to protect the business, rather than to delight customers. And most customers think that they are trivial, irrelevant, irritating and even pathetic. You need to challenge everything and, if this particular issue is crucial to your business, then ask yourself, How can we best protect our customers from this thing? 9. You can get away with murder by being nice to people Customers tend to be very forgiving when you have built a positive balance in their Emotional Bank Account. But it goes much deeper than that: when you treat customers with dignity, friendliness, helpfulness and respect, they feel a sense of obligation to support you, and to protect you. They are the ones who go the extra mile for you, not the other way round. Regenesys Business School 57

62 10. Customers love choices One of the most powerful ways to get customer commitment is to empower them, and one way in which this comes is through choice. Having a sit-down meal is fine, but a buffet lets me choose what I want. Self-service in whatever customer environment you care to mention is a powerful way to get enthusiastic participation, to save your business from the hassle of serving each customer individually, and to give customers a sense of ownership. When they feel like partners, they act like partners, and this can only benefit your firm. Regenesys Business School 58

63 8 REFERENCES Abahe.co.uk. (n.d) Quality Management Systems, (accessed 01 March 2013) American Society for Quality. (2013) Total Quality Management (TQM), Asq.com. Viewed 01 March Beckham, E., Beckham, C. (n.d.) You can assert yourself, (accessed 29 March 2013) Berndt, A. Herbst, F. and Roux, L. (2005) Implementing a Customer Relationship Management Programme in an Emerging Market, p7.pdf (accessed 28 March 2013) Bowen, R. (2012) Theories in Total Quality Management (TQM), brighthubpm.com, (accessed 04 March 2013) BusinessDictionary.com. (2013b) Quality Management systems defined, (accessed 01 March 2013) BusinessDictionary.com. (2013) Customer relationship management: Philosophy, (accessed 28 February 2013) Cengage, G. (2006) Quality gurus, Enotes.com. (accessed 29 March 2013) CRMforcast.com. (n.d) The global CRM software industry forum. CRM Defined and Understood, (accessed 28 February 2013) Davis, S. Goetsch, D.L. (2013) Quality Management for Organisational Excellence: Introduction to Total Quality Management. 7 th ed. New Jersey. Pearson. Development Dimensions International, (2012) Taking the HEAT, DDIworld.com, (accessed 29 March 2013) ExpertResorce.net. (2013) Advantages of Quality management systems: ISO Systems and Standards, Expertresource.net, (accessed 01 March 2013) Regenesys Business School 59

64 Fasset (2004). Implementing Quality Management Systems, Fasset.org, (accessed 28 February 2013) Gifford, E. (2002) Customer Relationship Management, Businessballs.com. (accessed 05 March 2013) Handy, L and RQA Outreach Working Party. Quality Systems Workbook Research Quality Association, Terqa.com, ems_workbook.pdf (accessed 28 March 2013) Hashmi, K. (2010). Introduction and Implementation of Total Quality Management (TQM), Isixsigma.com, (accessed 28 March 2013) ISO.org (2012) Quality Management Principles, ISO.org, (accessed 28 February 2013) ISO. (2013) ISO TC/176/SC2 Home Page, ISOtc.ISO.org. (accessed 01 March 2013) Juran, J.M. (1988) Juran on planning for quality, The Free Press. NY Kile, L. (2012) The new measure of customer service success, Destinationcrm.com, Customer-Service-Success aspx (accessed 29 March 2013) Knipe, A., & van der Waldt, G Project management for success. Sandown: Heinemann. Leland, K. Bailey, K. (1999) Customer Service for Dummies. 2 nd Edition. Hoboken, John Wiley & Sons. Murray, L.J. (2013) What is continuous process improvement?, Ehow.com. (accessed 29 March 2013) Nqa.com (n.d) ISO: All NQA Services: What is ISO 9001:2008, Nqa.com, (accessed 28 February 2013) Padhi, N. (2011) The eight elements of TQM, Isixsigma.com, (accessed 28 March 2013) Regenesys Business School 60

65 Praxion Research Group. (2013) ISO 9000, 9001, and 9004 Plain English Definitions, Praxiom.com (accessed 28 February 2013) Thompson, B. (n.d) Best Practices for effective CRM, Businessweek.com. (accessed 28 February 2013) Traut, T.R. (2002) Handling challenging situations with a customer-focused mindset, Business know how.com. (accessed 29 March 2013) Tyndall, R. (2013) What is a continuous quality improvement model?, Ehow.com, (accessed 29 March 2013) Regenesys Business School 61

