The Honeywell quest for excellence began when it convinced its mangers they could try harder. Despite achievements to date they now know they can still do better.
Managers are right to be wary of panaceas. Business history is littered with the hulks of grand nostrums, wildly popular in their day, that now lie discarded and discredited. At first sight, Total Quality Management is a perfect candidate to join their number: reduced to smart initials, founded on international envy (Japan's example), subject to more sweeping claims even than Management by Objectives. The scoffing has risen to quite a crescendo before the practice has become firmly established or, indeed, widely understood. TQM sounds like a technique and looks like a technique, being tied up with British and international standards, and involved with technical definitions like "six sigma" - which means no more than 3.4 defects per million parts. But you can satisfy every quality standard and even reach the Holy Grail of six sigma without having a quality organisation. The objective measurements are an essential part of TQM. But the philosophy (for that is its true description) is fundamentally subjective. It is easy to see, but hard to describe in any way save by anecdote. At Honeywell (UK), for instance, it is embodied by a small, energetic Scot, Carol Livingston, who leads a manufacturing "cell" in Newhouse with zest and knowledge; she has an important section of the microswitch "business" at her fingertips; she visibly and audibly "owns" it, along with colleagues who move from task to task, and product to product, with complete flexibility.
It is also epitomised by a group of sales engineers who cracked a familiar hard nut; that is, you visit a customer who expresses interest in another product made by the company, but not in your province. If, later, you remember the enquiry at all, you don't know the right contact; even if, with difficulty, you find that contact, the enquiry disappears into what Dennis Kennedy, Honeywell's managing director, calls a "black hole".
The sales engineers' brilliantly simple solution: set up a toll-free 0800 line to a central enquiry desk. The call can be made then and there from the customer's office, the desk keeps track of the enquiry, and the messenger gets reports on his message's fate all the way to the end-result: order or no sale. The improvement in "quality" is evident, but it's quality of management rather than any definable quantity.
All three initials in TQM hold equal weight. Where companies fail to get the expected benefits, or any at all, the fault is usually that they have staged an effort that isn't total - embracing the whole company and everyone within. Anything less takes a narrow view of quality, and isn't about management. The totality of Honeywell's effort is illustrative: recent quality projects tackled a range from a handbook for administrators, via speeding up deliveries between Holland and the UK, to eliminating "poor customer response" in industrial controls.
"Customer response" animates the quality teams at work all over the company. As Kennedy says, "Everybody has a customer." Earlier in his career, he worked at Honeywell before leaving for ITT, and memories of those days, even though Honeywell has always been considered a good company, convinced him that radical changes were urgently needed. But this wasn't a "company in crisis". Rather, Kennedy wanted to "sustain Honeywell's position as prime-choice supplier in our markets". The snag, a relatively happy one, is that Honeywell leads comfortably in most of those markets - commercial and residential "environmental control" (from domestic central heating to highly sophisticated installations, as at Canary Wharf); industrial products and systems, from Carol Livingston's sealed and pre-wired microswitches to the automation of entire oil refineries; and avionics equipment.
Given its hefty Number One positions, Honeywell cannot very easily grow its share: and its dependence on the battered building industry is sadly clear. There is nothing sad about its 1991 results, however. Sales of £201.3 million were up 7.5%, while flat operating profits of £20 million before tax represented a 10% margin - up by more than half during two-and-a-half years of recession on a 25% rise in turnover.
Kennedy is proud of a record that he is sure - not as measurable fact, but as observed certainty - results from the total quality programme. The very totality, though, makes it hard to separate one element from another. At the Newhouse plant, for example, the two-stage introduction of flexible, cellular manufacturing has produced spectacular increases in speed, eliminated huge amounts of inventory, and emptied large areas of floor space. In theory, it could all have been done without total quality; in practice, the two have fed off each other. On the old assembly lines, operatives couldn't have developed the multi-tasking, or the sense of ownership, or the independence they now plainly enjoy. Cellular working has brought down overheads (from 270% of direct labour cost to 100%), partly by reducing numbers of middle "management". More important, though, the supervisor who now looks after 100-plus people is truly "managing", and no longer putting out continual fires.
