Total Quality Management
Case Study on the Deming Prize:
Analysis of, “Deming’s
Luster Dims at Florida Power & Light”
by Jimmy Alyea
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.
For more information, please
contact Jimmy Alyea:
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
