Quality Is Becoming Job One In The Office, TooAaron Bernstein
It was in some desperation that University Microfilms Inc. embarked on a quality improvement program three years ago. The country's largest publisher of doctoral dissertations, UMI had grown steadily in the 1980s as universities churned out rising numbers of PhDs. But its backlog, which swelled by 2,000 manuscripts in some years, reflected more than prosperity. Though UMI had adopted new technology, its creaky ed-iting process had changed little in decades. By 1988, the Ann Arbor (Mich.) company had orders for nearly 30,000 theses a year but could get out only 22,000. The rest went intothe backlog--creating more unhappy customers who weren't getting orders on time.
So UMI, a unit of Bell & Howell Co., turned loose quality teams to try and end the carping. They quickly made a startling discovery: During the 150 days it took the company's 1,000 employees to process an average thesis, a grand total of two hours was spent actually working on the manuscript. The rest of the time it sat waiting, unable to move to the next stage, such as copyright approval or indexing, until the author responded by mail, for instance, on how to fix some glitch. Partly by adopting more flexible editing standards and partly by moving a manuscript to the next step instead of holding it for corrections, the 150 days were cut in half within six months. Today, the average is 60 days, which should lower UMI's backlog to 1,500 this year. Last year, customer complaints fell by 17%, to nine per 1,000 shipments, a figure UMI hopes to reduce by 25% this year.
UMI's experience is unusual but by no means unique. A decade after the quality revolution hit U. S. manufacturing, quality is a rising concern in office work, too. This trend "is just getting started," says Curt W. Reimann, who runs the Malcolm Baldrige National Quality Award program for the Commerce Dept. "I don't think most people have fully realized the potential there yet." Still, dozens of employers see the chance to both please customers and save money: When quality goes up, productivity usually does, too, since eliminating errors cuts redos in offices and factories alike. Dave Billick, who heads UMI's dissertation-publishing operations, says his company's quality plan should help it publish more than 40,000 dissertations in 1991 without adding workers. "That's 30% more work with the same people" that UMI had three years ago.
CHEAP LABOR. White-collar America needs to make such gains if the country's stagnating living standards are to regain their growth rates of the 1950s and 1960s. Economists say increases in real incomes depend on how fast productivity rises across the U. S. work force. Bureau of Labor Statistics figures show that factory productivity has climbed 51% since 1973. But the productivity of office workers has dropped by some 7% over that period, according to economist Stephen S. Roach of Morgan Stanley & Co. This has flattened overall productivity, since today there are so many more workers in offices than in manufacturing--60 million vs. about 20 million.
Some economists think that the weak showing of office workers is rooted in the huge supply of labor that became available in the 1970s and 1980s in the form of women and baby boomers. Such workers were so plentiful that employers snapped up lots of them--even inexperienced ones--instead of hiring fewer employees and teaching them to be more productive and quality-conscious. Now, the influx of baby boomers is over and the increase in working women may be leveling off, too. So, says Roach, companies can no longer "hire lots of cheap workers instead of boosting productivity."
One popular solution has been to engage high-priced consultants, who restructure work, suggest layoffs, and otherwise improve white-collar efficiency. But quality gurus call this a backward approach. Just as there's no point in being the most efficient maker of a car that no one will buy, it's self-defeating to squeeze more useless paperwork out of a billing clerk. "We have plenty of examples of people who meet all the productivity measures," says Norma Rossi, the head of quality at Metropolitan Life Insurance Co. "But if the customers aren't getting what they want, it's just a joke." So for many companies, "quality first" is now the byword. Corning Inc. showed why last summer when it looked at the quality of its tax returns. Corning had vastly improved quality in its plants, and thought the same approaches might work in its offices. Chuck Wise, the head of its tax unit, set out to identify his customers, which is less obvious than it sounds. In offices, these usually are other departments, or perhaps suppliers or lenders. Wise found that the Internal Revenue Service was his unit's largest client. Then, he asked the IRS to rate Corning's federal tax returns, on which Wise's 19-person tax unit spends about half its time. It was the right question. For years, Corning had prepared a summary of thousands of accounts detailing the expenses of each of its departments--on the assumption that the feds wanted this. But the IRS didn't want the summary, which it spent hundreds of hours unraveling. It thought Corning kept its books this way.
FASTER AUDITS. In the wake of this discovery, Corning eliminated the summary, saving itself more than 400 work hours a year. Donald Mitgang, the IRS district director for the Buffalo region, says this will cut the time his office spends on Corning's biennial audit from 18 months to 15. This might never have happened if Corning had gone after efficiency first and simply tried to do the summaries faster. "If you develop a product that satisfies the customer, even a tax return, you save everyone redo work and overhead cost," says Mitgang.