The resulting spirit and co-operation have made the switch to flexible manufacturing visibly a great success, with an achieved simplicity that produces sophisticated components with deceptive ease. It's natural to equate quality with factory work like that at Newhouse. But Kennedy is at pains to point out that the Scottish plant only accounts for15% of his revenues: the larger gains had to be made in the marketing and back-up areas which employ most of his people.
His own commitment to getting the fullest possible value from quality work is supported by his fellow-directors. Here the roles of human resources head Steve Foster and quality director Martin Kruger are central in both senses. Kruger is the only professional quality expert involved: he describes his work in sales and service as "driver, motivator, minder and critic" - and he works with just one assistant. For his part, Foster masterminds a massive training effort which, with deliberate significance, was not cut back to reflect recession.
Kennedy stresses that putting "the quality people" in charge of quality is a mistake - "otherwise it wouldn't be everybody's responsibility". Nor must TQM appear as "the flavour of the day". Rather, it is how Honeywell is managed, and has been for the past four years, via open forums, open discussion, and shared tools and techniques. Boundaries are drawn very widely: quality of service skills, for example, apply to "everyone in contact with the customer - and that's many times more than the sales people".
No area is excluded. Kennedy gets a particular charge out of the application of TQM to cash management. This programme ran throughout the company. At training sessions, people were "invited to see what could be done," he says. Non-financial people made suggestions, and there was rapid improvement as they used techniques with which they were familiar from other quality projects. Like all proper quality work, this wasn't top-down. Indeed, the cash management team, in one respect at least, proved tougher than the top. The issue was the company's repayment of expenses on a weekly basis. This supplied employees (for instance, when they paid by credit card) with a free cash float at Honeywell's expense. The directors backed off, fearing that any crackdown would cause "a revolution". The quality team, though, raised the matter themselves. "They thought the company was mad," Kennedy says. The proposed and accepted reforms eliminated not only the float but many administrative costs.
As other TQM successes have shown, the task of management is facilitated by sharing ownership of problems and processes - and without any significant corporate downside. For individual managers, there were disadvantages. As Tom Frame, the factory director at Newhouse, says, "Leaders were not used to talking to their people. A number of managers were administrators - they had forgotten leadership." Some couldn't accept the change of style, "others loved it," he says. "They found it enjoyable, because people responded well." Putting themselves on display, they "had to be open, bi-directional, had to listen - and be measured" - that is, judged and questioned by their people in interactive workshops. The unions proved no barrier. But senior and middle managers "saw their power base eroded" - and their jobs were eroded, too, where the traditional conduits between senior management and the shop floor were no longer needed.
Thus, behind the technicalities and the incessant training and top-ups lies the theory of modern participative management, founded on process re-engineering and focused on the customer. That focus was Honeywell's starting point. The feedback from interviews with internal and external customers made it clear that change was necessary. "A whole bunch of things came out," says Frame. Yet the need for change was resisted by several members of the management group.
Six months after the first orientation session, five out of the group's 11 members had left. Frame's analysis, though, could not be gainsaid. Quality defects are easier to spot in manufacture: for instance, some products that deviated from specified measurements had been hammered to fit - "hones and files had become the norm". Customers were having difficulty in getting delivery, so Frame "held a mirror up to the organisation. In any change operation, you need a trigger to overcome resistance."
The first six or seven months of TQM work were directed at senior management. The same principle was adopted for the much larger sales and service operation: the top people had to be "taught their role as facilitators". That meant eventually leading other managers, down to supervisor level, to facilitating: exchanging the "illusion of control" for the reality of effective management.
Walking round Newhouse, where conversion from the old production lines is almost complete, everything seems delightfully simple: thus, whichever way boxes are turned, label inwards or outwards, directs their progress into or away from the manufacturing cell - with no paperwork. But Frame warns that cellular Just-in-Time working, for all the apparent simplicity, is difficult. "Try to copy it superficially, and you're in terrible trouble."
