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Creating Quality Leadership and Management

Recommendations and Actions

QUAL02: Improve Government Performance Through Strategic and Quality Management

Background

The "managing for results" approach builds on the Government Performance and Results Act of 1993, which mandates strategic planning and performance measurement in the federal government. It also builds on recognized principles of strategic and quality management embodied in the Presidential Award for Quality.(1) The President created the award in 1988 to recognize federal organizations that, by implementing quality management, created high- quality products and services and provided best value for tax dollars. The award is intended to champion the understanding of the value of quality management and encourage its adoption throughout the federal government. The criteria for the award serve as a valuable assessment tool for culture change.

Presidential Quality Award Criteria.

The Presidential Award criteria parallel the criteria used in the prestigious Malcolm Baldrige Award--the national quality award for top-performing private sector companies. However, its criteria reflect the unique circumstances of the federal government. The award, administered by the Federal Quality Institute (FQI), has seven criteria:

Leadership--requires the personal commitment and involvement of top leaders and managers in creating and sustaining an organizational vision and a customer focus. Leadership includes integrating vision, values, and a customer focus into an organization's management system, labor relations, and external partnerships and in the way it addresses its public responsibilities.

Information and Analysis--requires an organization to have a data, information, and analysis system to support improved customer satisfaction, products, services, and processes.

Strategic Quality Planning--requires short-term (one to two years) and longer-term (three or more years) plans containing (1) customer requirements and expected changes in these requirements; (2) organizational and individual capabilities to address key requirements or technological opportunities; (3) capabilities of external suppliers; (4) changes to work processes to improve performance; and (5) productivity improvement and reduction of waste. The criteria cover an organization's planning process as well as the specifics of the plan itself.

Human Resource Development and Management--requires an organization's entire workforce to develop its full potential and pursue quality and operational performance improvement goals. The criteria require building and maintaining an environment conducive to staff involvement and personal and organizational development. Employee education and training, employee performance and recognition systems, and employee well-being and satisfaction are emphasized.

Management of Process Quality--requires an organization to use systematic methods to continually improve quality and operational performance. It includes the design and management of process quality for all work units, the management of internal customer-supplier relationships, supplier quality, and quality assessment.

Quality and Operational Results--tasks organizations with measuring and continuously improving trends and quality levels for products and services. In addition, measures are to be developed for internal business processes and support services (e.g., procurement), and the quality of goods and services provided by outside suppliers, such as subcontractors. Data should be compared against competitors and world-class standards (known as benchmarks or "best-in-class").

Customer Focus and Satisfaction--requires an organization to identify external customer requirements, establish and maintain positive customer relations, and continuously improve customer satisfaction. This criterion also requires organizations to determine customer satisfaction in terms of absolute levels as well as trends.

Strategic and quality management, as embodied in these seven criteria, relies on their use as an integrated set of principles and systems. They are guides to culture changes, not a technique or a program.

Quality Management Makes a Difference.

Achieving high levels of quality has become an increasingly important element for success in a competitive environment. In recent years a number of U.S. companies have found that they could not attain world- class quality by using traditional approaches to managing the quality of products and services. To enhance their competitive position, some American companies have reappraised their traditional view of quality and have adopted what is known as the quality management model in running their businesses. At the same time, many companies have continued to implement their quality management strategies and quite a few have integrated quality management into their day-to-day businesses.(2)

At the request of members of Congress, the General Accounting Office (GAO), in 1991, examined the effects of quality management practices on the performance of selected U.S companies. GAO concluded that companies using quality management principles had better employee relations, higher productivity, greater customer satisfaction, increased market share, and improved profitability.(3)

A 1992 GAO study of quality management in the federal government reported that 68 percent of federal agencies said they had started or were starting to implement quality management.(4) While implementation was wide, it was seen as shallow--only 13 percent of employees in those agencies surveyed were involved in quality management. While most of these efforts are in small subcomponents within agencies, a few have been organizationwide, such as the Internal Revenue Service, the Departments of the Navy, Air Force and Army, Defense Information Systems Agency, the National Aeronautics and Space Administration, and the National Security Agency. GAO found that those agencies with mature efforts--three to five years old--had achieved significant increases in customer satisfaction, organizational performance (productivity, effectiveness, quality) and workforce excellence (improved employee morale, greater skill levels, fewer grievances). These findings confirm that cultural and systemic changes require a long-term effort, but that the results can be significant. For example,

IRS Ogden Service Center. Action on recommendations from its quality improvement teams improved customer service, effectiveness, and productivity. It also resulted in savings of over $11 million.

