1. Making the Case for Quality
November 2010
Negative Press Motivates
Impossible Mission
by Ted Schaar
No organization can afford to make an
At a Glance . . . enemy of the media. When Telefónica
Group in Argentina wasn’t paying media
• Telefónica’s Impossible suppliers on time, its leadership well
Mission team set understood the ramifications.
out to improve the
company’s ability to pay Telefónica outsources its advertising to a
advertising placement media agency that buys billboard, maga-
invoices according to
agreed upon terms. zine, and newspaper space and air time
Members of the Impossible Mission team.
on radio and television. Telefónica’s Upper row, from left to right: Sebastian Minoyetti, Ramón Ponce Gil,
• Applying a Six Sigma
approach and quality tools placement budget of $34 million per Juan Waehner, Jose Luis Aiello, and Luciana Barrera.
year goes to about 800 media outlets. Lower row, from left to right: María Gabriela Ramírez, Andrea Buzadas,
such as process mapping, Gisela Padrón, Gonzalo Careaga, and Rafael Scarinci.
5 Whys, multivoting, Pareto The media agency pays the invoices for
charts, and Gantt and PERT air time and space after receiving authorization from Telefónica Group.
charts, the team increased
on-time payments from 2 Until two years ago, only 2 percent of payments to media suppliers were made on time. Although
percent to 97.5 percent.
advertising represented the lowest volume of purchases by Telefónica Group at 3.5 percent, it had the
• Among other results, greatest number of suppliers (58 percent) that were dissatisfied with payment timeliness.
recovery of tax credits
that would have been
Problems involving late placement payments were so severe they resulted in negative references to
missed due to the poor
payment system netted Telefónica in news stories.
$1.7 million, employee
satisfaction increased Processing supplier payments in a timely manner according to terms is a challenge many organizations
from 36 percent to 85.4 face. Various factors might cause payment intervals to lengthen. To correct its overdue invoices prob-
percent, and supplier lem and get the media back on its side, Telefónica turned to quality tools and processes.
satisfaction improved from
28 percent to 86 percent. About Telefónica
• By paying advertising-
related invoices in a timely Telefónica Group is a telecommunications company that operates in 25 nations and has 250,000
manner, Telefónica Group
employees. It is owned by Telefónica, S.A., a Spanish broadband and telecommunications conglomer-
also avoided penalties
and increased its ability ate headquartered in Madrid, Spain.
to negotiate rates.
In 1990, Telefónica de Argentina became part of Telefónica Group. Now the largest fixed-line operator
in Argentina, it provides broadband and telephone services in the southern part of the country as well
as the Buenos Aires metroplex.
Telefónica has a quality policy that stresses commitment to customers, employees, shareholders,
suppliers, regulatory entities, and society. The policy has helped the company earn certifications to
standards ranging from ISO 9001 to ISO 27000.
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2. Excellence models Telefónica uses, such as the ASQ Molteni & Associates, Argentina, provided training for the team,
International Team Excellence Award (ITEA) process, have with instruction divided into modules related to the define, mea-
been factors in the many awards the company has earned, includ- sure, analyze, improve, and control phases of Six Sigma.
ing the Argentina National Team Competition and recognition
Improvement and innovation chief Matías Gadda Thompson said,
by the Great Place to Work® Institute Argentina. Telefónica has
“In addition, we incorporated the ITEA evaluation model that
also participated in the ASQ (ITEA) process.
we learned about through ASQ in our training and mentoring
program. It helped make sure key validations were achieved and
Why Quality?
that implementation of the solution was solid.”
After receiving many complaints, Telefónica managers in Stakeholders
Argentina discovered that bill payment deadlines for advertising
placement were being missed 98 percent of the time, and there To identify potential stakeholders, the team interacted with staff
were more than 1,000 overdue invoices, some dating back six from different areas and used process mapping.
months. The outstanding debt totaled $10 million.