66 9 GLOSSARY OF TERMS Term/ Abbreviation Explanation Benchmarking is a methodology that is used to search for best practices. Benchmarking can be applied to strategies, policies, operations, processes, products, and organisational structures. By finding and adopting best practices you can improve your organisation s overall performance. Best practices can be found either within your own organisation or within other organisations. It usually means identifying organisations that are doing something in the best possible way and then trying to emulate how they do it. Benchmarking There are at least two types of external benchmarking: competitive benchmarking and generic benchmarking. Competitive benchmarking involves comparing how you do things with how your competitors do things while generic benchmarking involves comparing yourself with organisations in unrelated sectors. In order to carry out benchmarking projects, you need to develop a benchmarking methodology. Your benchmarking methodology should define rules that control: How the scope of each project is defined. How benchmarking partners are selected. How confidentiality is respected and ensured. How benchmarking characteristics are specified. How benchmarking indicators or metrics are chosen. How benchmarking data is collected and analysed. How potential improvements are identified. How improvement plans are developed. How your benchmarking experience is added to your organisation s knowledge base. Characteristic A characteristic is a distinctive feature or property of something. Characteristics can be inherent or assigned. An inherent characteristic exists in something or is a permanent feature of something, while an assigned characteristic is a feature that is attributed or attached to something. Concession A concession is a special approval that is granted to release a nonconforming product for use or delivery. Concessions are usually limited by time and quantity and tend to specify that nonconforming characteristics may not violate specified limits. Conformity To conform means to meet or comply with requirements. There are many types of requirements. There are quality requirements, customer requirements, product requirements, management requirements, legal requirements, and so on. Requirements can be explicitly specified (like the ISO 9001 requirements) or implied. A specified requirement is one that has been stated (in a document, for example). When your organisation meets a requirement, you can say that it conforms to that requirement. Regenesys Business School 62

67 Continual improvement Continual improvement is a set of recurring activities that an organisation carries out in order to enhance its ability to meet requirements. Continual improvements can be achieved by carrying out audits, self-assessments, management reviews, and benchmarking projects. Continual improvements can also be realised by collecting data, analysing information, setting objectives, and implementing corrective and preventive actions. Correction A correction is any action that is taken to eliminate nonconformity. However, corrections do not address causes. When applied to products, corrections can include reworking products, reprocessing them, regarding them, assigning them to a different use, or simply destroying them. Corrective action Corrective actions are steps that are taken to eliminate the causes of existing nonconformities in order to prevent recurrence. The corrective action process tries to make sure that existing nonconformities and potentially undesirable situations don t happen again. Customer A customer is anyone who receives products or services from a supplier organisation. Customers can be people or organisations and can be either external or internal to the supplier organisation. For example, a factory may supply products or services to another factory (customer) within the same organisation. According to ISO 9000, examples of customers include clients, consumers, end-users, purchasers, retailers, and beneficiaries. Customer satisfaction Customer satisfaction is a perception. It is also a question of degree. It can vary from high satisfaction to low satisfaction. If customers believe that you've met their requirements, they experience high satisfaction. If they believe that you've not met their requirements, they experience low satisfaction. Since satisfaction is a perception, customers may not be satisfied even though you ve met all contractual requirements. Just because you haven t received any complaints doesn t mean that customers are satisfied. There are many ways to monitor and measure customer satisfaction. You can use customer satisfaction and opinion surveys; you can collect product quality data (post delivery), track warranty claims, examine dealer reports, study customer compliments and criticisms, and analyse lost business opportunities. Design and development Design and development is a process (or a set of processes). This process uses resources to transform requirements (inputs) into characteristics or specifications (outputs) for products, processes, and systems. You may treat design and development as different stages of a single integrated design and development process or you may treat design and development as two (or more) separate processes. You may also use the terms design and development interchangeably if they mean the same thing in your organisation. Regenesys Business School 63

