When TQM means Totally Quack Management

When I was growing up in business, there weren’t many management gurus around. 

In fact, I think there was just one: Peter Drucker.

Drucker was the book for every student of management.

He was it.

Then I moved into industry and another book came out: In Search of Excellence.

This one was by Tom Peters – does anyone remember that
Robert Waterman was the co-author? – and gave insights into the practices of
the world’s best performing firms.

It was 1982 and, as mentioned, there were few business books
out back then.

However, the success of In
Search of Excellence saw the spawn of the modern era of business
guru books and fads.

Soon after, we saw a rush towards Total Quality Management
(TQM) – and the just-in-time, process re-engineering, six sigma, theory of
constraints, straight through processing, lean, etc – and shaped much of the
thinking of my generation of management: cut
costs to the minimum by automating as much as possible, whilst aiming to have
everything done right first time, every time.

It’s a laudable concept as it cries out for achieving
maximum customer service at lowest cost, but there are fundamental flaws to
this concept.

First, automating everything to cut costs.

This is fine, as long as it keeps humanity in the
process.

Great examples of this are the majority of firms who view
customer service as give the customer an internet form and an outsourced call
centre.

The internet form means that you serve yourself – you’re
more likely to get it right, aren’t you? – and the hope is that there will then
be no further interaction.

I experienced this recently with a house move where I ordered
a bundled package of telephone, internet and television.

This bundled package is far cheaper than ordering such
services under separate cover.

I duly filled in all the internet order forms and got lots
of emails and text messages confirming everything was on track.

Fantastic.

The automated processes worked well.

Then it all went wrong on the day of installation as the
equipment was being sent by UK mail, under separate cover to the engineering
install.

The equipment concerned telephones, set-top box and wireless
router.

The equipment didn’t arrive.

It was lost.

Now I was in the human process and it all fell apart.

I called the network provider’s call centre, which was divided
between sales (UK) and service (India).

The sales side responded brilliantly but couldn’t do
anything about missing equipment.  The
service side did not understand the problem, even though it was clear: I am
missing telephones, television and broadband equipment.

When the service side finally got that and agreed it was
missing – their systems had flagged it had been shipped and were waiting for
confirmation from the UK mail that it was missing – they re-shipped the
equipment … one box at a time.

This was actually a tortuous process, involving hours of
telephone calls as one day a telephone arrived, the next a router and finally,
a week after the start of process, the set-top box.

What it demonstrated clearly to me is that it’s all well and
good to cut customer service costs to the minimum by automating as much as
possible and getting the customer to self-serve as far as possible, but where
the human process needs to kick in then the firms that excel are those who do
this part brilliantly.

It is the reason why First Direct differentiate themselves
as a bank: they focus upon the human parts of the automated process.  The firms that fail are those who apply the
same cost minimisation aspects to the human side of the process as they do to
the automated parts.

Then we move on to the other core tenet of Total Quality
Management (TQM): getting it right first time, every time.

It is obvious that if you get it right, first time, every
time, then things flow smoothly, costs are reduced and the operational
efficiency and excellence is maximised.

That is the foundation of TQM.

Good in principle, but not so good in practice as we
automatically think of TQM as a process movement rather than a cultural movement.

We have applied TQM far too much to our automation of
process thinking, as demonstrated above, whilst forgetting the human aspects
again.

This is clearly illustrated if you review the sales scandals
in the UK financial markets over the past few years.

For example, the Financial Services Authority announced a
clampdown on financial markets mis-selling last week.

This was at a Thomson Reuters Newsmaker meeting where the
FSA's Martin Wheatley released the results of an FSA review of 22 financial institutions
internal reward schemes for selling financial products.

The result, he said, is that “most of the incentive schemes
we looked at were likely to drive people to mis-sell in order to meet targets
and receive a bonus, and these risks were not being properly managed.”

In particular, the PPI schemes – these are the payment
protection schemes that have cost the UK banks £11 billion in compensation for
mis-selling practices – “were rotten to the core and made a bad problem worse”.

Correct.

Martin Lewis responded with a variety of constructive critiques, but specifically he said
that if the culture of banks and insurers were right, then this would not
happen.

If you sold the product to the customer that was appropriate
to them, then you wouldn’t have to pay compensation and costs downstream for
mis-selling it to them.

He said that it is far more expensive to rectify the
mis-selling mistakes than if you had sold the right products in the first place.

This is true of PPI in consumer banking and potentially
Swaps in small business banking.

In other words, if you have got this right first time, you wouldn’t
be paying so much more for the mistakes you’ve made now.

You can watch the one-hour debate about these proposals if
you want (it’s worth it if this is in your space):

But I’m posting this here as these mis-selling issues show
the lack of Total Quality Management in financial markets culture.

After all, we have had mis-selling scandals many time in the
past

The pensions mis-selling scandal of the 1980s and 1990s cost
the insurance industry £13 billion for the exact same reasons as PPI, namely a culture of rewarding sales at the
expense of treating customers fairly.

If we did this right, we would not actually need a regulation
about Treating Customer Fairly.

Do we treat customers unfairly?

Sometimes, but many times not, and this is where the TQM
approach to sales culture should change things as TQM is not about automating
processes, but about culture.

Get the culture right and sell the customer the right product,
first time, every time.

Automate processes to achieve maximum efficiency, but ensure
that the parts that aren’t automated are as human and customer focused as possible. 

In other words, go back to the basics of management principles:
get it right first time, every time but, when it goes wrong, make it as easy as
possible to make it right again.