Internal stakeholders were quality, marketing, management
This hurt Telefónica Group’s reputation and made negotiating control, accounts payable, communication and corporate image,
advertising space and time rates more difficult. purchasing, media administration, accounting and taxation, and
executive. External stakeholders included the media agency and
Solving the payment problem would address Telefónica’s overall 800 media outlets. Figure 2 shows the team’s force field analysis
organizational objectives and have a direct impact on three stra- outlining positive and negative forces related to stakeholders.
tegic plan objectives: Figure 1— mpossible Mission team
I
Role Contribution
• Shareholders—Improving efficiency to help generate growth Contribute a strategic vision to the
How: Sponsor
and increase profits • Followed a project and remove obstacles that could
S. Minoyetti arise throughout its development.
• Employees—Maintaining Telefónica’s “best place to work” status procedure included
in Telefónica’s Supervise and guide team efforts,
• Society—Improving public positioning, which has an Improvement System. Champion introduce progress in the monthly
influence on the technical, economic, and social development Steps: R. Ponce Gil meetings, and make decisions
together with the Black Belt.
of the company 1. Identify: Internal
search to find Master Black Belt Guarantee the correct methodological
potential applicants. Six Sigma approach in business
L. Barrera problem resolution.
An earlier attempt to solve the payment problem involved 2. Select: Test of
potential; individual Guarantee the use of Six Sigma
increasing the number of people who handled the process. It and group interviews. Black Belt tools, develop and monitor working
teams, set action plans with progress
didn’t succeed because the weaknesses—even chaos—in the 3. Validate: Field testing. G. Ramírez indicators, and propose solutions in
payment process couldn’t be overcome by personnel alone. Who: order to agree with the champion.
• Quality and human Green Belt Participate actively in the project,
resources, with collecting data and preparing matrices.
Defining the Impossible Mission assistance of the
R. Scarinci
Apply Six Sigma tools and carry out
G. Padrón
sponsor and the A. Buzadas analysis using Minitab program.
champion.
Ramón Ponce Gil, media director and a member of the man- Participate actively in the project
Team members: and contribute knowledge to the
agement committee, and Luciana Barrera, quality director and • People with business process. Contacted systematically,
Team Members
Master Black Belt, chartered a project aimed at eliminating the expertise and key according to the team needs as
people involved G. Careaga regards validation of solutions or for
poor payment situation. in the process. L. Porchetto data collection. Acted as a channel of
F. Luzzatto internal and external communication,
• High analytical level.
A. Gallese both for collecting information and
María Gabriela Ramírez, a Telefónica Group Black Belt, would • Ability to make
decisions and perform for reducing the impact of change
lead the effort. Her objective was to increase on-time payments interdisciplinary tasks. and guaranteeing improvements.
to 95 percent. Dubbed “Impossible Mission” because of the Process owner: Guarantee sustainability of
Heir improvements for 12 months
magnitude of the challenge, the project began in March 2008 • Champion.
G. Padrón after project closure. Correct
and ran until August 2008. deviations that may arise.
Ramírez assembled a 12-member team using a selection method Figure 2— orce field analysis
F
Stakeholders Opportunities Forces against
that is part of Telefónica’s improvement system. Potential team
Marketing Improve process quality
members were identified from a pool of candidates created by Communications and
Standardization is associated
Low cost with bureaucracy.
human resources. The quality department then composed the corporate image
team based on individual profiles. Management control Low cost Fear of losing control of expenses.
Concern that the department may
Media administration Improve quality
disappear and functions be divided.
“Tasks were delegated according to abilities, which enabled us to Suppliers (media agency Improve quality Lack of confidence in improvements
optimize strengths and generate greater commitment,” said Gil. and the media) + service and fear of increased costs.
Figure 1 lists team members and their roles and contributions. Others stakeholders Cost + service + quality No forces against.
