Tuesday, June 19, 2012

Total Quality Management - The Deming Award

Total Quality Management Case Study on the Deming Prize:  
Analysis of, “Deming’s Luster Dims at Florida Power & Light”

The key to managing a successful supply chain is balancing efficiency and responsiveness.  A supply chain manager must manage the little details without losing sight of the big picture in order to achieve total quality.  In this case study, Florida Power & Light lost sight of this while trying to win the Deming Prize.

In 1989, Florida Power & Light (FPL) became the first American company to win Japan’s prestigious Deming Prize for outstanding performance in quality control management.  FPL had established a $4 million quality-improvement program in 1985 several years after its company’s chairman visited a Japanese utility company that won the Deming Prize in 1982.  Although the award’s sponsor, the Japanese Union of Scientists and Engineers (JUSE), opened competition to overseas companies in 1986, no foreign firms applied for the award until 1989 when FPL decided to “go for the gold.”  According to FPL’s president at the time, Bob Tallon, applying for the Deming Prize provided FPL’s 14,000 employees with added incentive to accomplish needed quality goals (Kolody, 1989).

FPL entered the race wholeheartedly.  Instead of continuing  to implement the company’s 1985 quality-improvement initiative gradually, employees were given less than six months to meet Deming award requirements.  Rigorous weekly training courses were developed for first-line, nonsupervisory employees, and over 1700 teams were formed to come up with problem-solving solutions to reduce costs or improve efficiency.  Managers were required to master new managerial theories and complex statistical calculations.  Supervisors spent their time tracking and calculating dozens of cross-referenced indicators such as the percentage of street lights installed in 21 days.  A functional review team was required to document and analyze 800 different procedures for everything from conducting energy surveys to answering customer complaint letters.  An area manager of customer service for the utility’s commercial/industrial group summed up the rigid process and the avalanche of paperwork by stating that preparing for the exam was “grueling.” 

When FPL received the Deming Prize in November, 1989, company president Bob Tallon cited numerous instances of quality-improvement benefits received from applying Deming principles.  For example, the company had reduced the average length of customer power service outages from 100 minutes annually in 1982 to 48 minutes in 1989.  In the safety category, FPL had reduced lost-time injuries from more than one per 100 employees in 1985 to 0.42 in 1989.  Additionally, customer complaints to the Florida Public Service Commission were at their lowest level in 10 years.  FPL also had reduced its fossil power plant’s forced outage rate from 14 percent in 1986 to less than 4 percent in 1989, saving ratepayers $300 million that would have otherwise been spent on new generating units (“FPL First International Winner,” 1989).

At the same time, CEO James Broadhead acknowledged that there were “some glitches” in the system.  These problems were deemed by many, however, to have overshadowed the quality benefits.  Employees felt that the system was too bureaucratic and inflexible.  Many had put in long, extra hours to prepare the Deming application and the volumes of documentation.  First-line supervisors complained they could not get their jobs done because workers were attending problem-solving meetings every week.  Problem-solving teams were frustrated when they realized proposed solutions were being evaluated for procedures rather than for results and substance.  The Deming method was so rigidly applied to every team problem that something so simple as moving an office water cooler required that seven mandatory steps be followed.  Not only commonsense, but also customers took second place to following Deming guidelines.  Customer-service representatives were so pressured to answer calls quickly that they began issuing work orders for problems that could have been resolved faster over the phone.  In retrospect, one FLP official stated, “We had an internal revolt. . . .  Winning the prize became less important than the challenge of trying to meet the judges’ strict demands” (Bacon, 1990).

In response, FPL officials made sweeping changes during the months following receipt of the award.  The more stringent requirements of Deming’s quality program, though not abandoned, were pushed into the background.  The Quality Department was reduced from 85 full-time individuals monitoring the quality teams to 6, and the quality-related departments set up during the award application process to do statistical “quality reviews” were disbanded.  The number of tracked “quality indicators” were cut from 41 to 3.  First-line supervisors were included in training programs which began to focus on areas other than quality, such as supervisory skills and customer sensitivity.  Most significantly, the mandatory, often-dreaded “seven-step process” no longer had to be used for all problem solving.

The experience provided valuable lessons, including the need to bring all levels of employees into the program and to show them how all will benefit from it.  Mike Brunetti, FLP’s executive vice-president, now advises companies just beginning to implement quality management programs to start with the top and work down to middle management, then first-line management, and finally to first-line employees (Bacon, 1990).  Brunetti said FPL’s experience also showed that in addition to team activity, it is equally important to have policies that stress external and internal customer satisfaction, that improve coordination within the company, and that concentrate company efforts on a few priorities at a time.
Without question, FPL’s commitment to quality was 100 percent.  Although service quality was obviously enhanced and a new corporate direction resulted, FPL’s profitability did not reflect improvement comparable to their winning the award.  The path FPL followed in pursuing the Deming Prize marked the company as one of the most-cited companies that failed to implement total quality management (TQM) properly (along with the bankrupt Wallace Co.).  FPL’s experience with TQM is an example of what can happen when companies adopt new management techniques too wholeheartedly.  As one outsider remarked, “people seemed more interested in the appearance of quality and jumping through the internal TQM hoops than on quality itself” (Harari, 1997).  Today, the Deming methods share the spotlight at FPL with other management tools such as benchmarking and reengineering, and employees have the freedom to innovate and solve problems without having to follow one particular methodology.

Copyright 2012 James L. Alyea. All Rights Reserved.

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Works Cited:

Bacon, D.  (1990, January).  A pursuit of excellence – Florida Power and Light offers strategies
for successful quality management.  Nation’s Business.  Retrieved from http://findarticles.com/p/articles/mi_m1154/is_n1_v78/ai_8279735/

FPL first international winner of Deming Prize.  (1989, October 18).  Business Wire.  Retrieved
from http://search.proquest.com.ezproxy.uhd.edu/docview/447094933

Harari, O.  (1997, January).  Ten reasons TQM doesn’t work.  Management Review, 86.1. Retrieved from connection.ebscohost.com/.../ten-reasons-why-tqm-doesnt-work

Kolody, T.   (1989, October 19).  FPL captures Deming Prize:  utility lst U.S. firm to win award.
Sun-Sentinel.com.  Retrieved from http://articles.sun-sentinel.com/1989-10-19/business/8902040936_1_fpl-deming-prize-turkey-point

Wiesendanger, B.  (1992, September/October).  Deming’s luster dims at Florida Power & Light. 
Journal of Business Strategy, 14.5.  Retrieved from http://search.proquest.com.ezproxy.uhd.edu/docview/202687879