notes

1. DEPARTMENT OF BUSINESS AND SOCIAL STUDIES
COURSE CODE: BIT 4201
COURSE TITLE: TOTAL QUALITY MANAGEMENT
Instructional Materials for Distance Learning
UniversityMt Kenya

2. COURSE OUTLINE
COURSE CODE: BIT 4201
Pre-requisites: BBM 122
Purpose: To introduce concepts of total quality management (TQM) and their implications to performance
and effectiveness of business management
COURSE OBJECTIVES: By the end of the course the student should be able to:
Discuss the total quality management philosophy of business management
Describe the tools and techniques for introduction and sustaining total quality management programs
in business management.
Describe the TQM preparation and implementation plan.
COURSE CONTENT
WEEK 1-2: CHAPTER 1: INTRODUCTION TO QUALITY:
Introduction of Quality Management
Historical Background
Defining Quality
Dimensions of Quality
The importance of Quality
The Cost of Quality
Prevention Costs
Quality and other functional areas of Management
WEEK 3-4: CHAPTER 2: CUSTOMER SATISFACTION
The Concept of Customer Satisfaction
Identifying Customer Satisfaction
Measures of customers Satisfaction
Determinants of Customer Satisfaction
Strategies to Enhance Customer Satisfaction
WEEK 5-7: CHAPTER 3: TOTAL QUALITY MANAGEMENT
Introduction
Definition of TQM
Principles of TQM
TQM models and framework
The TQM approach
Benefits of TQM
Criticism of TQM
AFTER THE 7TH
WEEK YOU ARE REQUIRED TO A CAT ONE
WEEK 7-8: CHAPTER 4: BENCHMARKING
Benchmarking
Definition
Reasons for benchmarking
Types of Benchmarking

3. The Pre-Requisites of Benchmarking
The Benchmarking Process
Drawbacks of Benchmarking
WEEK 9-10: CHAPTER 5: Business Process Re-Engineering (BPR)
Introduction to Business Process Re-Engineering (BPR)
Definition of BPR
The Process of Implementing BPR
The principles of BPR
Benefits of BPR
Drawback of BPR
BPR and Quality
WEEK 11-12: CHAPTER 6: THE SIX SIGMA
Introduction
Six – Sigma as a Statistical Measure
Six – Sigma as a Goal
Six-Sigma as a System of Management
Core elements of Six-sigma
Six – Sigma problem – Solving Approaches
WEEK 13-14: CHAPTER 7: QUALITY TOOLS AND MEASUREMENTS
Pareto charts
Check sheets
Cause and effect diagram
Scatter diagrams
Histogram
Graphs or flow charts
Control charts
AFTER THE 14TH
WEEK YOU ARE REQUIRED TO DO CAT TWO
A SAMPLE OF MAIN EXAMINATION AND SUPLLIIMENTARY/SPECIAL EXAM

4. WEEK ONE AND TWO
CHAPTER ONE
Introduction of Quality Management
OBJECTIVES:
To learn the history of quality
Introduction to quality and definition.
The learner should be able to describe different dimensions of quality.
The fundamental factors which affect quality.
1.0 Introduction
Today’s world of business imposes an intimidating array of pressures on the organizations and
their performance. The demands of the stakeholders and more so the customers are for ever
increasing as they require improved quality of products and services. The customer has come of
age and no longer accepts inferior quality, limited choice and monopolistic margins. Today’s
customer is strongly demanding quality in products and services. Hence, continuous
improvement in business activities with a focus on the customer throughout the entire
organization and an emphasis on quality is one of the main means by which organizations face
up to the global competitive threats. This is why quality is looked upon by many organizations
as the means by which they can survive in n increasingly aggressive market and maintain a
competitive edge over their competitors.
Quality is a major factor in business revolution, as it enhances sales and revenue growth, creates
jobs and provides an avenue for sustainable business expansion. Therefore it is only those
organization which are quality conscious that will survive in these interesting times of
intensive competition and customer awareness. Quality is the need of the hour, and top
management should increasingly pay attention to this critical and interesting subject. Good
quality products and services mean customer satisfaction and long-term loyalty.
1.1. Historical Background
The history of quality can be traced back to 221BC when in China the Chaou dynasty required
that physicians pass an examination before entering practice. This was also practiced by the
ancient Egyptians who demonstrated a commitment to quality in the construction of their

