Creating the New Center for Quality Management of

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CENTER FOR QUALITY OF MANAGEMENT JOURNAL
Creating the New Center for
of
Quality Management
^
by Thomas H. Lee and Toby Woll
“Whatever we want something to be right now
includes what we expect of it in the future.”
– Russell L. Ackoff
Thomas H. Lee is President of the
CQM and has been trying to integrate
TQM methods and Ackoff’s strategic What compels an organization to revisit its strategic intent? Manage-
planning process since 1989. ment often will question an organization’s direction when faced with
poor business results. In 1994, however, the Center for Quality Man-
•••
agement reexamined its direction at a time when the organization was
very successful and not in distress. This planning effort afforded CQM
Tody Woll is Executive Director of the
a unique opportunity: to reassess our strategic direction and at the same
CQM and led the CQM team through
the idealized design process de- time to run an important experiment in combining Total Quality Man-
scribed in the article. agement techniques with a sophisticated planning methodology. This
article will describe the background, the process, and the outcome of
this effort.
The Background
The Center for Quality Management was founded in December 1989 as
a membership organization whose purpose was to make its member
companies more competitive by training their executives in Total Qual-
ity Management.1 By the end of 1993, CQM had developed substan-
tially. Indeed, one could argue that CQM was a success by all conven-
tional means.
CQM at the end of 1993
As a snapshot of some of the key metrics at the end of 1993:
• CQM’s membership had increased from 7 to 43 member companies.
This growth met the planned pace and targets set by the Board of
Directors and was achieved with full adherence to the requirement that
the senior executives of each new member company take the 6-Day Course.
• Senior managers from CQM member companies had volunteered and
successfully taught 626 other managers through the 6-Day Course.
• CQM had developed new products and services to meet member needs
as they arose.
1 Thomas H. Lee and David Walden,
• All CQM members were participating in either networking
“What Is the Center for Quality
activities or research efforts, or both.
Management,” CQM Journal, Vol. 1,
No. 1, 1992.
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• At the urging of key members in California, a West Coast chapter was 2 It is interesting to note that in 1993, 70
being planned, for formal launch in January 1994. of Japan’s foremost TQC experts
gathered in Tokyo to discuss the
• CQM, as a nonprofit corporation, had achieved a responsible fund
weaknesses in TQC. Shoji Shiba was
surplus to insure its long-term viability.
among them. At that time, they
concluded that TQC did not offer
Initial Strategy of CQM
methodology for strategic planning.
Clearly, Hoshin management offered a
For the first four years of CQM’s existence, members focused on learn-
powerful deployment methodology
ing about and implementing Total Quality Management as a manage-
for aligning organizational efforts
ment system. During the initial planning of CQM in 1989, however, the
around key breakthrough goals.
founding members had considered a more comprehensive plan. As part
However, the question still remained,
of this plan, an early objective had been to incorporate a strategic plan-
where do the Hoshin goals come from?
ning process into TQM.2 The planning process called Idealized Design,
Is it enough to count on the wisdom of
developed by Russell L. Ackoff and his colleagues, was introduced along
the CEO?
with TQM to some of the founding member companies.3 But these com-
panies still lacked a full understanding of either TQM or Idealized De-
3 Russell Ackoff has created a very
sign methodology and could not verify that the two approaches were
comprehensive approach to strategic
complimentary. People questioned the wisdom of introducing what they
planning and implementation called
perceived as two different methodologies at the same time. In the face
Interactive Planning. Idealized Design
of this confusion, Ray Stata, Thomas Lee, and Shoji Shiba jointly de-
is the part of the methodology used to
cided to focus only on TQM as CQM got underway.
generate the plan for the organization.
As a whole, Interactive Planning is a
Preliminary Work on Idealized Design Planning Methodology
systemic approach that focuses on
management of the interaction
Tom Lee, however, continued to explore the possibility of combining
between the parts of the organization
strategic planning with the operational power of TQM. Once compa-
to achieve the strategic objectives of the
nies in the CQM family were familiar with TQM, the expectation was
whole.
that they would need the integrated package and would value the
complementary nature of the two methodologies. During 1991, the ex-
ecutive committee of Bolt Beranek and Newman (BBN) studied Ackoff’s
approach; and David Walden, then Senior Vice President, wrote a white
paper on the relationship of TQM and Idealized Design methodologies.