Air Force Logistics Command. On-time delivery rate for contract line items across the command rose from 65 percent in April 1988 to 76 percent in April 1989, and by March 1990 had improved to 79 percent.

Results such as these achieved by the early pioneers encouraged their agencies to expand their efforts and spurred other federal organizations to follow suit.

Need for Change

President Bill Clinton noted, "The American people deserve a government that treats them like customers. Government must be accessible to those it serves and to those who pay its bills. It must be responsive to [their] concerns. It must be run efficiently and well with respect for the tax dollars on which it depends. It must pay its way and live within its means."(5)

Although documented figures are unavailable, the government's cost of poor quality is probably at least as high as the 25 percent cost of poor quality in the nation's service industries.(6) Americans are hardly reticent when venting their frustration with the federal government. They wonder, why can't the government answer requests in less than two months or give correct information the first time? Why is mail misdelivered, and why are names misspelled? Why can't government employees be pleasant on the telephone and find someone else to answer questions when they can't? Why can't a public servant correct the same computer error that has occurred month after month? Why can't a public servant treat me like a customer?(7)

On the other hand, federal agencies now face severe, sustained budget cuts, have fewer staff to serve more customers, enforce more regulation, suffer tighter constraints on discretionary spending, and bear sharper criticism from customers and a Congress that is itself getting bitter complaints from constituents.(8)

Congress is doing its part to help. For example, the Government Performance and Results Act of 1993, signed by President Clinton in August 1993, requires all agencies to develop strategic plans, set agreed-upon goals and objectives, and measure their progress toward these goals and objectives. The Act also provides managers with incentives and tools to focus on results and program outcomes. Implementation of the Act is an important step toward systemic change in the federal government's management culture. However, the Act by itself cannot ensure that government will serve its customers. This means agencies must build on the framework created in the Act to develop ways to identify and meet their customers' needs and expectations, make themselves customer-friendly, maintain excellent relationships with their customer groups, and continually increase customer satisfaction.

Barriers to Culture Change.

Several barriers exist in changing the culture of government to focus on management improvement. The major barrier, according to FQI, has historically been the lack of a strong senior leadership intent on achieving long-term results.(9) As a result, strategic and quality management practices were often delegated to mid-level managers. In addition, authoritarian and bureaucratic management styles have been an additional barrier impeding a leaner, more participatory, quality conscious organizational culture.

To change to a culture that emphasizes quality and results, there must be wholehearted executive branch commitment. Top officials, starting with the President, Vice President, and department and agency heads, must understand, support, and lead the transformation in the federal sector. Fortunately, there is already progress and momentum upon which to build. However, continued visible leadership from the President and his management team is essential. Recent participation by the executive branch's top leadership in quality and productivity conferences, town hall meetings, and recognition programs has already attracted the attention of public servants and has sent a positive message of commitment for change in the federal government.

Another barrier has been the lack of employee participation and involvement. Research increasingly shows that employee involvement is essential to achieve quality and productivity improvement.(10) If the workforce is represented by one or more unions, top agency leaders should consider involving unions in the strategic and quality management effort from the outset. In addition, management should also consider involving other employee groups, such as minority representation groups.

To date, there are two primary ways in which union and management have chosen to deal with employee involvement when implementing quality and productivity improvement efforts. Some have chosen to work "cooperatively," where unions have membership on quality councils and participate fully in planning, implementation, and evaluation of the entire effort. Others have adopted the more "traditional" mode of bargaining to have input on the impact and implementation actions affecting unions. Either approach presents benefits and risks for both management and labor. However, high- performing government agencies found it was important to seek the early involvement of unions and make the nature of their involvement as specific as possible.(11)

Fragmented Awards.

While not considered a significant barrier, the present quality recognition efforts in the federal sector should be consolidated to better focus on consistent criteria and to improve overall administration and efficiency. Currently, three different organizations are involved with the development, solicitation, and administration of four governmentwide awards related to quality and productivity.