5. pyramids. The quality of Greek architecture in the 5th
century B.C was so envied that it affected
the subsequent architectural constructions of Rome. In fact Roman- built cities, churches, roads,
and bridges still inspire even today.
A major need for more quality control comes with industrial revolution. The revolution brought
the concept of division of labor as a method of enhancing quality. The workers became
specialists who were responsible for only a small part of the process. Individuals who performed
similar operation were grouped together and a supervisor assigned to ensure quality was
achieved. This phase was referred by Feigenbaum (1983) as Foreman quality control.
The period between 1920 and 1940 saw the next phase in evolution of quality control period
which Feigenbaum (1983) calls inspection quality control period. During this period products
and processes became complicated, and production volume also increased. As the number of
workers reporting to a supervisor increased, it became difficult to keep close watch over workers
operations, hence standards were set and inspectors compared the quality of the product or
service with the set standards in the event that the product or service failed to meet the standards,
the items were set aside from other items and where reworked or discarded. It was also during
this period that a couple of developments were made, for instance Walter A. Shewhart
developed control charts in 1924 which eventually set the stage for statistical Quality Control
(SQC). Similarly, around 1930 Dodge and Roming from Bell Telephone Laboratories
developed lot –by-lot inspection of work in progress and finished goods i.e acceptance
sampling statistical quality control called economic Control of Quality of a Manufactured
Product’ The book set the stone for the subsequent application of statistical methods to the
process of quality control.
During the World War II, sampling inspection gained popularity and even after the war,
acceptance sampling became the norm. This is not to imply that Shewahart’s control charts were
not being used, but that they did not achieve popularity because top management may not have
understood the concept behind shewhart’s approach. Shewhart, however, continued his efforts to
popularize the fundamentals of statistical quality control to industry. To achieve this objective,
he obtained sponsorship of the American Society for Testing Materials (ASTM), (ASA) and the

6. Institute Mathematical Statistics (IMS) in creating the joint committee for the development of
statistical applications in engineering and manufacturing.
The next phase of quality evolution occurred between 1940 and 1960 which Feigenbaum (1983)
termed Statistical Quality Control phase. This period was characterized by increased production
requirements during the war making 100 per cent inspection unfeasible, hence increasing the
acceptance of sampling plans. The American Society for Quality control (ASQC) was formed in
1946 and a set of sampling inspection plans for attributes called MIL-STD -105A was developed
by the military in 1950. During this period, a number of pioneers began to create quality control
in Japan in the 1950’s by delivering a series of lecturers and holding seminars on quality control
methods. Deming became active in quality movement in Japan and even established a national
quality price in Japan. Japanes engineers and top management were convinced of the importance
of statistical quality control as a means of competitive edge in the market.
Later in 1954, Joseph Juran, also a pioneer in quality control, visited Japan in 1954 And even
stressed the strategic role that management play in the achievement of quality. He introduced
managerial topics such as planning, organizing, and controlling and the need for setting goals.
The Japanese were quick to realize the important role of quality on the future of business and
embarked on a massive program of training and education.
The total Quality Control phase took place during the 1960’s (Feigenbaum, 1983) which
emphasized on greater involvement of all department s and managerial personnel in the quality
management. The notion that quality is the preserve of the people on the shop floor, the
production foreman, or by the people from the inspection and quality control department was
discarded. During this period, people started to realize that each department had an important
role in the production of a quality product. The concept of zero defects championed by Phili
Crosby which centered on achieving productivity through worker involvement gained favor.
The approach focused on employee motivation and awareness and the expectation of perfection
for each employee. The use of quality circles, which is based on the participative style of
management, also emerged in Japan.

7. The 1970’s through 1990’s brought about Total Quality Management which advocated the
involvement of everyone in the organization. Quality was associated with every individual and
Fegeinbaum (1983) termed it a quality system. During this period, the Japanese enhanced the use
of graphical tools commonly known as cause-effect diagram or Ishakawa diagram which
sometimes is also known as fishbone diagram.
The computer explosion of 1980’s saw the emergence of quality control software programs in
the market. It was during this period that evolution of quality took a dramatic shift from quality
assurance to a strategic approach to quality. The emphasis changed from a reactive approach of
finding and correcting defectives before reaching the market to a proactive of focusing on
preventing mistakes from occurring altogether. It extended to suppliers, design, quality audit,
among other areas.
During the period 1990’s – 2000 emphasis was on establishing the culture of continuous
improvement, while from 2000 to the present day the focus in on organization – wide quality
management.
The chronology of quality development can be summarized as follows:-
Pre – 1900 Quality as an integral element of craftsmanship
1900- 1920 Quality control by foremen
1920 – 1940 Inspection – based quality control
1940- 1960 Statistical process control
1960 – 1980 Quality assurance / the quality department
1980 – 1990 Total quality management
1990- 2000 TQM and the culture of continous improvement
2000 – Present Organization – wide quality management.
Basu (2004) summarized the developments in quality management into four major phases as
follows;

8. 1.2 Defining Quality
Quality is one of the most important issues facing organizations today. We all know quality
when we experience it, but describing and explaining it may be rather difficult. In our everyday
life, we usually take quality for granted, especially when it is regularly provided; however, we
become acutely aware when it is lacking. People often recognize the importance of quality when
we experience the frustration associated with its absence. Given the difficulty associated with its
definition, Pfeilr and Cooke(1991) described it as a slippery concept because it has a variety of
meaning and that it means different things to different people.
In simple terms quality can be defined through the voice of the customer. It can be said that a
product is of satisfactory quality if it satisfies the customer’s needs. A customer will buy a
product if it meets he minimum expectation; therefore, quality refers to ability of a product or
service to constituently meet or even exceed customer needs and expectations. Quality means
getting value for your money; getting what you pay for. Thus customers’ satisfaction is the main
criteria for determining whether a product possesses the required quality or not
Many authors have attempted to define quality, a sample for which is given below:
• Meeting the needs of the customer, both present and future (E. Deming, 1986)
• Quality is conformance to requirements. (Crosby, 1979)
• Quality is fitness for use. (Juran, 1988)
• The totality of features and characteristics of a product or a service that bear on its ability to
satisfy stated or implied needs. (ISO 9000, 1988).
Inspection
- check work after
the event
- Identifying sources
of non-
conformance
- Take corrective
action
Quality Control
- Self inspection
- Quality Planning
and procedures
- Use of Basic
statistics
- Quality manual
- Us of process
performance data
Quality Assurance
- Developed
quality systems
- Use f quality
cost data
- Quality planning
- Use of statistical
process control
- Involve non
sperations
TQM
- Teamwork
- Employee
involvement
- Process
management
- Performance
management
- Involvement of
all functions