68 Design and development review Design and development review is a set of activities whose purpose is to evaluate the suitability, adequacy, effectiveness, and sometimes the efficiency of a set of characteristics or specifications. Design and development review can be used to evaluate product, process, and system characteristics or specifications. In this context, an effective set of characteristics or specifications is one that has the potential to achieve planned results or realise planned activities. Design and development validation Design and development validation is a process. This process uses objective evidence to confirm that products meet the requirements that define their intended use or application. Whenever specified requirements have been met, a validated status is achieved. The process of validation can be carried out under realistic use conditions or within a simulated use environment. Design and development verification Design and development verification is a process. It uses objective evidence to confirm that design and development outputs meet design and development input requirements. Whenever specified input requirements have been met, a verified status is achieved. Effectiveness Effectiveness refers to the degree to which a planned effect is achieved. Planned activities are effective if these activities are realised. Similarly, planned results are effective if these results are actually achieved. For example, an effective process is one that realises planned activities and achieves planned results. Similarly, an effective set of characteristics or specifications is one that has the potential to realize planned activities and achieve planned results. Efficiency is a relationship between results achieved (outputs) and resources used (inputs). Efficiency Efficiency can be enhanced by achieving more with the same or fewer resources. The efficiency of a processor system can be enhanced by achieving more or getting better results (outputs) with the same or fewer resources (inputs). Infrastructure The term infrastructure refers to the entire system of facilities, equipment, and services that an organisation needs in order to function. According to ISO 9001, Part 6.3, the term infrastructure includes buildings and workspaces (including related utilities), process equipment (both hardware and software), support services (such as transportation and communications), and information systems. Inspection Inspections use observation, measurement, testing and judgment to evaluate conformity. Inspection results are compared with specified requirements in order to establish whether conformity has been achieved. Product inspections compare product characteristics with product requirements in order to evaluate conformity. Regenesys Business School 64

69 Interested party An interested party is a person or group that has a stake in the success or performance of an organisation. Interested parties may be directly affected by the organisation or actively concerned about its performance. Interested parties can come from inside or outside of the organisation. Examples of interested parties include customers, suppliers, owners, partners, employees, unions, bankers, or members of the general public. Interested parties are also referred to as stakeholders. Key performance indicator (KPI) A key performance indicator (KPI) is a metric or measure. KPIs are used to quantify and evaluate organisational success. They measure how much success you ve had and how much progress you ve made relative to the objectives you wish to achieve. KPIs are also used to set measurable objectives, evaluate progress, monitor trends, make improvements, and support decision-making. KPIs should be quantifiable and appropriate and should collect information that is useful to your organisation and relevant to the needs and expectations of interested parties. Examples of KPIs include the following: average revenue per customer, customer attrition rate, student failure rate, average response time, average delivery time, employee retention rate, return on equity, lost time due to accidents, and energy costs per unit of production. The following analogy might help make the point: when you go to your doctor he or she might measure blood pressure, cholesterol levels, heart rate, and your body mass index as key indicators of health. KPIs try to do the same thing for organisations. Management The term management refers to all the activities that are used to coordinate, direct, and control an organisation. In this context, the term management does not refer to people. It refers to activities. ISO 9000 uses the term top management to refer to people. Management review The overall purpose of a management review is to evaluate the suitability, adequacy, and effectiveness of an organisation's quality management system, and to look for improvement opportunities. Management reviews are also used to identify and assess opportunities to change an organisation s quality policy and quality objectives, to address resource needs, and to look for opportunities to improve its products. Measuring equipment In the context of this standard, measuring equipment includes all the things that are needed to carry out a measurement process. Accordingly, measuring equipment includes measuring instruments and apparatuses as well as all the associated software, standards, and reference materials. Mission According to ISO 9004, a mission statement explains why an organisation exists. It defines its reason for being (its raison d'être). Regenesys Business School 65