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3. “Marketing and communications and corporate image are exam- The biggest challenge the team faced was identifying problems
ples of departments with positive and negative forces,” Gil said. in the stakeholders’ processes that led to delays. “It wasn’t easy
“They associated standardization with bureaucracy and were because there were 800 external stakeholders,” stressed Gil.
concerned changes would slow the process rather than speed
it up. Nevertheless, they supported the project because they The team convened a meeting of stakeholders and drew up a
needed advertising campaigns to happen as planned and at the function deployment matrix, which allowed prioritization of
most economical cost.” the root causes that had impacts on the slow payment situation.
Potential root causes were ranked using multivoting and con-
The team also took into account the interests of other stake- nected with project and organizational objectives.
holders, including the CEO and non-media suppliers, holding
Reasons payments were delayed included:
meetings with each. According to Barrera, “The team commu-
nicated opportunities to stakeholders throughout the project. We • Poor planning for needs
also uncovered fears and possible objections and implemented • Lack of procedures to offset bartered advertising invoices
actions to eliminate or mitigate them.” • Bartered payments not accounted for
• Unnecessary circulation of invoices
Measure and Analyze: Uncovering Root Causes and • Lack of a pre-approved budget
Potential Solutions • Certifications received after deadline
• No person in charge
Figure 3 shows the tools used in the Six Sigma measure phase to • No deadlines to place orders in a timely manner
gather and interpret data to identify potential root causes. • Duplicate invoices
• Unnecessary invoices and payment authorizations
“After analyzing data, we could see that our performance was
• Paying suppliers according to agreements not viewed as a
regularly 93 percent below objective,” Ramírez reported. “The critical to quality characteristic (CTQ) for marketing
variability was as high as 4 percent, and the process did not com-
ply with agreed upon terms in 98 percent of cases.” To identify the greatest sources of delays, the team created a cause
and effect diagram and applied the 5 Whys. Multivoting and an affin-
Process mapping showed the team that advertising campaign
ity diagram helped reduce the list. Finally, Pareto analysis revealed
orders were often placed before expenses were authorized. “We
that 80 percent of the delays resulted from four potential root causes:
soon recognized that the activities where the longest delays
occurred were expense authorization and barter control,” • Duplicate invoices.
Ramírez said. Barter control refers to the practice of paying for • Lack of a pre-approved budget. “Lack of pre-approved
some placements by providing telecommunications services to budgets was a major problem,” Gil said. “Publicity campaigns
vendors at no charge—such amounts weren’t being applied prop- were given to the media agency for placement without the
erly and led to the generation of cash invoices that had already proper payment authorization. Securing authorizations after
been paid through bartered services. the invoices were submitted caused many delays.”
Figure 3— ools used during measure phase
T
Control
Define Tools according to
Who? What for?
sequence of use
Method To identify special causes
1. Control charts Team
Six and process stability.
Sigma Improve
To see how far from
DMAIC 2. Process capability Team accomplishing customer
specifications the process is.
Measure Analyze
Phase Team + To identify activities where
3. Process mapping
stakeholders the longest delays occur.
Measure
the critical 4. Brainstorming
Team + To identify waste and
indicators. Cause-effect
stakeholders potential root causes.
Identify diagram (5 Whys)
potential 5. Affinity diagram Team + To prioritize potential root
causes. Multi-voting stakeholders causes qualitatively.
Team + To prioritize potential root
6. Pareto
stakeholders causes quantitatively.
Data To make a comparison of the
• Qualitative analysis. 7. Benchmarking Team process under analysis within
• Information sampling. Telefónica Group companies.