In 1992, a two-day meeting took place at Russell Ackoff’s Institute of
Interactive Management (INTERACT) in Philadelphia. Attending from
CQM were Ray Stata (CEO, Analog Devices); Steve Levy (CEO and Presi-
dent, BBN); Tom Lee (President, CQM); Dave Walden (Chief Quality
Officer, BBN); Professor Shoji Shiba (CQM and MIT); Mike Bradley (To-
tal Quality Manager, Teradyne); and Gary Burchill (MIT). Russell Ackoff,
Jamshid Gharajedaghi, and two associates from INTERACT also at-
tended. At the end of two days, it was agreed that CQM and INTER-
ACT would launch a joint effort to develop a strategic alliance between
our two organizations. Tom Lee wrote a paper celebrating that agree-
4 Thomas H. Lee, “Systemic Approach
ment in the CQM Journal.4
to Management: TQM and Planning,”
Between 1991 and 1994, six experiments in Idealized Design were
CQM Journal, Vol. 3, No. 4, 1994.
conducted at the following organizations in the following order:
See also Thomas H. Lee, “How the
• Carrier Corporation
Technology of TQM Breeds Joy in
• Software Division of Bolt Beranek and Newman Inc.
Work,” CQM Journal, Vol. 2, No. 1,
• Analog Devices, Inc.
1993.
• COM/Energy
• CQM
A Logistic Support Operation of the U.S. Navy
The projects had different degrees of success, but they were invaluable
to our learning process. At the beginning of the six experiments, CQM
merely observed how Jamshid Gharajedaghi conducted the design pro-
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cess. Gradually, TQM tools for processing language data — such as the
LP method, MPM method, the tree diagram, and matrices — were in-
troduced into the process. By the fifth experiment, the Idealized Design
of CQM was done without facilitation by INTERACT. The sixth experi-
ment was also done in a similar way. At the end of the sixth experiment,
we were confident that a combined planning and operational system
could be offered to the CQM family. To introduce this concept, CQM
held a one-day Idealized Design Overview Seminar for the West Coast
Chapter members on February 23, 1995.
This paper describes the results of the fifth Idealized Design experi-
ment, in which we created a strategic plan for the Center for Quality
Management. The process led to a clarification of CQM’s strategic in-
tent and necessary improvements in CQM’s operation. We’ll begin with
a brief overview of the Idealized Design Planning process.
A Brief Description of the Idealized Design
Planning Process
There are three major elements in the Idealized Design Planning pro-
cess: (1) the Mess Formulation, (2) the Idealized Design and (3) the Means
Planning. According to the Ackoff methodology, two different teams
undertake the work. The members of the Mess Team are usually out-
standing managers, likely to be the leaders of the company in the fu-
ture, who have excellent operational knowledge. The Design Team con-
sists of the senior management and may include members of the
company’s board of directors. Usually the Mess Team managers start
their Mess Formulation process first but do not present their findings to
the Design Team until the Idealized Design is complete. The Mess then
acts as a reality check for the design. The design must completely dis-
solve the Mess before the Design Team can consider its job complete.
Finally, in Means Planning, the Design Team studies the obstacles to
achieving the design and plans how, by successive approximations of
the Idealized Design, the organization can move forward.
Detailed descriptions of the Idealized Designed Process and how Total
Quality Management tools can be helpful in this process will appear in
a companion paper in a special issue of the CQM Journal dedicated to
Idealized Design and its integration with TQM. For just a brief preview
of how the TQM and Idealized Design methodologies fit together, refer
to the Afterword of this article.
Mess Formulation
Figure 1 (next page) shows the steps of the Mess Formulation. There are
three major steps for gathering and analyzing information:
System Analysis
In this step, the Mess Team takes a comprehensive look at the current
internal and external situations. The inquiry is holistic; the team exam-
ines the functions, processes, and structures of the organization as well
as the environment, including the company’s stakeholders, competition,
and industry characteristics.