70 Nonconforming product When one or more characteristic of a product fail to meet specified requirements, it is referred to as a nonconforming product. When a product deviates from specified product requirements, it fails to conform. Nonconforming products must be identified and controlled to prevent unintended use or delivery. A product is the output of a process. Products can be tangible or intangible. ISO 9000 lists four generic product categories: services, software, hardware, and processed materials. Nonconformity Nonconformity refers to a failure to comply with requirements. A requirement is a need, expectation, or obligation. It can be stated or implied by an organisation, its customers, or other interested parties. There are many types of requirements. Some of these include quality requirements, customer requirements, management requirements, product requirements, and legal requirements. Whenever your organisation fails to meet one of these requirements, nonconformity occurs. ISO 9001 lists quality management system requirements. When your organisation deviates from these requirements, nonconformity occurs. Objective evidence Objective evidence is information that shows or proves that something exists or is true. Objective evidence can be collected by performing observations, measurements, tests, or by using any other suitable method. Organisation's Environment Your organisation s environment includes all the internal and external factors and conditions that can affect how well you achieve your objectives and how you treat interested parties. Outsourced process An outsourced process is any process that is part of your organisation s quality management system (QMS), but is performed by a party that is external to your organisation. According to ISO 9001, you must identify and control your outsourced processes, and you must ensure that each outsourced process is effective. You also need to figure out how to control the interaction between internal and outsourced processes. A process is a set of activities that are interrelated or that interact with one another. Processes use resources to transform inputs into output. According to ISO/TC 176/SC 2/N526R, the terms subcontract and outsource are interchangeable and have the same meaning. Preventive action Preventive actions are steps that are taken to remove the causes of potential nonconformities or potential situations that are undesirable. The preventive action process is designed to prevent the occurrence of nonconformities or situations that do not yet exist. It tries to prevent occurrence by eliminating causes. While corrective actions prevent recurrence, preventive actions prevent occurrence. Both types of actions are intended to prevent nonconformities. Preventive actions address potential problems, ones that haven't yet occurred. In general, the preventive action process can be thought of as a risk analysis process. Regenesys Business School 66

71 Procedure A procedure is a way of carrying out a process or activity. According to ISO 9000, procedures may or may not be documented. However, in most cases, ISO 9001 expects you to document your procedures. Documented procedures can be very general or very detailed, or anywhere in between. While a general procedure could take the form of a simple flow diagram, a detailed procedure could be a one-page form or it could be several pages of text. A detailed procedure defines and controls the work that should be done and explains how it should be done, who should do it, and under what circumstances. In addition, it explains what authority and what responsibility have been allocated, which inputs should be used, and what outputs should be generated. Process A process is a set of activities that are interrelated or that interact with one another. Processes use resources to transform inputs into outputs. Processes are interconnected because the output from one process becomes the input for another process. In effect, processes are glued together by means of such input output relationships. Organisational processes should be planned and carried out under controlled conditions. An effective process is one that realises planned activities and achieves planned results. Process approach The process approach is a management strategy. When managers use a process approach, it means that they manage the processes that make up their organisation, the interaction between these processes, and the inputs and outputs that tie these processes together. A process-based quality management system uses a process approach to manage and control how its quality policy is implemented and how its quality objectives are achieved. A processbased QMS is a network of interrelated and interconnected processes. Process-based quality management system (QMS) Each process uses resources to transform inputs into outputs. Since the output of one process becomes the input of another process, processes interact and are interrelated by means of such input-output relationships. These process interactions create a single integrated processbased QMS. The concept of a process-based quality management system is briefly mentioned in the introduction to ISO 9001 (section 0.2). However, ISO 9000 does not formally define this important term. Regenesys Business School 67

72 A product is the output of a process. Products can be tangible or intangible. ISO 9000 lists four generic product categories: services, software, hardware, and processed materials. Many products combine several of these categories. For example, an automobile (a product) combines hardware (e.g. tires), software (e.g. engine control algorithms), and processed materials (e.g. lubricants). Product Service is always the result of an interaction between a service supplier and a customer and can take many forms. Service can be provided to support an organisation s own products (e.g. warranty service or the serving of meals). Conversely, service can be provided for a product supplied by a customer (e.g. a repair service or a delivery service). Service can also involve the provision of an intangible thing to a customer (e.g. entertainment, transportation, or advice). While software is intangible, and includes things like approaches and procedures, hardware and processed materials are tangible and are often referred to as goods. Product inspection Product inspection is an activity that compares product characteristics with product requirements in order to evaluate conformity. More precisely, a product inspection compares one or more characteristics of a product with specified requirements in order to determine if the product meets these requirements. Product inspections use observation, measurement, testing and judgment to evaluate conformity. Product realisation A product starts out as an idea. The idea is realized or actualized by following a set of product realisation processes. Product realisation refers to all the processes that are used to bring products into being. The quality of something can be determined by comparing a set of inherent characteristics with a set of requirements. If those inherent characteristics meet all requirements, high or even excellent quality is achieved. If those characteristics do not meet all requirements, a low or poor level of quality is achieved. Quality Quality is, therefore, a question of degree. As a result, the central quality question is: How well does this set of inherent characteristics comply with this set of requirements? In short, the quality of something depends on a set of inherent characteristics and a set of requirements and how well the former complies with the latter. According to this definition, quality is a relative concept. By linking quality to requirements, ISO 9000 argues that the quality of something cannot be established in a vacuum. Quality is always relative to a set of requirements. Quality assurance (QA) Quality assurance is a set of activities intended to establish confidence that quality requirements will be met. QA is one part of quality management. Regenesys Business School 68