Potential Root Causes
Validated by specialists from the affected departments
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4. • Unnecessary number of invoices. The media agency sent is assigned to managers, who are put in charge of meeting
about 200 invoices per month, and Telefónica needed to payment terms.
handle, process, and pay all of them. 2. Orders and expense authorizations are delivered to the
• Unnecessary number of payment authorizations. The media media agency at the same time to ensure availability of
supplier was required to confirm that the broadcast campaign funds for payment.
actually ran before payment could be authorized. 3. The media agency receives invoices and certifications from
space and time providers immediately after ads appear to
To develop possible solutions, the team analyzed the root causes prevent delays in processing invoices.
and applied quality concepts such as value-added time, optimal 4. Items to be billed are grouped together by the media agency
lot, standardization, and layout. according to type of media, reducing the number of invoices
Telefónica receives from 200 per month to five.
One solution the team explored was asking the media supplier to 5. Invoices and certifications are digitized and sent
send just one invoice each month. Ultimately, this was rejected electronically to simplify and speed up the process.
because the cost (mainly due to information technology invest- 6. The media agency sends invoices and certifications directly
ments) to make it work was bigger than the benefit. to Telefónica accounts payable to prevent delays.
7. A new procedure factors in and tracks bartered advertising
Another proposed change was to plan advertising campaigns a
invoices.
year in advance. This would increase bargaining power, allow
8. Telefónica verifies payments have been made according to terms.
rates to be locked in, and allow approvals to be secured well
ahead of time. However, this was rejected because marketing felt
Improve Phase
it would have a negative impact on flexibility and the ability to
react to changing circumstances.
Pilot test
A solution decision matrix (see Figure 4) was used to assess
potential solutions against three criteria: benefits, cost of execu- The new process was evaluated during a two-month pilot test,
tion, and speed of implementation and use. “This matrix enabled which allowed for weaknesses to be detected and corrected. “Our
us to prioritize workable courses of action,” Ramírez said, “and goal was to produce a poka-yoke solution,” Gadda Thompson
validate them with stakeholders.” said. Poke-yoke is a Japanese phrase that means “fail-safe” or
“mistake proof.”
New process
“During the pilot test, we found a major impediment to this,”
The team invited stakeholders to meetings to help design possible Gadda Thompson continued, “so we changed the process to
solutions and also solicited stakeholder input through surveys. make it poka-yoke.”
Marketing, media administration, and the media agency also took
The problem involved expense authorizations. “Even with our
part in brainstorming and the evaluation of potential solutions.
new process,” he said, “we discovered that if an expense authori-
After rejecting various ideas and modifying others, the team cre- zation did not accompany the campaign order, the media agency
ated the following process to solve the late payment problem: still approved the expenditure. This could have caused many
delays. We eliminated the problem by changing the process so
1. Advertising campaigns, including the authorization to pay campaign orders cannot be delivered to the media agency with-
expenses, are planned on a quarterly basis. Responsibility out an expense authorization.”
Figure 4— olution decision matrix
S
Criteria
Potential Solutions Speed of
Benefits of project Low costs of
implementation TOTAL
objectives execution
and use
Weight 50 25 25
Appointment of people in charge and deadlines for placing orders 6 10 10 800
Planning of advertising campaigns on a quarterly basis 6 10 9 775
Approval of advertising campaigns’ expenses on a quarterly basis 8 10 8 850
Delivery of order and expense authorization to the media agency 10 7 8 875
Media agency receives invoices and its certifications from the media 8 8 9 825
Elimination of duplicate control 10 9 10 975
Items to be billed grouped together according to type of media (5 invoices/month) 10 7 7 850
Delivery of invoices from media agency to accounts payable 6 10 9 775
Digital invoices and certifications 6 5 8 625
Drafting of procedure to offset barter advertising invoices 8 9 7 800
Telefónica verifies the payment to media as required 5 9 9 700
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5. With expense authorization mandatory, a major source of pay- Various indicators were used to measure the success of the proj-
ment delays was eliminated. The change was also integrated ect, and the results were impressive:
with SAP (systems applications and products in data processing)
to produce a 100-percent accurate process. • The percentage of media invoices paid on time each month
has gone from 2 percent to 97.5 percent.
Setting the stage for implementation • Recovery of the total omitted tax credit of $1.7 million was
accomplished by paying $7.9 million of debt.