FQI administers the Presidential Award for Quality, which recognizes organizations that have implemented quality management in an exemplary manner and have achieved proven results in operational performance and customer satisfaction. A public/private sector evaluation partnership is used to select the winning organizations. FQI also administers the Quality Improvement Prototype Award, designed for organizations that have recently successfully begun the quality transformation process.

The President's Council on Management Improvement (PCMI) administers the Award for Management Excellence to recognize excellence by federal employees, groups, or entire agencies. Nominations are submitted by PCMI members.

The Office of Personnel Management (OPM) administers the Presidential Quality and Management Improvement Awards. This award is for tangible benefits to the government of $250,000 or more, or significant improvement in the quality of government services or products. It is awarded to individuals or teams that have been recognized by their individual agencies. It is currently inactive and awaiting a decision as to whether or not it should be continued.

In addition to the four public sector awards given each year, the Malcolm Baldrige National Quality Award recognizes private sector organizations for their quality management efforts resulting in significant improvement of operational performance and customer satisfaction.(12) This award is the highest level of national recognition for quality for privately or publicly owned businesses located in the United States. It is administered by the Office of Quality Programs, National Institute of Standards and Technology (NIST), Department of Commerce.

Ideally, one set of federal quality awards would be given within the federal government just as one set of national quality awards is awarded in the private sector. Moreover, these two award systems should be closely linked. However, this new award should not be seen as a replacement for agency-level awards. Agencies should continue to recognize and reward individuals and teams delivering quality products and services to customers. Emphasis at the governmentwide level should be on recognizing agency transformation and reinvention.

Actions

1. All department and agency heads should lead and manage in accordance with the criteria in the Presidential Award for Quality. (2)

The President should encourage all department and agency heads to adopt the criteria in the Presidential Award for Quality as standards for a well-managed and effective organization. Department and agency heads should be encouraged to conduct regular organizational assessments using the criteria to identify areas for improvement and to provide standards for judging progress.

2. All executive branch employees should attend appropriate educational sessions on strategic and quality management, to include the criteria for the Presidential Award for Quality. (2)

To help achieve his vision of managing for results, the President should require training in strategic and quality management. The responsibility for undertaking this effort will rest with FQI in its role as facilitator of strategic and quality management in the federal government.

The objective of these educational sessions is to engage federal workers in the vision for transforming government through the use of strategic and quality management principles. It should also encourage management and agency employees to conduct their business according to these principles. The sessions should also include a component describing the role of performance measurement, as envisioned under the Government Performance and Results Act, as well as the basic findings and recommendations of NPR.

The educational sessions should help agencies, managers, and employees link organizational change issues, performance planning and measurement, strategic and quality management, budget decisionmaking, and financial reporting. The first session will be given to the President, Vice-President, and cabinet members.

This initiative should be based on a "cascading" approach that calls for leaders, after participating in the educational session, to personally conduct a session for their immediate subordinate employees. Consequently, this approach would reflect commitment by top management and send a clear message regarding the expectation of the organization's leadership.

3. Each department and agency head should establish a top-level "quality council" to lead that organization's culture change. (2)

The President should encourage all department and agency heads to establish top-level quality councils. According to Dr. Joseph Juran, a noted management expert, "the first step in mobilizing for the projects collectively is to establish a quality council. The basic responsibility of this council is to launch, coordinate, and institutionalize annual quality improvement. If no such council is in existence, the upper managers should create one."(13)

FQI reports that virtually every organization that has successfully introduced quality management in the federal government had also formed a quality council of top leaders--or executive steering group- -to lead the effort.(14) Quality councils are usually chaired by department or agency heads, or their deputies, and include other members of the senior leadership team. In organizations with cooperative labor-management efforts underway, union leaders are also often members. Membership sometimes also includes major external suppliers.

By establishing a quality council, top leadership provides identity and structure to culture change. It also serves to legitimize and institutionalize the quality improvement effort by being the first concrete indication that top leadership is willing to act.(15) This is especially true of cooperative labor-management efforts.

