Case: Wengart Aircraft President Ralph Larsen of Wengart Aircraft has become increasingly concerned about profits. Though he is not fearful of a company takeover, he does feel an obligation to maximize shareholders’ return on their investment. He and about a dozen top executives receive sizable stock bonuses, so it is to their advantage to obtain a high share price. Wengart manufactures private and military aircraft.
It is number two in its industry, which consists of seven companies. Its profits, however, are ranked sixth. It is disturbing to Larsen and his top management team that they are not able to maximize profits.Quality Problems The top management team has identified quality as one of the major problems at Wengart. Aircraft have to be reworked even after they are sent to the customer.
The federal government, one of Wengart’s largest customers, shares the concern about quality. The Secretary of Defense has sent Larsen several letters warning that unless quality is improved by 20 percent within six months, the government will exercise its contract provision to withhold partial payment as a penalty. This will place even more pressure on profits.Nongovernmental customers have also expressed serious concerns about quality.
There have been major stories in the Wall Street Journal and Business Week about Wengart’s quality problems and deteriorating financial condition. The Department of Defense, in its latest letter to Larsen, said it would look favorably upon Wengart’s implementing a “TQM program similar to programs at other aircraft, automobile, and electronic firms. By Presidential Executive Order 12552 applying TQM to all federal executive agencies, the Department of Defense is encouraging all defense contractors to adopt TQM.Total Quality Management and the OD Practitioner Larsen, in an effort to learn more about TQM, hired an OD practitioner to explain it. The practitioner made several points at a two-hour meeting with Larsen: •Customer, engineering, production, and product support functions are integrated into a team. •The customer is the next person in line. Therefore, for someone within the company, the customer can be the next person on the production line, and for the company the customer is the purchaser of Wengart’s planes.
Everyone in the company is both a customer and a producer. •Quality is giving customers what they have a right to expect. •Substantial increases in education and training are required. •Teamwork is a basic building block of TQM. •As the CEO, Larsen and his top management team must be committed to TQM and communicate its importance by word and deed at every opportunity. •TQM will have to become part of Wengart’s culture. The CEO must believe in work principles that include improved leadership, working conditions, and job security.Larsen thanked the practitioner and said he would take it from here.
To Larsen, TQM was a matter of common sense. It was what they were doing or should be doing. Larsen decided that the company had no other choice but to implement TQM. He called a meeting of his vice presidents and explained TQM. Larsen put Kent Kelly, vice president of production, in charge of the program. Maria Lopez, vice president of human resources, tried to convince him that TQM should be a joint project between human resources and production, with the president’s office coordinating the program.Larsen explained, however, that he didn’t have time to get involved with TQM personally because he wanted to spend his time and energy improving profits. Mary Romero, a supervisor of the wire harness assembly team for the drone aircraft, is responsible for 11 people on the swing shift.
Her people put together the thousands of color-coded electrical wires that make up a “harness. ” Another production team sets the harness in place in the aircraft by running the harness from the aircraft’s central computer to the other sections of the aircraft. The drone is a new and highly advanced unmanned aircraft for the U.
S. Air Force using the latest in electronic and computer controls in combination with a stealth design. Romero’s team, like every team working on the drone, is critical to the place’s ability to meet specifications. Two months ago, all the managers and line supervisors at the Pico Durango plant, including Romero, attended a meeting called by the plant superintendent, Allan Yoshida, who explained TQM to them.
Managers and supervisors came away from the meeting with various interpretations of TQM, and thus the line workers tended to get different ideas about TQM.Within a day after the meeting, all the workers in the plant received a brief memo from Yoshida in which he outlined TQM, said that the managers and supervisors had the details, and that everyone was to support the program. Romero was very enthusiastic about TQM. She was taking a management course at a local university, and her class had recently spent several class meetings learning about TQM.
She was, however, confused at the brevity of the TQM information she and the other supervisors got from Yoshida.Two of Romero’s veteran workers, George Karas and Shannon Potowski, said it sounded just like the other management programs where the union workers did all the work and management, especially top management, got the credit- and the bucks. Both of the workers made some rough calculations and figured that under the old system, at least 20 percent of their time was spent reworking a defective harness after it had been installed in a plane, waiting on products coming from the preceding production team, or waiting on delayed inventory items.The waiting time, which was about the same for other teams, was a good opportunity to go to the company store, take a longer coffee break, or visit with friends on other production teams. After comparing notes with other workers around the plant, plant workers generally concluded that Allan Yoshida was trying to speed up production so that the midnight shift should be cut. This morning, Romero and several other supervisors went around their department and division heads to see Yoshida.They explained the rumors they had heard about a worker plan to get the job done right the first time but make sure it took so long that no one would be laid off.
Yoshida’s knowledge about what to do, referred to the seven-page memo Kent Kelly had sent him on how to implement TQM. Yoshida’s knowledge of TQM was limited to the memo he had received from Kelly. The situation the supervisors were explaining was valid, said Yoshida. Unfortunately, Kelly’s memo did not address the problem.
After looking at the way Kelly had set up the plant goals, Yoshida decided that quality was what mattered most.Yoshida quickly reasoned that his next promotion was dependent on meeting his quality goals, not on improving productivity. Getting the workers mad at you was a sure-fire way to lose both quality and production.
He told the supervisors at the meeting to pass the word that layoffs were not the purpose of TQM and just make sure quality was top-notch. After the meeting, Yoshida wondered if he should call Kelly and see if there was any more to TQM he should know about. But he decided after several minutes that if the program was very important, he surely would have heard something more. He reasoned that it was best not to make waves.