9. • The quality of product or service is the fitness of the product or service for meeting or
exceeding its intended use as required by the customer (Mitra, 2000).
• The quality of a product is the minimum loss imparted by the production society from the
time the product is shipped (Taguchi, 1986)
• The American Society for Quality and Control defines quality as a subjective term for which
each person has his or her own definition. In technical usage, quality can have two meanings;
1) The characteristic of a product or service that bear on its ability to satisfy stated or implied
needs and 2) a product or service free of deficiencies.
• According to Guasspari (1988) Quality = S+E=e; where ‘S’ stands for Specifications, ‘E’
concerns macro Expectations and ‘e’ relates to micro expectations. According to him,
specifications relate to the closeness with the product or service matches him,
specifications; macro expectations are the general expectation that customers expect i.e the
minimum standard of customer expectation; while micro expectations arise out of the
organizations communications and advertisement to potential customers or simply the
promises made to customers. Gauspari noted that a quality product or service is that which
provides a maximum overlap between ‘S’, ‘E’ and ‘e’. this means that a product or a service
must conform to, or exceed specifications, meet industry standards and exceed internally
generated specifications and communications.
• Feigenebaum (1983) states that quality is a customer determination which is based on
customers’ actual experience with the product or service, measured against his/her
requirements stated or unstated, conscious or merely sensed, technically operational or
entirely subjective and always representing a moving target in a competitive market.
Several aspects clearly stand out in this definition
a) Customer determination – It is only customers who can decide if and how well a product
or service meets his other needs, requirement and needs.
b) Actual experience – The customer will judge the quality of a product or a service based
on actual experience either during purchase or after.
c) Requirements – Aspects of the product or service required by the customer may be stated
or unstated, conscious or merely sensed. The product or service must fit the requirements;

10. hence, quality is about measuring up to predetermined standards and meeting hose
standards time and time again
d) Technically Operational – Aspects of the product or service may be clearly identified in
words by the customer.
e) Entirely Subjective – Aspects of the product or service may be interpreted in the
customer’s personal feeling.
Therefore, organizations producing goods and services must define and meet the customers’
reasonable explicit anticipated needs, requirements and expectations even as they change over
time, hence quality refers to the degree to which a specific product satisfies a particular customer
or the degree to which it conforms to a design specifications or the distinguishing feature of a
product’s taste, color, appearance, etc it means getting value for your money; getting what you
pay for.
The driving force behind any quality program is the customer. The customer is the judge to
determine the level of quality and hence, as the needs of customers change, so should the level of
quality. Thus customers satisfaction is the main criteria for determining whether a product
possess the required or not.
According to feigenbaum defining quality for a particular product or service is extremely
difficult because people attach different values to different quality dimensions. It is difficult to
have two customers sharing similar expectations for the same product or service. Similarly,
customers’ needs, requirements and expectations are like a moving satellite, which keeps
changing over time and with different situations. Garvin (1984) develop a conceptual framework
for categorizing the approaches used to define quality. His classification is based on the
following perspectives:
1. Transcendent Perspective – The Transcendent perspective of quality seeks to define quality
in terms of some philosophical, perceptual, moral or religious connotation. The transcend
appears to be the foundation from which all other quality perspectives are derived.
Philosophical approach is grounded on the cultural context and myths of the quality

11. construct, for example Germany’s obsession with quality is a core cultural value and hence
is a measure of personal and societal worth.
2. Product – Based Perspective – A product – based perspective of quality supports Kotler’s
definition that the product is a bundle of need – satisfying attributes. This product – based
approach is also supported in the ISO-9004 standard, where quality is defined as fitness for
use, performance, safety and dependability.
3. User-Based Perspective – User – based perspective’s definition of quality suggests that
quality is the ability of a product to satisfy human needs. A cornerstone of the Deming’s
definition focused on the customer and suggested that product cannot be a quality product it
it does not meet both explicit and latent needs.
4. Manufacturing - Based Perspective – Manufacturing perspective of quality pertains to a
products’ degree of conformance to engineering and design specifications. These perspective
of the definition hinge on two factors; one is benchmarking and secondly, ISO-9000
standards. The ISO-9000 standards
5. Value – Based Perspective – Value –based definition of quality account for the relationship
of a product quality and relative product cost. . Simply put, a product exhibiting high level of
conformance and relatively low monetary costs would be classified as a higrspective – Value
–based definition of quality account for the relationship of a product quality and relative
product cost. . Simply put, a product exhibiting high level of conformance and relatively low
monetary costs would be classified as a high value product. Kotler suggests that value to the
customer is a function of product related benefits discounted by all product related costs.
Product related costs typically encompass the monetary price of the product. The total from a
value based perspective would include both monetary and non-monetary costs such as time,
energy and opportunity costs.
6. Social-Loss Perspective:- This perspective was developed by Genichi Taguchi which
suggests that quality is the loss a product causes to society after being shipped other than

