Thesis on "Reported Benefits of Quality Improvements and Organizational Change"

Thesis 4 pages (1601 words) Sources: 2

[EXCERPT] . . . .

Quality Improvements & Org. Change

Evaluating the Effects of Total Quality Management and Organizational Change

Evaluating the Effects of Total Quality Management and Organizational Change on Boeing and Hewlett-Packard:

A Seven-Year Analysis

Assessing the level of results Boeing and Hewlett-Packard have been able to attain their through their Total Quality Management (TQM), Six Sigma, and lean manufacturing initiatives is the subject of this analysis. Each of the company's annual reports, filings with the Securities and Exchange Commission (SEC), and mentions in peer-reviewed articles are used for ascertaining the extent to which these initiatives have influenced the operations of these organizations. Both organizations found that resistance to change of existing processes, systems and roles of employees was significant. Each was able to overcome this resistance to organizational change using different strategies, both of which were effective, to get on the path towards accomplishing their TQM strategic objectives. Financial analysis of both companies has been completed using twenty-one different measures of performance across seven years of financial data gathered from annual reports and filings both corporations made with the Securities and Exchange Commission. This analysis is provided in tables 1 and 2 of the Appendix of this document.

Evaluating the Effects of Total Quality Management and Organizational Change on Boeing and Hewlett-Packard:

A Seven-Year Analysis

As TQM, Six Sigma and lean manufacturing principles have over time, across multiple industries proven to be contributors to more efficient production processes and therefore lower costs (Emery, 2009) their effects on the ability of large, multinational corporations to respond quickly to market conditions and still stay profitable has yet to be fully defined. In this analysis, that point emerges as a significant finding. Despite the global economic recession which began in late 2007 according to the U.S. Treasury Department and many experts including Dr. Ben Bernanke believe continues as of this writing in October, 2009 is still ongoing, these two companies have successfully using Total Quality Management, Six Sigma, and lean manufacturing principles to protect and in the case of Hewlett-Packard, actually grow their profitability. Each company's path to success on these factors is different and analyzed in the following sections.

Analysis of Boeing Corporation's Total Quality Management Strategies

Boeing is a global leader in the research, development, manufacture and service of aerospace, defense, commercial and defense-related aviation systems, devices and services, and as a result has a project management-based organizational structure and culture. The variation between projects and their level of commitment to or rejection of TQM values is significant and noticeable within and across product divisions (Walden, 2003). This has made the standardization on a common series of TQM strategies difficult, yet the organizations instituted in the late 1990s the foundations of their Enterprise Compliance and Quality Management (ECQM) platform which includes corporate-wide engineering standards for product quality levels as measured by Six Sigma, the use of Corrective Action/Preventative Action (CAPA) workflows, and the development of quality audit processes and procedures which contributes to the company in 2007 generating a Return on Assets (ROA) of 7.36, a record for Boeing,. The full seven years of history for this financial ratio and twenty one others can be seen in table 1 of the Appendix. What a high ROA ratio signals is that Boeing in 2007 began to accrue the benefits of their TQM, Six Sigma, and lean manufacturing strategies. This also indicates that the initial project management methodologies, processes and roles of contributors have changed significantly enough to make a major impact on how Boeing is using its fixed assets. It also indicates that Boeing has found audit benchmarks defined prior to the launch of a new project actually reduce material costs and drive up material usage rates (Walden, 2003). In this regard, Boeing has found that by integrating TQM, Six Sigma and lean manufacturing principles into its baseline series of methodologies it is using its fixed assets more effectively and also reducing materials costs as well.

The standardization on quality management processes and concepts corporate-wide also led to a higher level of satisfaction by Boeing customers as well. This had been mentioned in the Securities and Exchange Commission documents and annual reports reviewed, yet it is also visible in the financial analysis shown in Table 1. The significant increase in Sales Per Employee, Return on Investment (ROI) and Accounts Payable Turnover all indicate Boeing sold more projects as a result of a more quality-based project methodology, and customers paid on time for these projects being done. In conclusion it is clear that the revamping of the project management methodologies and program guidelines within Boeing had a significant financial effect on the performance of the organization over the seven years of financial data gained from analysis. This also indicates the financial impact of successful TQM, Six Sigma, and lean manufacturing strategies over time as well.

Analysis of Hewlett-Packard Corporation's Total Quality Management Strategies

The Hewlett-Packard Corporation is one of the global leaders in the research, development, manufacturing and service of computer systems, peripherals, enterprise computing platforms and services. As a result relies on an extensive knowledgebase to successfully manage its myriad of products and services offered. This company was specifically chosen for this analysis of TQM, Six Sigma and lean manufacturing as it has a unique business model that is fueled by expert-level product and innovation knowledge which must be quickly monetized into product strategies. One of the most daunting aspects of TQM enterprise-wide implementations is the development of knowledge-based strategies that can quickly assimilate, analyze and then produce financial results from this knowledge-process integration (Akdere, 2009). As an analysis of the HP annual reports and filings with the Securities and Exchange Commission illustrate, their business units are in industries that contain product lifecycles measured in some cases within weeks or months, not years. This makes the task of managing to TQM strategies company-wide very challenging as the markets, knowledge and technologies are all moving at different rates and to time a product introduction just right and have strong product quality takes exceptional project management skill. The HP Printer Division, which is where the TQM, Six Sigma, and lean manufacturing concepts were initially introduced (Hammond, 2000) is also the leading revenue producer for company today. The lessons learned in the HP Printer Division have in turn been used throughout the other divisions of the company to better align product strategies and marketing objectives to product quality objectives (Hammond, 2000). Just as Boeing was able to more efficiently use their production assets (plant and equipment) in projects, HP has been able to do the same. HP reported a Return on Assets (ROA) of 8.51 in 2007 and in 2008, 8.22. This in spite of a global economic recession. Further evidence still of the value of TQM on the financial performance of the company and its ability to stay profitable by instituting enterprise-wide lean manufacturing systems in the Printer Division first and later across the company (Hammond, 2000). This resulted in HP reporting an Earning before Interest and Taxes, Depreciation and Amortization (EBITDA) Margin of 10.95 in 2007 rising to 11.69% in 2008. Considering this is in the midst of one of the most difficult recessions of the last forty years illustrates just how effective TQM-based strategies are in preserving profitability. Mark Hurd, CEO of HP challenged his company to change and become more profitable by trimming back any unnecessary steps in product development, production and services strategies, according to the annual reports reviewed. His executive team and outside analysts quoted in the annual reports credit this approach to making TQM central to all strategies for the company's financial performance over the last several years.

Conclusion

The lessons that other organizations can learn from Being and HP illustrate how quickly the benefits of TQM, Six Sigma and lean manufacturing concepts can have a significant effect… READ MORE

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