After the customers have been identified, a common next step is to examine how work moves through specific departments. Often, this involves making step-by-step flowcharts, much as efficiency experts have done for years. But while assembly-line analysts look at output per unit, quality statisticians lookat things such as accuracy and timeliness. Some track errors per thousand documents processed, for instance, or the response time to customer requests.This approach has led some companies to restructure jobs that haven't been fiddled with in decades. One dramatic example involves the First National Bank of Chicago. A few years ago, the First Chicago Corp. subsidiary noticed that customers of its letter-of-credit department were being bounced from person to person when they called. In 1985, the company turned the problem over to one of the dozens of quality teams, composed of supervisors and employees, that it had set up in the early 1980s. The culprit, it turned out, was the department's assembly-line approach. A customer's request would go through dozens of steps, involving nine employees, before a letter of credit was issued--a journey that took four days.
The solution was to invent a new process to let each customer deal with just one person. The bank extensively retrained its letter-of-credit issuers to handle each step in the process. And customers were given the same employee each time they ordered a letter. Today, First Chicago issues credit letters in less than a day. In 1990, the bank issued 1,450 such letters, more than double the 1985 number, using 49% fewer employees. "To show you how good they are, when a customer needs a letter of credit to place an order with us, we tell them to use First Chicago if they can," says Robert J. Haider, an international credit manager at Motorola Inc. "Their new method is a lot easier to deal with than the way other banks usually do it."
In the long run, experts say, office quality efforts must move past initial breakthroughs to institutionalize improvement. Few companies have gotten this far, even among trendsetters. But one that's close is American Express.
WAITING TIME. AmEx began its white-collar quality work in the late 1970s with a pilot project in Phoenix, where 6,800 employees process 18 million charge slips a month for cardholders in the Western states. Even before the program began, AmEx tracked errors and timeliness. But it soon realized that most of these measures focused on internal processes, such as how fast or accurately a department did its work. In 1978, the company created new indices to measure quality as perceived by customers. This cast a new light on the business. For instance, AmEx previously had measured how quickly the credit department processed a new card application. But customers didn't get a response until the request had been through at least four other departments. The new system measured how long customers wait for all steps to be finished.
The Phoenix experiment led to one of the most sophisticated office-quality-measurement systems in the country, which AmEx calls its Service Tracking Report. The STR looks at more than 100 tasks, from how quickly phones are answered to the accuracy of monthly statements. It has become a tool for constant quality improvement at AmEx's five U. S. customer service centers. Using monthly reviews of the numbers, officials in New York periodically nudge up standards to produce higher quality in hundreds of functions. In the past 10 years, for instance, AmEx has cut processing time for new applications by half, to 11 days. Since 1980, such improvements--coupled with computerization--have more than doubled revenue per employee throughout AmEx's travel division, which includes credit cards. Last year, that figure reached $191,000.
Most office-quality programs deal with lower-level workers. But a few have tackled the hardest challenge: highly skilled professionals. Their work lends itself least to quality measures, since it involves innovation and trial and error. Still, AT&T's Bell Laboratories has made headway with product development engineers, including those in Whippany, N. J., who designed a digital loop carrier, a shoebox-size circuit board that transmits phone signals through fiber-optic cable. When Bell Labs began work on a new carrier a few years ago, it used a then-novel technique called design for manufacture: designing a product to be easily assembled.
STREAMLINING THE LAB. DFM, which began to spread across industrial America in the late 1980s, has drawn attention primarily for improving the production process. But Bell Labs found that it also has a big impact on the quality of product development, which is mostly office work. Previously, designs had been set in Whippany, then shipped to an AT&T plant in Oklahoma City for assembly, with problems ironed out after production started. On the new loop carrier, engineers from both locations worked together from the start. Small groups of them met to agree on every step, such as which plastics would withstand the heat needed to manufacture the new carrier.
This not only made production cheaper and easier--it also reduced engineering mistakes. For example, the loop carrier is chock-full of software embedded in its chips. Teresa Vega, who heads the Whippany testing unit that screens the final product, says the 1990 version had 60% fewer software errors than one produced in 1986. "That translates into savings," she says, "because we would have had to do that much more testing and delay the product introduction."
It may be years before most U. S. companies produce such results. Still, they need to start trying. Increasingly, the quality of office work will be a key element in the formula for success.