12. losses caused by he product functionality. Losses may be incurred from either variability in
product functions or harmful side effects. Losses due to harmful side effects occur when
producer’s actions result in uncompensated loss to others, for instance, a textile mill pollutes
a commercial fishery. Similarly, a customer’s actions may result in uncompensated loss to
others, for example cigarette smoking. Therefore, according to Taguchi’s social loss function
approach to quality, cigarettes would typically be classified as low quality products because
of negative externalities associated with their consumption, even though a specific brand has
both conformance and customer demand.
7. The Slogan Approach – This approach was proposed by Kelemen (2005) to add to the
Garvin’s framework. According to kelemen, organizations’ obsession with quality and the
consequent abuse of the term has led to a situation where quality has become a mere slogan.
A slogan is meaningless platitude with which nobody disagrees as to who could be could be
against quality. As a slogan, quality gives the illusion of a unitary meaning that is endorsed
by everyone in the organization; in so doing, it aims to construct a sense of normality and
taken for granted commonsense among employees. Therefore, it is important to be wary of
slogan that urge us to view quality as an inherently morally good project. Slogans of quality
hide the contentious, political nature of the production and consumption practices in which
quality is necessarily embedded. It is these practices that we need to understand and
challenges in order to arrive at a notion of quality that is meaningful. More talk about quality
is not bad in itself but it could have disastrous effects when people do not what they say do,
for example, when organizations pledge quality in their advertising campaigns but do not
deliver it.
The social-loss function approach to quality appears to be most comprehensive of all the
definitions because it recognizes the impact of quality on all other aspects of the society.
Similarly, it is all inclusive of other dimensions; product perspective (losses occur when the
product fails to meet customer expectations), the user perspective (losses occur when customer
explicit and latent needs are not met) and the value perspective (product related benefits are
greater than product –related costs). Taguchi’s typology addresses transcendent perspective by
implicitly making the value judgment that typology addresses the transcendent perspective by

13. implicitly making the value judgment that losses to society due to poor quality are bad outcomes
and social gains are good outcomes. Therefore, looking at the Garvin’s classification framework,
most of the quality definitions are limiting, covering typically one or two of the six perspectives;
for instance, Deming’s definition n only covered transcendent and user perspectives.
1.3 Dimensions of Quality
Any serious effort to address quality must begin with a clear understanding of the various
dimensions of quality. From the definitions given it is clear that quality is a broad concept and
does not pertain to a single set of product or service attributes, but to a number of different
dimensions. Customer expectation can therefore be broken down to a number dimensions that
customers use to judge the quality of a product or a service.
Garvin (1984) identified eight dimensions of quality which he maintaining cover various
meanings of quality held by the management and customers appropriate in the product area as
follows;-
• Performance – The most essential aspect of quality is whether the product does what it is
supposed to do. Where a customer provides product specifications such as weight, designs
etc, adherence to these specifications is an important dimensions of quality; for example
when buying a car, performance would mean acceleration, speed, consumption levels, and
comfort, among others
• Aesthetic – Features such as appearance, feel, smell, taste or sound may form important
aspects of quality. Food that is healthy but not tasty may not be considered to be of high
quality. Motor vehicles currently being manufactured have good appearance and excellent
interior designs which may include facilities such as Television, CD changer, among others.
The saying goes that the best goods are not the most sophisticated, rather the most appealing
and that the market belongs not to the highly sophisticated goods but rather to the most
appealing goods.
• Reliability – Is the ability of a product to continue to be fit for the intended purpose or
function. Reliability measures how consistently the product performs at acceptable level

14. under normal maintenance. It is the probability that a product or part of the equipment will
perform satisfactorily for a given time under normal conditions of use. Reliability is related
to the continuation of performance over a period of time. A product with initial performance
may fail to give the same performance afterwards. In such a case a product is not considered
reliable. Therefore a product should not only be of good quality but also reliable. Failure of a
product may at times cause great harm to the user, for instance, failure of a car to brake may
result in fatal accident, similarly, failure of an important part in a power generating machine
in a thermal power station, which is not available within the country, is considered very
serious, because it results in the closure of power generating plant for a long period of time.
• Durability – Durability measures how long the product performs until repair is needed and
the overall usage and life span of the product. For products such as bulbs durability relates to
the longer it stays in use.
• Maintainability and Serviceability: - It measures the frequency, cost and difficulty of actions
required to keep the product operating at a desired level of performance. It entails the ease of
repair of the product, for example to remove a plug from a Chevrolet of 1970’s required a
whole engine to be pulled down. Other important aspects include the training offered to
customers in order to use the product, the assistance available, the availability of replacement
parts and the ease of replacement.
• Special Features:- Customers are normally interested in extra features in the product, for
example remote control for television, similarly, in the automobile industry customers may
not only be interested in product performance but also other addition al features such as air
conditioning, radio systems, automatic lock system, among others.
• Conformance – This deals with how well a product corresponds to design specifications. It
applies to products that have specifications, and that a quality product depends on whether it
matches the manufacturer’s specifications. For instance, stitched suit will be of high quality
if it corresponds to the measurements taken.