73 Quality characteristic A quality characteristic is tied to a requirement and is an inherent feature or property of a product, process, or system. A requirement is a need, expectation, or obligation. It can be stated or implied by an organisation, its customers, or other interested parties. An inherent feature or property exists in something or is a permanent characteristic of something. Quality control Quality control is a set of activities intended to ensure that quality requirements are actually being met. Quality control is one part of quality management. Quality improvement Quality improvement refers to anything that enhances an organisation's ability to meet quality requirements. Quality improvement is one part of quality management. Quality management Quality management includes all the activities that organisations use to direct, control, and coordinate quality. These activities include formulating a quality policy and setting quality objectives. They also include quality planning, quality control, quality assurance, and quality improvement. Quality management system (QMS) A quality management system is a set of interrelated or interacting elements that organisations use to direct and control how quality policies are implemented and quality objectives are achieved. A process-based QMS uses a process approach to manage and control how its quality policy is implemented and quality objectives are achieved. A process-based QMS is a network of many interrelated and interconnected processes (elements). Each process uses resources to transform inputs into outputs. Since the output of one process becomes the input of another process, processes interact and are interrelated by means of such input-output relationships. These process interactions create a single process-based QMS. A quality manual documents an organisation's quality management system (QMS). It can be a paper manual or an electronic manual. According to ISO 9001 section 4.2.2, your quality manual should: Quality manual Define the scope of your QMS. Explain reductions in the scope of your QMS. Justify all exclusions (reductions in scope). Describe how your QMS processes interact. Document your quality procedures or refer to them. Notice that an ISO 9001 quality manual does not regurgitate the ISO 9001 standard. While this is a common practice, it not only fails to comply with the standard it also fails to serve any useful function. NOTE: ISO does not require a quality manual. Regenesys Business School 69

74 Quality planning Quality planning involves setting quality objectives and then specifying the operational processes and resources that will be needed to achieve those objectives. Quality planning is one part of quality management. Quality plan A quality plan is a document that is used to specify the procedures and resources that will be needed to carry out a project, perform a process, realize a product, or manage a contract. Quality plans also specify who will do what and when. Quality policy An organisation s quality policy defines top management s commitment to quality. A quality policy statement should describe an organisation s general quality orientation and clarify its basic intentions. Quality policies should be used to generate quality objectives and should serve as a general framework for action. Quality policies can be based on the ISO 9000 Quality Management Principles and should be consistent with the organisation s other policies. Quality objectives A quality objective is a quality-oriented goal. A quality objective is something you aim for or try to achieve. Quality objectives are generally based on or derived from an organisation s quality policy and must be consistent with it. They are usually formulated at all relevant levels within the organisation and for all relevant functions. Record A record is a type of document. Records provide evidence that activities have been performed or results have been achieved. They always document the past. Records can, for example, be used to show that traceability requirements are being met, that verification is being performed, and that preventive and corrective actions are being carried out. Requirement A requirement is a need, expectation, or obligation. It can be stated or implied by an organisation, its customers, or other interested parties. A specified requirement is one that has been stated (in a document for example), whereas an implied requirement is a need, expectation, or obligation that is common practice or customary. There are many types of requirements. Some of these include quality requirements, customer requirements, management requirements, product requirements, and legal requirements. Review A review is an activity. Its purpose is to figure out how well the thing being reviewed is capable of achieving established objectives. Reviews ask the following question: is the subject of the review a suitable, adequate, effective, and efficient way of achieving your organisation s objectives? There are many kinds of reviews. Some of these include management reviews, design and development reviews, customer requirement reviews, and nonconformity reviews. Relative to the previous types of reviews, the focus of each review is as follows: quality management systems, design characteristics and specifications, customer requirements, and nonconformities, respectively. Regenesys Business School 70