Obstruction Analysis
The purpose of this inquiry is to find the obstructions both internal and
external that prevent the organization from accomplishing its objectives.
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Figure 1 is a Diagram of the Mess Formulation Process
System Dynamics
This analysis is different from the conventional model building in sys-
tems dynamics. In Mess Formulation this step requires that the team
analyze the major trends and directions to suggest what may happen if
the organization make no changes to respond to the changing environ-
ment.
After these three information-gathering steps, the next step in the
Mess Formulation is to Map the Mess. Mapping is a synthesizing pro-
cess designed to reduce the complexity of the Mess to an expression of
the critical interdependent problems. The Mess Team carefully studies
the interdependence of the problems and endeavors to understand the
“second-order machine” — the underlying cause for the organization’s
Mess and that which restricts the organization’s ability to change and to
respond to new environments.
Mess Formulation is very difficult, because its weakness orientation
is much harder than the weakness orientation in reactive problem solv-
ing in TQM. In Mess Formulation you are confronting system failures,
management issues, and interdependent problems that, by their nature,
cannot be solved individually. Mess Formulation requires what Chris 5 Chris Argyris, Facilitating
Argyris calls double-loop learning.5 We found, however, that the most Organizational Learning (Englewood
important thing to understand is that the Mess is invariably the result of Cliffs, NJ: Prentice Hall, 1990) 91-94.
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past successes. A system grows and solidifies in a way that initially
works extremely well. Success encourages people in the organization
to maintain the status quo. Then, when the environment changes, this
solidification becomes a threat to the organization’s existence.
Idealized Design
Figure 2 diagrams the elements of the Idealized Design process. First,
the Design Team must establish the context in which the new design
Figure 2 is a Diagram of the Idealized Design Process
must exist. They must examine:
• The stakeholders and their expectations, and
• The current business environment with its drivers for change, risks,
and opportunities.
The basic rules for creating the Idealized Design are that the existing
organization has disappeared overnight; the new design must be viable
given today’s stakeholders and business environment; and the technol-
ogy required must exist; the new organization must be capable of “learn-
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ing” as it goes forward. The steps in the design process are to design:
• The purpose of the organization — i.e., its mission and vision — and its
criteria of success;
• The appropriate product and market mix to achieve the mission;
• The organizational architecture capable of delivering the productsto the
markets; and
• The critical processes to ensure the viability of the organization.
The process of design must be iterative, because one cannot answer any
one of the questions without having some knowledge about the answers
to the other questions.
While the Mess Formulation is difficult because its weakness orienta-
tion is hard to accept, the Idealized Design process is also difficult be-
cause of another cultural issue. The story Russell Ackoff loves to tell is
how Pogo went into the forest to search for the enemy. When he came
out, his friend asked him whether he had found the enemy. His answer
was, “Yes.” When asked, “Who are they?” Pogo replied, “They is us!”
Our difficulty with Idealized Design is to overcome self-imposed con-
straints. Indeed, there are real constraints that we cannot do very much
about. But there are also self-imposed constraints that we only think are
real. The Idealized Design process is designed to help us understand
which is which. In reality, freeing ourselves from self-imposed con-
straints in order to design an ideal turns out to be the second-most diffi-
cult challenge in the process.
I (Lee) want to tell a personal story at this juncture. In 1974, I became
the chief planner for General Electric’s energy business. Nuclear energy
was one of my major responsibilities, and GE was in the process of los-
ing $1 billion on its nuclear program. My approach to the problem was
heavily influenced by two people. The first was my boss, who told me
that I was allowed to think the unthinkable. The second was an advisor
who said to me, “Tom, the United States has just mad a major policy
change. Previously, U.S. national policy was to promote the peaceful
application of atomic energy. Now, the government has pulled back
from that effort. Why don’t you say that the GE nuclear program was
GE’s attempt to be a good corporate citizen in supporting the national
policy — but that now, since this is no longer the national policy, GE
wants out?” I went to my boss and said, “I want an analysis done on
our legal liabilities if we decide to announce that we are getting out of
the nuclear power business.” He supported the idea. As it turned out,
GE did not make the announcement, because the potential legal risk
was too great; and eventually we did come up with a strategy that, be-
lieve it or not, made the nuclear business one of the most profitable op-
erations for several years. By undertaking the study, however, we caused
an interesting cultural shift. By asking the people in the operation to
think the unthinkable, we helped create a climate for thinking without
constraints. This culture continued to flourish in the organization, long
after the triggering study. As we introduce Idealized Design in to the
CQM family, we must somehow foster this cultural change in our mem-
ber organizations.