15. • Perceived Quality: - Quality is largely a matter of customer perception; hence customer
perception of the product is very important. Customers rely heavily on the past performance
and the reputation of the firm producing the product, hence attaching a perceived value on
the previous performance of the companies’ other products
The dimension of product quality may not adequately describe the service quality, however,
specific dimensions of service quality have been identified through pioneering research by
Parasuraman. Zeithaml and Berry (1998) using the following dimensions.
• Reliability: - This entails the ability to perform the promise service dependably consistently
and accurately. It means that the company delivers on its promise about delivery, service
provision and problem solving. Customers value companies that keep their promise about
service outcomes and core services.
• Responsiveness: - The willingness of service providers to help customers and to provide
prompt services including helping customers in unusual situations and dealing with their
problems. This dimension emphases attentiveness and promptness in dealing with customers
requests, questions, complaints and problems. Responsiveness is communicated to customers
based on the length of time they have to wait for assistance or attention to their problems.
Responsiveness also involves the service to customer needs. To excel on this dimension,
companies need to view the process of service delivery from the customers point of view
rather than from the company’s.
• Assurance: - The knowledge and courtesy exhibited by personnel who come into contact
with customers and their ability to inspire trust and confidence. This dimension is particularly
important for services that the customer perceives as involving high risk or feel uncertain
about their outcomes, for example medical service.
• Empathy:- Relates to the way customers are treated by employees who come into contact
with them. Providing caring, individualized attention to the customers. Empathy entails
conveying through customized services, that customers want to feel understood by the firm
that provides the service; for example personnel may strive to know customers by name and
build relationships that reflect their personal knowledge of customer.

16. • Tangibility:- Appearance of physical facilities, equipment , personnel and communication
materials. This provides images of the service that customers, particularly new ones will use
to evaluate quality. They are normally used to enhance their image and signal quality to
customers .
Other dimensions not included in Parasuraman, zeithalm and Berry’s service quality and
Garvin’s product quality classification but are important in defining quality include
• Time: - The speed with which the service is provided or delivered.
• Convenience: The availability and accessibility of the service
• Price: The selling price of the product or service
Quality is therefore determined by balancing technical considerations such as fitness for use,
performance, safety and reliability, with economic factors, which include price and availability.
1.4 The importance of Quality
Quality is strategic factor that works through virtuous cycle to enhance a company’s sustainable
competitiveness as illustrated in figure 1.1 in the present time, every company is interested in
product’s quality because of the following reasons:-
• It increases customer satisfaction
• It enhances profitability – improved quality increases demand for the products or services
which enables the firm to charge high prices for the value differentiation that it offers.
• It lowers costs – process improvements have a direct bearing on costs because defects are
not free, rather someone is pad to make them, resources are used and opportunities for
making saleable product are lost.
• It increases productivity: - Quality improvement results in fewer delays, mistakes and
reworks which may result in increase in net output.
• It enhances competitiveness
• It enhances staff morale- Poor quality is demoralizing for staff because they spend time
coping with complaints and are frustrated when nothing seems to be done to relieve them.
• It increases flexibility in meeting the changing needs of the market.

17. • It improves customer service and delivery times.
It is therefore important for management to recognize the different way that the quality of the
firm’s product and services can affect the organization. Some of the ways in which poor quality
affects organizations include.
• Loss of business which may be occasioned by increased critics, or controls by the
government or pressure from activist groups. Studies have shown that while a satisfied
customer is likely to tell a few people about their experiences, a dissatisfied customer will
tell an average of nine others. It is also important to note that people rarely company
directly to the company for poor quality but more often switch to a competing product
causing loss of business.
• Liability ;- Organizations incur heavy liabilities occasioned by damages or injuries due to
faulty designs or poor workmanships, for instance, a surgeon may be held liable for
negligence during a patient’s operation. Liability for poor quality has been well
established in the courts of law.
• Reduced productivity – Productivity and quality are closely related. Poor quality affects
productivity because defective products have to be reworked, similarly, poor quality in
tools and machines may lead to injures and defective output, which must be reworked or
scraped thereby reducing the amount of usable output.
Improved
Performance
Features
Improved
Reputation
Increased
market share
Economic of
scale
Higher Price
Increased profit
Low Service
Cost
Low Warranty
costs
Low
manufacturing
Lower
Scrap
Increased
production
Improved
Performance

18. Figure 1.1: Importance of quality
1.5 The Cost of Quality
The cost of quality is the amount of money that has to be spent as a result of quality problems
within the organization. It aims at quantifying in financial terms all activities involved in the
prevention and rectification of defects. These are costs associated with the discovery of failure
and the cost of preventing poor quality.
The American Society for Quality Conrtol (1971) categorized quality costs into four categories
(i) Internal failure costs
(ii) External failure costs
(iii) Appraisal costs
(iv) Prevention costs
1.5.1 Internal Failure Costs
Failure costs are costs that result from producing defective products. They are costs of doing it
wrong. They are considered as internal failure costs if it is detected within the organization
before delivery to the final customer. Internal failures may occur due to a variety of reasons such
as defective materials from vendors, faulty equipments and machine, incorrect methods
carelessness, faulty materials handling procedures and incorrect processing. The cost of internal
failure costs include:
• Downtime: This is the cost of idle personnel and facilities when production is halted to
correct a quality problem, including stoppages due to defects materials.
• Scrap: These are defective products which cannot be repaired, used or sold
• Reworked or rectification: It involves the cost of correcting non-conforming unit such as
additional manufacturing operations.
• Cost of re-inspection: Reworked items may require re-inspection or retesting to ensure
compliance to quality standards.
• Downgrading costs: Products which do not meet specification may be sold at a discount
price or as second hand at throw away prices.