75 Self-assessment According to ISO 9004, a self-assessment is a comprehensive and systematic review of an organisation s overall maturity and is used to help achieve and sustain organisational success. Maturity self-assessments evaluate an organisation s practices and performance and identify improvement and innovation opportunities. Self-assessment results are used to identify and recognize best practices and to encourage innovation and improvement. Service According to ISO 9000, a service is a type of product. Service is always the result of an activity or interaction between a service supplier and a customer and can take many forms. Service can be provided to support an organisation s own products (e.g. warranty service or the serving of meals). Conversely, service can be provided for a product supplied by a customer (e.g. a repair service or a delivery service). Service can also involve the provision of an intangible thing to a customer (e.g. entertainment, transportation, or advice). Special process A special process is any production or service delivery process that generates outputs that cannot be measured, monitored, or verified until it's too late. It's often too late because deficiencies may not be obvious until after the resulting products have been used or services have been delivered. In order to prevent output deficiencies, these special processes must be validated in order to prove that they can generate planned results. Standard A standard is a document. It is a set of rules that control how people develop and manage materials, products, services, technologies, processes, and systems. ISO's standards are agreements. ISO refers to them as agreements because its members must agree on content and give formal approval before they are published. Technical committees develop ISO standards. Members of these committees come from many countries. Therefore, ISO standards tend to have very broad support. Strategy A strategy is a logically structured plan or method for achieving long term goals. According to ISO 9004, you need to develop a strategy and policies to ensure that your organisation s mission, vision, and values are accepted and supported by interested parties. Supplier A supplier is a person or an organisation that provides products. Suppliers can be either internal or external to the organisation. Internal suppliers provide products to people within their own organisation while external suppliers provide products to other organisations. Examples of suppliers include organisations and people who produce, distribute, or sell products, provide services, or publish information. Sustained success According to ISO , an organisation achieves sustained success when it meets its objectives and continues to do so over the long term. It further says that objectives can only be achieved if the organisation consistently meets the needs and expectations of interested parties (stakeholders). Regenesys Business School 71

76 Systems approach When managers use a systems approach, it means that they treat the interrelated processes that make up an organisation as an integrated system and then they use this system to achieve its objectives. A system is a set of elements that are interrelated or interact with one another. Top management When ISO 9001 (and ISO 9004) uses the term top management it is referring to a person or a group of people at the highest level within an organisation. It refers to the people who coordinate, direct, and control organisations. The term management refers to all the activities that are used to coordinate, direct, and control an organisation. The term management does not refer to people. It refers to activities. Traceability Traceability is the ability to identify and trace the history, distribution, location, and application of products, parts, and materials. A traceability system records and follows the trail as products, parts, and materials come from suppliers and are processed and ultimately distributed as end products. Validation is a process. It uses objective evidence to confirm that the requirements, which define an intended use or application, have been met. Whenever all requirements have been met, a validated status is achieved. The process of validation can be carried out under realistic use conditions or within a simulated use environment. Validation In the context of this standard, the term validation is used in at least two different situations: design and development and production and service provision. Design and development validations use objective evidence to confirm that products meet the requirements, which define their intended use or application. Production and service provision processes must be validated whenever process outputs cannot be measured, monitored, or verified until after the product is in use or the service has been delivered (by then it s too late to do anything about output deficiencies and defects). In this case, validations use objective evidence to confirm that production and service provision processes are capable of producing planned results. Values According to ISO 9004, your values are the general principles and beliefs that are important to your organisation. Regenesys Business School 72

77 Verification is a process. It uses objective evidence to confirm that specified requirements have been met. Whenever specified requirements have been met, a verified status is achieved. Verification In the context of this standard, the term verification is used in at least two different situations: design and development, and purchasing. Design and development verifications use objective evidence to confirm that design and development outputs meet specified input requirements. Similarly, objective evidence must be used to verify or confirm that purchased products meet specified purchasing requirements. There are many ways to verify that requirements have been met. For example, you could do tests, perform demonstrations, carry out alternative calculations, compare a new design specification with a proven design specification, or you could inspect documents before you issue them. Vision According to ISO 9004, an organisation's vision describes what it wants to be and how it wants to be seen by interested parties. Work environment The term work environment refers to working conditions. It refers to all of the conditions and factors that influence work. In general, these include physical, social, psychological, and environmental conditions and factors. Work environment includes lighting, temperature, and noise factors, as well as the whole range of ergonomic influences. It also includes things like supervisory practices as well as reward and recognition programs. All of these things influence work. (Praxion Research Group, 2013) Regenesys Business School 73