Idealized Design Planning at CQM
We selected CQM as the subject for the fifth experiment in Idealized
Design Planning for three reasons. (1) The business environment had
changed significantly in the four years since CQM’s inception, and our
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strategic direction needed to be reexamined. (2) We wanted to test
whether CQM could successfully undertake the planning process with-
out the expert guidance of an INTERACT facilitator. And (3) we wanted
to develop a case that could be used as an example of a planning pro-
cess in future training sessions. Unlike the results of reactive problem
solving in TQM, which are not difficult for members to share with one
another, the actual outcome of an Idealized Design Planning process
would contain information too sensitive for a member company to share
with others as a detailed case.
During the CQM experiment, the same people acted as both the Mess
Team and the Design Team. The team members were: from CQM, Silja-
Riitta Dandridge (Executive Assistant and Registrar), Phil Gulley (Di-
rector of Educational Programs), Thomas Lee (President), Donna McGurk
(Manager of Information Systems), Shoji Shiba (Advisor and Board of
Directors), Ted Walls (Manager of Research and Publications), and Toby
Woll (Executive Director); and from Bose Corporation, Warren Harkness
(Directory, Total Quality) and Ilene Ringler (Manager, Corporate Edu-
cation and Training).
Over seven months the team met 14 times for a total of 47 hours. In
addition, team members worked individually and in small groups to
assemble data and to document the steps.
In the interests of conveying the outcome of CQM’s planning pro-
cess as a direct result of following the Idealized Design Planning meth-
odology, we will present the conclusions reached by the team in the same
order as the planning process.
The Mess Confronting CQM
As the team analyzed CQM’s products and services and our successes
in delivering them to our members, we had a clear picture of some of
our weaknesses. To give a taste of the obstacles that we expressed:
• As the member population had evolved over four years, the maturity and
status of TQM implementations began to duffer greatly among member
companies. Some of the later members were extremely well along in
their quality journey, while others were just beginning. But we had a
homogenized set of offerings for this diverse set of members.
• Some member companies needed additional help in TQM implementa-
tion. What the senior managers learned in the 6-Day Course was not
enough to enable them to guide a company-wide program without
midcourse support.
• As the number of members grew, we did not continue to have clear and
intimate knowledge of the state of implementation in each of the member
companies.
• While the 6-Day Course was well received by senior executives, the
penetration of understanding and skill among midlevel management was
inadequate.
• There were signs that the demand for the 6-Day Course, the core course
offered by CQM, was dwindling among the older member companies
and that CQM’s revenue would drop dramatically with limited member-
ship growth. At the same time, the falling demand for the 6-Day Course
did not replect a lack of need for help in TQM implementation.
• The book A New American TQM had been published, and the CAES-MIT
tape series by Shoji Shiba had been released. Many requests for help were
coming from nonmember companies. But by our own charter we could
not serve these requests.
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Figure 3 is a Map of 5 Key Problems that Confront the CQM.
Figure 3 shows the map of the Mess after the group had gone through
the Mess Formulation process. How this was done will be described in
the companion paper mentioned earlier.
For this paper, let us illustrate the interdependence of these prob-
lems by tracing one path through interrelationships among the compo-
nent problems of the Mass. (Refer to figure 3 as needed.)
• One of the problems identified was that we lack resources for essential, dis-
cretionary, and advanced work (Problem V). This problem is related to…
• Our self-imposed constraint of working only with members eliminates
the possibility of getting revenue from other sources (Problem IV)…
• Our members are reluctant to invest in necessary advanced work until
the results of their TQM implementation have been decisively proven
(Problem II)…
• The lack of resources prevents us from recruiting key expertise and re
sources to help the member companies improve their TQM implementa-
tion (Problem III)…
• And, lacking adequate communication with our members, we are not
able to document successfully the achievable successes from TQM
programs (Problem I)…
• At the same time, increasing available resources by increasing the number
of members through aggressive recruitment further damages our
communication with member companies (back to Problem V)…
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The problem goes around in circles — our important points are:
• Problems in the Mess are interdependent. Taking action to solve any one
alone can adversely affect the others.