19. • Waste: The activities associated with doing unnecessary work or holding stocks as the
result of errors, wrong materials among others.
• Cost of investigation:- Includes the cost of all activities required to establish the causes
of internal product failure.
• No body want the responsibility for high proportion of defectives; hence, one
department or an employee may shift the blame to another which eventually affects the
morale of the workforce.
• Inventory safety stocks: Costs of extra safety stocks held specifically to guard against
shortages and breakdowns due to making defective products.
• Excess capacity cost: Cost of excess capacity that must be maintained to make up for
capacity cost from making defective products. This include the cost of extra facilities and
equipments above those that would be needed if production were defect free .
• Defect generated overtime costs:- Additional costs of having employees work overtime
to meet delivery deadlines for orders that were ate because defective items had to be
reworked.
1.5.2 External Failure costs
These are costs incurred when the product fails to perform satisfactorily after being transferred to
the customer. External failure costs include;
• Loss of goodwill: Good will is always created as a result of good performance over a
long period of time. Poor quality has a negative impact on the reputation and image and
impinges directly on future prospects for sales. Re-establishing a lost goodwill is a
difficult task.
• Warranty charges: Failed products within the warranty time may have to be replaced
under guarantee.
• Liability costs: These are costs of defending law suits and compensating customers for
injury deaths and business losses and even change of contracts.
• Cost of returned, replacement or allowances : These costs include cost of investigation
of the rejected product, replacing shipping and handling, or any price reduction or
allowance to compensate for a defective product.

20. • Compliant costs: These include all costs incurred with servicing customers’ complaints
such as cost of investigation and adjustments, cost of receiving and handling the
complaints.
1.5.3 Appraisal costs
According to Mitra 9(2000) appraisal costs are those costs associated with measuring, evaluating
or auditing products, components or purchased materials to determine their degree of
conformance to the specified standards. It relates to costs of inspection, testing and other
activities intended to uncover defective products or services, or to assure that there are no
defects. Such costs involve costs checking whether it is right and include the following
• Incoming material inspection: These are costs of inspection and testing items received
from suppliers.
• In process inspection and testing: These are costs of inspecting and testing the product
throughout the production process to ensure conformance to specified standards.
• Cost of maintaining inspection facilities;- These are costs such as the calibration and
maintenance cost of any equipment used in appraisal activities.
• Cost of quality audits:- These are costs incurred to check that the quality system is
functioning satisfactorily.
• Cost of materials and product consumed in a destructive test or devalued by reliability
tests
• Cost of interruption of production to take samples
• Vendor rating costs to assess and approve suppliers of all products and services.
1.5.4 Prevention Costs
Prevention costs are normally costs incurred in planning, implementing and maintaining a
quality system (Mitra, 2000). They are costs incurred in order to prevent defects from occurring.
According to Muhlemmann, Oaskland and Lockyer (1992) prevention costs are associated with
the design, implementation and maintenance of the quality system. Such costs include:

21. • Quality planning: These include all costs related to developing and planning the quality
assurance system e.g. costs of setting up the design and operational policies and
development and the cost of communicating quality plans to workers.
• The Cost of determining product and service requirement : or example e the cost of
determining quality requirements and the setting of corresponding specifications for
incoming materials, processes and finished products.
• The cost of product design and review: - Any incremental costs of product design
incurred to review and improve the quality f the product.
• The cost of process design and review: Any incremental costs of process design to
review and improve quality conformance of the product or service, including equipment
enhancements intended primarily to improve quality.
• Training costs: - Consists of costs associated with the development, preparation and
maintenance of quality education and training for operators, supervisors and managers.
• Data collection analysis and reporting costs: - it includes costs of electing data relating
to quality problems and the costs of analyzing and reporting data to monitor and improve
quality.
• Cost of quality improvement efforts: - These are costs related to programs or activities
designed to monitor and improve quality; for instance quality circles, and defect
reduction programs.
• Cost of working with vendors to ensure the quality of incoming materials preventing
costs re meant to ensure that the product is made right the first time and reduce cost of
getting it wrong (failure cost) and the cost checking if it is right (appraisal cost).
Prevention costs goes up because of the investment in training and other action oriented
efforts towards making it right first time, however, the real benefits will be realized when
it yields significant reduction in failures( both internal and external) and appraisal
activities. Therefore the more the prevention costs, the lower he failure and appraisal
costs, which reduces the total cost of quality as illustrated.
According to Juran (1979), the total cost of quality (TCQ) is the sum of failure costs (internal
failure costs ‘IFC’ and external failure costs ‘EFC’) and effect control costs ‘CC) and appraisal
costs ‘AC’. He derived the following formula