4. Create a category within the Malcolm Baldrige Award for quality in the federal government. (2)

The President should authorize one set of awards for quality in the federal government. These awards should be part of the Malcolm Baldrige National Quality Award program. This set of awards would take the place of the four sets of quality awards currently administered by FQI, PCMI, and OPM. The Secretary of Commerce will have to notify Congress of his intent to add the federal government to the Baldrige Award program. Currently, there are three eligibility categories for the Malcolm Baldrige Award: manufacturing companies, service companies, and small businesses. In accordance with the intent and authorization of the Malcolm Baldrige National Quality Improvement Act of 1987, a Malcolm Baldrige Award for excellence in government services should be proposed to Congress. Consideration might also be given to expanding the award at some later date to include state and local governments as well as nonprofit groups.

NIST's existing Office of Quality Programs should manage the award program and seek advice from FQI on the program's federal component. FQI should work with NIST to manage a properly phased transition from FQI to incorporate the existing Presidential Award for Quality into the NIST effort.

Combining existing awards will facilitate cooperation and the exchange of information between public and private organizations. It will also improve efficiencies by leveraging examiners, cost, and time. It also demonstrates that the federal government is willing to measure itself by the same standards with which it measures the private sector.

Cross References to Other NPR Accompanying Reports

Improving Customer Service, ICS01: Create Customer-Driven Programs in All Departments and Agencies that Provide Services Directly to the Public.

Mission-Driven, Results-Oriented Budgeting, BGT02: Effectively Implement the Government Performance and Results Act of 1993.

Office of Personnel Management, OPM02: Redefine and Restructure OPM's Functional Responsibilities to Foster a Customer Orientation; and OPM03: Change the Culture of OPM to Empower Its Staff and Increase Its Customer Orientation.

Reinventing Federal Procurement, PROC10: Ensure Customer Focus in Procurement.

Reinventing Human Resource Management, HRM06: Clearly Define the Objective of Training as the Improvement of Individual and Organizational Performance; Make Training More Market Driven; and HRM13: Form Labor-Management Partnerships for Success.

Streamlining Management Control, SMC01: Implement a Systems Design Approach to Management Control.

Endnotes

1. Federal Quality Institute, Presidential Award for Quality:1994 Criteria (Washington, D.C.: Federal Quality Institute, June 1993).

2. Delta Consulting Group, Inc., Ten Years After: Learning About Total Quality Management--A Study of CEOs and Corporate Quality Officers of the Business Roundtable (New York: April 1993), p. 2.

3. U.S. General Accounting Office, Management Practices: U.S. Companies Improve Performance through Quality Efforts, GAO/NSIAD-91- 90 (Washington, D.C.: U.S. General Accounting Office [GAO], May 1991), p. 18.

4. See U.S. General Accounting Office, Quality Management: Survey of Federal Organizations, GAO/GGD-93-9BR (Washington, D.C.: GAO, October 1992).

5. White House Press Office, A Vision of Change in America (February 17, 1993).

6. Ritter, Don, U.S. Congressman, "Needed: A National Commitment to a Culture of Quality," Looking Ahead (Washington, D.C.: National Planning Association, October 1992), p. 3.

7. Mizaur, Don G., "Is Quality Government Possible?" Looking Ahead (Washington, D.C.: National Planning Association, October 1992).

8. Ibid.

9. Federal Quality Institute, Training Module 1: Overview (Washington, D.C., August 1993).

10. Federal Quality Institute, Employee Involvement and Quality Management in the Federal Government (Washington, D.C.: U.S. Government Printing Office, July 1993), p. 1.

11. Ibid., p. 47.

12. On August 20, 1987, President Reagan signed P.L. 100-107, the Malcolm Baldrige National Quality Improvement Act. This law established the Malcolm Baldrige National Quality Award, named for the former Secretary of Commerce. The award is designed to recognize companies that have successfully implemented total quality management systems. Increasingly, companies view the criteria outlined in the Baldrige Award application as useful diagnostic tools for evaluating the effectiveness of their management practices. Corporate executives also see the process of applying for the award as a way of improving their corporate knowledge of quality management principles and practices.

13. Juran, Joseph M., Juran on Leadership for Quality (New York: Free Press, 1989), pp. 43-45.

14. Federal Quality Institute, How to Get Started--Implementing Total Quality Management (Washington, D.C.: U.S. Government Printing Office, June 1993),

p. 18.

15. Ibid.

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