• The Mess is a result of our past success. CQM’s design was based on our
being a member-driven, member-run organization with only seven
member companies, all of whom were at about the same level of
maturity in TQM implementation. The original CEOs were intimately
involved in every facet of CQM’s activities. But, the growth of CQM,
which was a natural outcome of its members’ success, resulted in an
erosion of the capability of the system to stay on track.
CQM’s Changing Environment
To begin the Idealized Design Planning process, the CQM team studied
the current business environment, the nature of the competition, and
the drivers for change.
Competition with Japan surfaced as a critical issue in the 1980s, when
the United States found that the automotive, electronic devices, and con-
sumer electronic sectors were losing significant market share to Japan.
There was a general rush to learn how the Japanese managed their en-
terprises. The U.S. givernment introduced a national award, the Malcolm
Baldrige Award, to stimulate improvement in American management.
Some early winners, like Xerox and Motorola, testified to the power of
Total Quality Management. All of a sudden, in typical American fash-
ion, TQM became a household word. When CQM was founded in 1989,
the rush was about at its peak. CQM had to turn down applications for
membership because of our limited capacity to serve a large number of
companies.
Within three to four years, however, the environment changed con-
siderably. The results of TQM’s implementation were, at best, confus-
ing. There were some significant success stories, but there were also
disappointments. At the same time, Japan experienced the worst eco-
nomic recession in the postwar era. Questions were raised about how
powerful TQM really was and why it had failed to fulfill people’s high
hopes. Some noted academics proposed that TQM offered only incre-
mental improvement and that breakthrough improvement was what the
U.S. economy needed. The United States was culturally more comfort-
able with breakthrough types of activities.6 Reengineering was proposed 6 Thomas H. Lee, “TQM Myths,”
as the solution to our industrial ills. But, less than two years since the unpublished (1995). See also David
introduction of reengineering, doubts are surfacing about its viability as Walden, “Breakthrough and
the silver bullet for American industry. Continuous Improvement in Research
There are many possible explanations for these conflicting results and and Development — An Essay,” CQM
directions: Journal, Vol. 2, No. 2, 1993.
• Our love for a “plug-in” concept of management. With typical optimism,
many Americans would like to believe that it is possible to plug in what
consultants have to offer like an appliance. As a result, management
often fails to invest in the necessary study and practice to develop skill
and to effect real change.
• The increasing variety of solutions. As corporate America asks for more
guidance about how to improve its management systems, the number of
experts offering solutions increases to satisfy the demand.
• Our strong appetite for the menu of the month. Given an ever-increasing
variety of approaches, management tends to shift from approach to
approach as the popularity of one guru eclipses the luster of the prior one.
• The failure of many CEOs to understand TQM and the role they must
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play in its implementation. In many failed attempts, the need for the
active involvement of top management was sadly underestimated.
• The lack of academic research to support and improve our knowledge
about TQM as a management system. Having com “from the field,”
TQM has been mainly overlooked as a legitimate area for research and
development in our academic institutions.
We felt that the changing environment had to be addressed if CQM
was to fulfill its objective of making its member companies more com-
petitive. The known weakness of TQM had to be addressed. As knowl-
edge about markets improved, products had to change also. Small com-
panies had to have appropriate strategies; service companies needed
their own approach. And, where possible, strategic alliances would re-
duce rather than exacerbate the confusion of multiple suppliers.
CQM’s Stakeholders
Who are CQM’s stakeholders, and what are their expectations? The
team identified and analyzed seven stakeholder groups. Our conclu-
sions are best summarized in figures 4 and 5.
Figure 4: Stakeholder Analysis I.
The companies with mature TQM programs and the “gurus” (thought
leaders) are critical to CQM’s success. The both have:
• High influence (voice in CQM’s directions) and high leverage (ability to
contribute), and
• Great importance to CQM’s success, and significant degrees of
independence.
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