22. TQC = PC + AC + IFC+EFC
PC and AC are costs relating to ensuring that the product conforms to specifications; while IFC
and EFC are costs of non-conformance. Bank (1992) extends this classification by adding to the
cost of non-conformance, the cost of exceeding requirements, while a third category of cost has
also been added; the cost of opportunity.
The cost of exceeding the requirements refer to those costs incurred as a reslt of providing
information or services that are not necessary. Examples include excessive features in a mobile
phone which are generally unnecessary. The cost of lost opportunity may be difficult to quantify,
however, some costs can be attributed to lost opportunity , for instance, cancellation of customer
order due to inadequate product or service supply , ordering the competitors products because
the organization products were not available, and the intangible cost of demoralized employees.
1.6 Quality and other functional areas of Management
At the outset, quality was primarily an operations functions, more recently, however its relevance
t other organizational functions has become more apparent and recognized as crucial to the
successful functioning of the organization as a whole. Several organizations are currently
pursuing quality management initiatives that cut across functions from marketing, strategy to
human resources and accounting. Therefore, this section explores the relationship between
quality management and other management disciplines and practices as follows:
1.6.1 Quality and Marketing
Marketing plays an important role in identifying requirements. Any pre occupation with quality
must start with knowing what the customer want. Such wants must then be translated into an
appropriate product or service which not only meet customers expectations but also matches the
operational capabilities of the organization. The main reason why new products fail is due t lack
of understanding of the whole experience of the customer from awareness to the disposal of the
product. Therefore, marketing activities could help organizations understand the complexity of
customer experience and enhance the relationship in the value chain. Marketing activities also
help the organization furnish information regarding the competitors operating levels, sets

23. products and service specification, help analyze customer complaints, sales staff reports,
warranty clams and product liability cases all of which are critical activities in quality
management.
Similarly, the current philosophy of marketing has turned inwards towards other functions
individuals within the organization, the so called internal customers. Internal customer embraces
the idea of getting everyone in the organization to practice marketing that is to be individuals
employees. All these marketing effort have a significant effect on the management of quality in
organization.
1.6.2 Quality and Human Resource Management
According to Victor et al (2000) the pursuit of quality alters significantly the way jobs are
designed, requiring new behaviors, roles and responsibilities for all organizations’ members.
Work under a quality regime is dual in that it combines two distinct types of tasks; standardized
tasks and continuous improvement tasks. When employees are confronted with this dual role
some may experience stress.
Most quality programmes rely on the use of HRM policies to encourage employees to focus on
tasks and generate employee commitment. The rhetoric of the committed employee builds upon
the imagery of total immersion in quality goals and supporting organizational practices.
Developing quality across the entire organization is an important function of the HR department
HR can act as senior management’s tool in implementing TQM in two fundamental ways; first
by modeling the TQM philosophy and principles within its departmental operations; the HR
department can serve as a beachhead for the TQM process throughout the company. Second the
HR department with senior management’s support take TQM process company wide by
developing and delivering the long-term training and development necessary for the major
strength in terms of recruitment, selection, appraisal, and reward system to institutionalize a
quality first orientation.
1.6.3 Quality and Strategy

24. Quality programmes have a strong relationship with strategic change due to the fact that many
companies adopt quality management programmes at times of crises or due to pressure from
customers’ competition, government regulations, among others. Such changes may or may not
be revolutionary but they are strategic in that they typically require that the organization makes
quality a long term objective, allocate appropriate resources for its achievement and institute
control and evolution procedures to review its progress, consequently, quality management
requires strategic management skills.
Strategic management is a process which provides guidance and direction for all aspects of
operational management. It is carried out by top-level management. It emphasizes organizational
adaptation to environmental demands and opportunities via the dynamic and complex interaction
between the behavioural aspects of organization such as culture, learning and leadership and
technical aspects such as planning and budgeting. Quality management programmes are
adaptation tools for they aim to ensure fit between the organization and the environment by
combining the hard technologies (i.e employee, involvement training, leadership and
organizational culture).
1.6.4 Quality and Production / Operation Management
The role of operation management in the achievement of quality objectives is very crucial
production and operations management is concerned with the ways of achieving the most
effective and efficient use of organizations resources, such as its financial and human, capital
resources and materials (Bicheno and Elliot, 1999). Quality on the other hand means confirming
to the requirements and specifications, which implies that production and operations
management activities determine the level of quality of an organization. The major production
and operation management activities that influence quality in the organization include:
agreement of specifications provided by the marketing department, pre-production and
operations and prototype trails, design of product and service, special handling and storage of
material for purpose of production, process control, storage of finished products and analysis of
scrapped, reworked, rectified, replace and downgraded products. These activities are necessary
for an organization to achieve quality hence production and operations’ success in quality.

