Firms need to identify customers’ needs, design the production and service strategies to meet their needs, and measure the results to improve such strategies.
The Importance of Customer Service Satisfaction and Loyalty.
Customer wants and needs drive competitive advantage, and statistics show that growth in market share is strongly connected with customer satisfaction.
Customer satisfaction is also an important factor for the bottom line. Achieving strong profitability and market share requires loyal customers, who stay with the company and make positive recommendations to others. Loyal customers will only make business with a specific organization and will go out of their way or pay a fee to stay with the company.
In order to achieve customer satisfaction, products or service must meet or exceed customer expectations.
Value is quality related to price. Nowadays, consumers not only make purchases based on price. They compare the consumer benefit package (services and products offered) with the price and competitive offerings. This package influences the perception of quality and includes the actual product, its quality dimensions and presale support.
It is important to understand exactly what customers want and their view of value in order to have competitive success. In addition, satisfaction and loyalty are influenced by service quality, integrity, and the relationships companies establish with customers.
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The American Customer Satisfaction Index
1994 – The University of Michigan and the American Society for Quality (ASQ) released the first American Customer Satisfaction Index (ASCI), which is an economic indicator that measures customer satisfaction at the national level. One of its goals is to increase the public’s views and understanding of quality. This will help to interpret price and productivity measures and promote customer-driven quality.
The ASCI is based on customer evaluations on the quality of goods and services purchased in the USA and produced by both domestic and foreign companies with a large US market share. Companies can use the results to analyze customer loyalty, identify potential obstacles to entry within markets, predict return on investments, and identify areas where customer expectations are not satisfied.
April 2000 – a similar European Customer Satisfaction Model was announced. It was conducted by the European Organization for Quality (EOQ).
Creating Satisfied Customers.
Expected quality – it is what the customer assumes will be received from the product.
Actual quality – it is the result of the production process and what is delivered to the customer. It may change greatly from expected quality if information gets lost or misinterpreted from one step to the other.
Perceived quality – customers evaluate quality and develop perceptions (opinions) by comparing their expectations with what they received. Perceived quality drives consumer behavior; therefore producers should ensure that actual quality matches expected quality. In order to understand this relationship companies require a system of customer satisfaction measurement and the ability to use customer feedback for improvements.
CHAPTER FIVE: LEADERSHIP AND STRATEGIC PLANNING.
Leadership – the ability to positively influence people and systems under one’s authority to have a meaningful impact and achieve important results. Leaders create clear quality values and integrate these values into the organization’s strategy.
Types of Leadership:
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1. Formal, organizational leadership – responsible for combining, resourcing, and coordinating the activities of the project teams.
2. Ad hoc (informal) leadership required within project teams.
3. Leadership in every member of every project team that combines initiative, self-management capacity, the sense of business responsibility, etc.
Strategy – the guide of decisions that determines and reveals a company’s goals, policies, and plans to meet the needs of its stakeholders.
strategic planning – the process of picturing the organization’s future and developing the necessary goals, objectives, and action plans to achieve that future.
Leadership for Quality.
Leaders should ensure that the principles for TQ are put in practice and used in the organization. The following core skills reflect the practices of quality leaders in the world:
* Vision – visionary leaders create mental and verbal pictures of desirable future states and share these visions with their organizational partners, including customers, suppliers and employees.
* Empowerment – leaders empower employees to take ownership of problems or opportunities, and to be proactive in implementing improvements and making decisions in the best interests of the organization.
* Intuition – leaders are not afraid to follow their intuition. They have to anticipate the future and must be prepared to make difficult decisions that will help the business to be successful even in doubt.
* Self-understanding – leaders are able to look at themselves (weaknesses and strengths) and then identify relationships with employees within the organization.
* Value equivalence – this happens when leaders combine their values into the company’s management system. Values are assumptions and beliefs about the nature of the business, mission, people and relationships of a company.
