TQM AND THE ROLE OF CPAS IN INDUSTRY

By Jacqueline Babicky

TQM, or "total quality management," is a way of doing business. What has come to be called the quality movement is based on a philosophy first expounded by Dr. W. Edward Deming (1902-1994). Dr. Deming was instrumental in helping Japanese manufacturers rebuild after World War II--and not only regain their industrial capability but to dominate key industries--by focusing their attention on quality management and customer satisfaction. His philosophy is expressed in his "14 points and seven deadly sins" (see sidebar), a series of succinct pronouncements regarding how business must be run in order to prosper over the long term. The "14 points" discuss the organization's need for a long-term vision and criteria for decisions that support its long term health. The philosophy also strongly supports the basic underlying belief in the capability and desire of each and every worker to make good decisions, contribute ideas that support efficiency, and have a place where they can take joy in working together cooperatively. The quality philosophy is not easy to implement. When it is successful, it is pervasive, affecting all areas of the organization.

TQM has several basic components: employee empowerment, continuous improvement, measurement, and strong leadership. All of these components are centered around customer service. Customer service, the heart of quality, means meeting customer expectations error free, hassle free, 100% of the time. This does not mean that everyone must do everything that any customer asks of them. Instead it means that we, the organization, together with our clients, set joint expectations about the work or product we will provide; then we provide this work always, unerringly, without exception.

To provide this level of service, every employee must be empowered. As a basic component of TQM, empowerment means that employees have both the authority and the responsibility to take on tasks and make decisions about their work in the best interests of the organization. All employees must understand that their job is to do their job and to improve their job. It is a basic tenet of a quality organization that the best persons to improve work are those who are closest to it--simply because they understand the work and the process and can "see" the small steps that will make a difference. Management teams who are distant from the work usually do not understand it in enough detail to make changes that make sense.

Never Ending Process

Continuous improvement, another key component, becomes part of the firm's culture. There are always ways to use new ideas to better work flow. Also, work flow can be improved simply by creating the atmosphere where each worker pays attention to his or her part in the larger scheme of things and makes efforts to reduce waste of both labor and materials. There is an understanding that all work, whether manufacturing a product or providing a service is, in fact, a process--a flow of tasks, steps, and jobs. With education, employees pay attention to the performance of the tasks as part of the overall process or work flow. The atmosphere in a quality centered company is one of constant improvement--reviewing, streamlining, and simplification.

Some people confuse TQM and reengineering. Reengineering can be a component of TQM, a dramatic version of continuous improvement. That is, with TQM the entire process is shaken down to its foundation, and its work flow is completely redesigned. Usually reengineering involves the more intense use of applied technology tools, the availability of which has made old work systems obsolete and no longer the most efficient means of producing work. Reengineering may be the answer when competitive forces have created an opportunity or a requirement to totally revamp the way work is done. Once work flow has been reengineered, however, the organization continues to need the TQM concepts of continuous improvement and measurement in order to fully realize
the benefits hoped for with the
reengineered effort.

Measurement and Date

An important part of the quality organization is the structural portion of measurement and data. Many of the elements of a quality organization relate to the human resources and environmental culture of the enterprise. In this system, however, those softer elements are intrinsically interwoven with a very strong infrastructure of data collection, key measurements, logical problem solving, and measurable outcomes. In a quality organization, facts, statistics, and an understanding of variation in process reign supreme. It is measurement that tells us factually whether the solutions and changes being implemented are having the desired results and impact. It is measurement that makes certain that once a process is in control, it stays in control and does not drift off course again.

The component that can make or break a quality initiative is group leadership. The leader must hold clearly in his or her mind the vision of an organization. That is, a vision where the customer comes first, the employees feel a sense of inclusion, and where the products and services offered are considered to be first rate, reliable, and consistent. The leader must be willing to communicate and share this vision with others, and to make the often hard decisions necessary to build the organization he or she knows is possible. The leader must model the behavior as well as inspire the work force. At the same time, the leader must see the values, standards, and guidelines necessary to turn the vision into reality. Such leadership is the essence of a quality initiative.

Role of the CPA

The CPA, either as an employee or as a consultant, holds many skills that can help the quality initiative succeed. The CPA understands a logical approach to problem solving and how to identify and record key indicators. The CPA can help organizations learn and use flow charting and process mapping techniques to identify process problems, create solutions, and describe potential new work designs. The CPA can help the organization identify the real costs of work processes by looking at cost based on activities rather than using old cost-center or labor-hour methods. Often this takes a great deal of creativity and sophistication on the part of the accountant, but the outcomes can result in the organizations finally having a costing and pricing tool based on actual circumstances. This knowledge is crucial for financial prosperity.

The CPA can play an important role in benchmarking for the organization. Benchmarking is the process of determining critical success factors and making comparisons to the best in the class. Finding the appropriate benchmark candidates and developing the in-house data for comparative purposes is an important undertaking. CPAs understand the importance of key indicators, of comparing like things, and of data consistency.

The CPA in the typical employee role is often in charge of the organization's IT system. This is the "neural network" that collects data from and provides information to all areas of the enterprise. Having data available that is correct, consistent, immediate, and accessible in an easy-to- use format is extremely important in a transformation system that depends on being able to count and measure results. This may be one of the most important roles of the CPA in a TQM company. This role requires that the CPA use the discipline and skills as an accountant and at the same time be willing to be creative and do thinking "outside of the box." Usually, the traditional accounting data will not give the real information that managers need to manage well. The CPA needs to understand the workings and flow of information and costs throughout the sales, production, and delivery processes. He or she needs to understand at which point in the process critical decisions are made--where value is added and where measuring results can make a difference.

The CPA can also take on a more consultative role in a TQM organization, that of change agent. Someone needs to hold the role of implementing the long-term plan of moving the organization through the phases of organizational change. CPAs are used to thinking in terms of overall processes and how they impact one another. CPAs tend to be systems thinkers, and the move toward quality uses all of the system's thinking skills. The CPA can be the one who not only understands the tools of logical problem solving and holds the key to providing data for process measurement and decision making but also the one who understands the relationships between employee policies and reward systems and the overall success of the organization.

Major organizational change and transformation is underway and will continue for a long time. Organizations of many kinds and from many production and service areas are taking steps to transform themselves into organizations that will thrive in the challenging environment of the 21st century. The CPA can play an integral role in the challenging work.