To gain support for the solution, the team showed the CEO and the • Since August 2008, six months after the start of the project,
sponsor how the changed process would advance progress toward the control graphs have shown a significant improvement in
objectives in Telefónica’s strategic plan. Anticipated improvements the process and sustained achievement of the objectives with
included optimizing the process, increasing payment punctuality, greatly reduced variability.
and generating other benefits, such as better employee and supplier • A March 2008 survey indicated that employee satisfaction
satisfaction, more than $3.3 million dollars per year in savings, and increased from 36 percent to 85.4 percent, and media
the elimination of negative mentions in the media. supplier satisfaction increased from 28 percent to 86 percent.
• Negative press about advertising accounts payable is a thing
Stakeholders were asked to participate in making and document- of the past.
ing needed procedural changes. “Not everyone was in favor of the
improvements and we heard a variety of objections,” said Gadda “We designated a Green Belt member of the team [to be] project
Thompson. heir with the task of maintaining the indicator values for a period
of one year,” Gadda Thompson said.
Typical objections included:
A critical measure of the continued effectiveness of the new sys-
• “I’ll have more tasks which do not belong to me; they are tem is the percentage of media supplier invoices paid on time.
going to waste a lot of my time.” Data obtained from the SAP system are used to assess this on a
• “I am going to lose control.” monthly basis. The goal is 95 percent on-time payments with an
• “This is not going to work.” acceptable deviation of 5 percent.
• “I may lose my job!”
• “Yes, I will adapt to the new system, but who can tell me that Mission Possible After All
payment won’t still be delayed?”
“All project objectives were achieved or exceeded despite the
“To overcome objections,” Gadda Thompson continued, “we size of the challenge,” Gadda Thompson said. “The key to suc-
held meetings with the department directors who showed the cess was picking the right team members and leadership and
greatest resistance. In the meetings, the sponsor and champion making sure the group worked well together.”
explained the benefits of the improvements, demonstrated how
the improvements were validated by the pilot test, and explained Added Gil, “We adopted and followed a rigorous improvement
how they would overcome the problems.” methodology, used appropriate tools correctly, and everyone
worked hard. It was also critical to believe we could solve this
Further assistance was provided by asking involved stakeholders to difficult problem. The happy ending is we learned that our mis-
talk about the benefits of the new approach with other stakeholders. sion wasn’t impossible!”
The sponsor and the champion also held meetings with the media
agency to explain the new process, settle overdue payments, and The overdue invoices improvement project was a finalist in the
address lingering doubts about Telefónica’s ability to change. The 2010 ASQ International Team Excellence Award process. Two
media agency held similar meetings with media suppliers. other Telefónica improvement projects also were finalists. One
received a gold award.
Implementation
For more information
The main operational changes involved instituting new proce-
dures for planning and approving expenses; a new management • Contact María Gabriela Ramírez at maria.ramirez@telefonica.com
and control panel, with indicators linked to the system of evalua- and Matías Gadda Thompson at matias.gadda@telefonica.com.
tion; and new internal and external audit procedures. • Telefónica’s website is http://telefonica.com.ar.
• Learn about the ASQ International Team Excellence Award
Now, payment is made at the end of the month after approval process at http://wcqi.asq.org/team-competition.
and broadcast or display of the advertising. In addition, invoices • The team credited Molteni Associates as a helpful resource
have been reduced from 200 per month to five. on the Impossible Mission project.
All solutions contributed to the development of the new standardized About the Author
media process, which was documented, verified, approved, commu-
nicated, and implemented. “The team and stakeholders shared Gantt Ted Schaar is a freelance writer who has written on quality topics
and PERT charts in which implementation progress was noted and ranging from statistical process control to 5S. A graduate of the
the most important milestones identified,” Gadda Thompson said. University of Wisconsin-Madison, he resides in Brookfield, WI.
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