Strategic Planning
Through strategic planning, leaders are able to shape a company’s future and manage change by focusing on their ideal vision of where the organization could be in the future years. An effective strategy focuses on customer-driven quality and operational performance quality.
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Leading Practices for Strategic Planning.
1. Top management, employees, customers and suppliers participate in the planning process – strong leadership is necessary to build credibility of a total quality focus and combine quality principles into the business planning process. Employees are a great resource due to their knowledge of customers and process implementation. Suppliers are important because of their involvement in the supply chain and may offer vital advice.
2. Systematic planning systems for strategy development and deployment – a systematic process helps optimize the use of resources, ensure the availability of trained employees, and ensure the connection between short-term and long-term requirements that may include capital spending or supplier development.
3. Gathering and analyzing a variety of data about external and internal factors as part of the strategic planning process – a clear understanding of customer and market needs and expectations, competitive environment and capabilities, financial and societal risks, human resource and other operational capabilities and needs is important to a successful strategic planning.
4. Aligning short-term action plans with long-term strategic objectives and organizational challenges, and communicating them throughout the organization, using measurements to track progress – communication ensures that strategies will be set up effectively at the three levels of quality – the organizational level, process level and individual job level.
5. Developing human resource plans from strategic objectives and action plans – human resource changes may be needed, such as training initiatives, work reorganization, incentive approaches, etc., in order to accommodate organizational change and plan.
Strategy Development Process.
Leaders should first explore and agree upon the mission, vision and guiding principles of the organization, which form the foundation for the strategic plan.
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Mission statement – defines the products and services the company provides, technologies used, types of market, important customer needs and core competencies that differentiate the company from others; it answers the question “Why are we in business?”
Vision – it communicates the basic characteristics that shape the company’s strategy and describes where it is headed and what intends to be. It must be consistent with the culture and values of the organization.
Values or guiding principles – they guide the journey to a vision by identifying attitudes and policies for all employees at all levels of the company.
Environmental Assessment – information gathered through SWOT (strengths, weaknesses, opportunities, and threats) analyses that help identify critical success factors on which strategy must focus. Organizations used this assessment to develop strategies, objectives and action plans.
Strategies – statements that set the direction for the organization to take in order to fulfill its mission and vision.
Strategic objectives – they are long term directions that the organization must change or improve to be competitive.
Action plans – steps that an organization must take to achieve their strategic objectives.
Strategy Deployment
Deployment links the planners (focus on “doing the right thing”) with the doers (focus on “doing things right”).
It refers to developing detailed action plans, defining resource requirements and performance measures, and arranging work unit, supplier, and/or partner plans with overall strategic objectives.
Deploying strategy effectively is often done through a process called hoshin kanri. Hoshin kanri, or policy deployment, emphasizes organization-wide planning and setting of priorities, providing resources to meet objectives, and measuring performance as a basis for improving it. It is essentially a total quality approach to executing a strategy.
The Seven Management and Planning Tools.
It helps managers to implement policy deployment and is useful in other areas of quality planning. These tools are:
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* Affinity diagram – a tool for organizing a large number of ideas, opinions and facts relating to a broad problem or subject.
* Interrelationship diagraph – a tool for identifying and exploring casual relationships among related concepts or ideas.
* Others include tree diagram, matrix diagram, matrix data analysis, process decision program chart, and arrow diagram.
Common organizational structures are the line, line and staff, and matrix organization. Organizational structure for quality must reflect individual company differences and provide the flexibility and ability to change. Companies must understand that processes, rather than hierarchical reporting relationships, drive quality within the organization.
* Leadership and Strategic Planning are fundamental to the Baldrige criteria, ISO 9000:2000, and Six Sigma. Although the relative emphasis varies, each of these frameworks views leadership as critical to successful implementation of quality and performance excellence initiatives, and strategic planning activities as a means of focusing the organization and ensuring that longer-term directions are achieved.
