Selling A Bright Idea Along With The Kilowatts Andy FreebergDavid Greising
By the time Florida Power & Light Co. became the first U.S. company to capture Japan's prestigious W.E. Deming Prize in 1989, the Miami-based utility had become a kind of mecca for Corporate America's quality mavens. Visitors marveled at FPL's quality department, numbering 80 staffers. And they were awestruck by the utility's 1,800 quality-improvement teams. "We had checkers checking checkers in everything we did," says J. Thomas Petillo, then an executive in the quality office.
In the end, however, FPL kept better tabs on quality than it did on its basic business. The utility's managers, preoccupied with such quality issues as timely billing and preventing downed power lines, woke up too late to the population explosion in southern Florida and the sudden surge in demand for power. FPL had to buy electricity from nearby utilities. It even had to initiate rolling brownouts to conserve power. The year it won the Deming, FPL's profits fell 8%, to $412 million, even though its revenues climbed 13%, to $5.3 billion.
TALKING CURE. With results like that, many companies would have turned out the lights on quality programs. Not FPL. Instead, the utility revamped its entire quality approach--this time with an emphasis on cost reduction. Nowadays, FPL's bottom line is much brighter. Its profits rose 23% last year, to $572.4 million. And building on its reputation as a Deming winner, FPL has launched a thriving return-on-quality consulting business. FPL's Qualtec Quality Services Inc. unit has 52 consultants, annual billings of more than $13 million, and a list of 100 clients worldwide, from U S West Inc. to Britain's Nuclear Electric PLC.
Qualtec's approach is straightforward. First, it tries to persuade managers to throw out their old views of quality. The consultants break up management--from top executives through midlevel managers--into groups to talk about quality and how it should be used only as a means to produce healthier results. The message is spread through teams made up of managers and blue-collar workers. Then, with everyone in agreement on how to define quality, Qualtec does a top-to-bottom review of the way a company operates, identifying potential quality improvements that could yield financial benefits.
At American President Cos., a shipping company based in Oakland, Calif., Qualtec consultant Joe L. Webb made three transpacific voyages before singling out 45 processes that were key to keeping American President's ships running smoothly. Of those, Webb figured that 25, including loading cargo and meeting schedules, were critical to customers--and therefore likely candidates for quality improvements. Since then, Webb has recommended a number of measures, such as streamlining paperwork to reduce the time it takes customs officials to clear cargo.
"TURBO TEAMS." Not all of Qualtec's consultants have time for cruises. As more companies look for tangible payoffs from quality, they are also demanding speedier results. "Twelve to 18 months? Surely you can do better than that" is the common refrain from clients, says Petillo, now Qualtec's president. In response, Qualtec has formed "turbo teams" of consultants and managers to develop quality programs in a matter of weeks, not months. Gauging the financial impact of quality improvements is still a challenge. To help its clients, Qualtec is developing new computer software to measure the cost of quality against projected financial results, such as sales and return on capital.
As for the old Deming process that FPL once championed, Petillo thinks it still has merits. But even the Japanese quality devotees he sees these days are no longer blind to cost. Japan's weakened economy has seen to that. "Before, the Japanese wouldn't talk about cost," says Petillo. "Now they understand." It's a revelation that Qualtec is helping to spread.