That could just as well be said of TQM as a whole. But the hard work of giving people ownership of their jobs is self-evidently successful. You need only glance at a cell, whose workers walk about as they build the entire product, to see the human advantages. The economic advantages are equally obvious - being able to build to demand, instead of forecast; to handle very small orders without disruption; to exchange investment in training for investment in expensive machinery; to slash cycle times and overheads (production control staff cut from 90 to 25) - the list goes on and on. "Much greater awareness of customers" is again visible and audible all the way down, reflected in every activity. An example is procurement, turned from an "elephant ground", to which people were shunted aside, into an organisation of frontline engineers trained in commercial skills. Their role is not the old straight buying, but making co-operative deals with sub-contractors. Newhouse now does "a lot of work" with suppliers whose efficiency is vital to its own.
The measured improvements in efficiency are mirrored elsewhere in the company, as they must be if overall quality of performance is to rise appreciably. Speed of response is not only desirable from the customer's viewpoint, either: it eliminates inventory. The building systems side, for example, used to turn its inventory over eight times a year. Now the figure is 36. The virtuous circle of quality is at work: in the food controls business, as service improved by 30%, inventory came down by 80%.
The detailed work that produces such gains is headed up by quality councils, one for the entire company, another for Newhouse, and a third for the rest of the business. The councils in effect are the senior management, and the quality organisation, says Kennedy, has "now blended with the regular structure. It's difficult to see the join." The councils' prime job is to prioritise - because "once people are alerted to continuous improvement, there are far more opportunities than can be taken."
To match the factory's success in other areas is inherently more difficult, simply because employees are scattered all over the country. Also, it was hard for salesmen, say, to see that quality was any concern of theirs. If product quality was right, surely all quality was. That's the product delusion over which many quality efforts stumble in the West: "There are many more ways (than poor product quality) to upset the customer." At Honeywell UK, the early sessions got across the message that non-product quality had equal impact. To repeat, quality improvement makes people manage in the way the gurus recommend: thus, the sessions brought together people from different functions who had never sat in the same room: "The branch manager meets the systems designer whose system he sells" (and whose design work, of course, is where quality starts).
The intensive training effort - 6,000 training days a year company-wide, including technical and professional skills - forms part, not only of the quality work, but of a careful structure of personal development. Most unusually, Honeywell runs a management assessment centre to which bosses can send subordinates with the required potential - and the boss is first grilled rigorously to ensure that the potential management quality really is there.
The shift from succession planning to career development is another variety of the re-engineering, or re-thinking, that has evolved over the past four years. As careers progress - and Kennedy's best UK managers are now eligible for jobs anywhere in the Honeywell world - so do rewards. But reward plays no part in the quality process. To reward people for quality improvements, however great the financial savings, "goes against everything" that Kennedy has tried to achieve, or that TQM means. People get recognition from peers and bosses for their contributions: they make presentations to their quality council; and there are lunches, plaques and certificates. But TQM, as it must be, is simply the norm, "the way we do things round here". Incentives for quality would be inappropriate - though a quality improvement team, drawn from human resources, finance, etc is looking at the existing pay for performance scheme to see how it can be improved.
The emphasis is on the "how" - there is no "if". There is nothing that the tools and techniques cannot tackle, nowhere that is not susceptible to improvement, from the supply of information ("what is it used for?") to the climate inside a building at Haverfordwest. Air-conditioning was the original proposal: reflective film on the windows was the quality, and much cheaper, answer.
Kennedy points out that the traditional approach is to seek macro-solutions (computerisation, a new accounting system, and so on) but "now it's more micro". The lesson of Honeywell is that many a micro makes a macro: not only success in straitened national economic circumstances, but a much stronger relationship with customers, and recognition two years running as Honeywell's best European affiliate.
The choice of Newhouse as the centre for design and manufacture of proximity switches gives the UK management particular pleasure: the work has been transferred from Bienne, in the heart of the Swiss watchmaking country. You could forgive Kennedy and his fellow-managers for getting a trifle complacent: but complacency is something for which real TQM leaves no room. It started in Honeywell with managers being forced to recognise that they were worse than they thought. Today, despite the achievements to date, everybody still knows they can do better. You don't understand quality until you see doing better as a compulsory task, and one that never ends.