25. 1.7 Sample Examination questions
1. Discuss the quality eras in the evolution of quality management thought.
2. a) Describe four dimensions of quality.
b) Quality can be evaluated on multiple dimensions. Explain how organizations can use
these dimensions for strategic competitiveness.
3. A defense contractor manufacturer rifles for the military. The military has exacting quality
standards that the contractor must meet. The military is very pleased with quality of the
products provided by the contractor. However, the contractor I experiencing high quality
related costs. Discuss the reasons for the contractor’s high quality related costs.
4. a) What are the major categories of quality costs? Explain each of them and give examples.
b) Cost and quality are seen to have some conflicts as strategies for competitiveness in products.
Explain how this arises and to what extent.
5. The cost of quality is what it costs a company to get things wrong. Discuss the various
classifications of a typical quality costs.
6. a) Explain why organizations view quality as a source of competitive advantage.
b) “For any organizations to succeed in this challenging business environment, it has to be
proactive in its plans” Discuss this quote in relation o quality functions.
7. Quality management is an important concept in strategic planning and a component of
strategy. Explain.
8. a) Explain the extent to which quality is a universal concept.
b) Discuss the responsibilities of the different departments of an organization as far as the
quality function is concerned.
c) Which functions of management must be integrated with the quality function to give
valuable complimentaries.
CASE STUDY
Quality at Nairobi Central Hospital
Nairobi Central Hospital is 60- bed hospital situated in Nairobi central Business district the
Hospital began facing serious competitive pressures as other health facilities started

26. mushrooming. Top management knew they had to establish and maintain a competitive
advantage against other health care providers. Their strategy was to dramatically improve the
quality of care Nairobi Central delivered to its patients.
Hospital administrators attended a seminar given by a leading quality management consultant.
The administrators decided to use the consultant approach to improve total quality in all aspects
of the hospital’s operation.
The administrators targeted a number of operations for quality improvement accuracy of patient
billing, nursing retention, turnaround time in the emergency department, quality of dietary
service, purchasing procedures and promptness and completeness of medical record entries.
They further decided to create teams of hospital employees as he primary mechanism for the
implementing process improvements.
Required
a) Define quality in the context of the case
b) Discuss the types of costs that may be incurred in the hospital and propose the best approach
to manage quality costs at the hospital.
c) Propose a specific quality improvement plan for the hospital.

27. WEEK 3-4
CHAPTER TWO
CUSTOMER SATISFACTION
OBJECTIVES:
To learn the concepts of customer satisfaction
The learner should learn various ways of identifying customer satisfaction.
The learner should be able to describe Strategies to Enhance Customer Satisfaction
INTRODUCTION
One of the most critical quality management concepts is customer satisfaction. Lee Locaca once
said that Chrysler has three rules.” Satisfy the customer, satisfy the customer, satisfy the
customer and satisfy the customer.” For anybody who believes in the quality management
philosophy customers is a golden word because customer satisfaction s a competitive tool for
increasing market share, sustaining log-term profitability and survival.
A customer is a person or a group of persons who receives the output of a process of the system.
Although it is generally understood that a customer is a recipient of the work output, customers
are classified into two; one is the traditionally view, which sees customers as a people outside
the company who buys the company’s products or services; while the current understanding is
that customers are both internal and external to the organizations. Customers internal to the
organization comprises employees who receive products and services within the organization for
the purpose of processing. This perspective sees every employee inside The Company as a
supplier and a customer. External customers are the end user of the product or service or the
ultimate customers.
The Concept of Customer Satisfaction
Satisfaction may be considered as a customers’ evaluate reaction to how particular product
performed when compared to how he or she anticipated that it would perform ( Woodruff and
Gardial 1999). Satisfaction is the customers’ feeling about the value that they received from a

28. particular product experience. According to Valarie, Zaithamal and Bitner (2005) satisfaction is
the customers’ fulfillment response. It is a judgement that a product or service features, or the
terms, satisfaction is the customers’ evaluation of a product or service in terms of whether that
product or service has met their needs and expectation.
Customer satisfaction has been defined in plethora of ways; for instance, Westbrook and Reilly
(1983) defined customer satisfaction as an emotional response to the experiences provide by and
associated with particular product as or services purchased, retail outlets or even modular
patterns of behavior such as shopping and buyer behavior. Howard and Sheth (1969) defined
customer satisfaction as the buyers’ cognitive state of being adequately or inadequately rewarded
for the sacrifices he has undergone. Curchill and Surprenant (1982) Considered customer
satisfaction as an outcome of purchase in relation to the anticipated consequences. It is about a
customer’s response resulting from an evaluation of the expected performance of the product or
service and its actual performance customers get dissatisfied. The management has a
responsibility to ensure that customers’ expectations are monitored so as to allow the
organization gauge whether they are providing what is actually needed by the customers. In this
way the organization should identify the characteristics or the dimensions of the product or
service which the customers require and ensure that it is provided in a manner expected by the
customers. For example a durable product which does not conform to customer design and
expectation may cause customer dissatisfaction.
The important of customer satisfaction in the quest for quality cannot be underestimated. Studies
have showed dissatisfied customer talk to more people han satisfied customers. Bearden, Ingram
and Lafarge (2004) observed that often dissatisfied customers never make a company. Because
new customers are harder to find, maintaining satisfaction among existing customers should be
paramount.
1.2 Identifying Customer Satisfaction
Identifying customer expectation especially the external customer is more difficult and
challenging, however, a number of different methods may be used as follow:
• Regular customer feedback system

29. The most ideal method of identifying customer expectation is to allow every single customer to
communicate complaints directly to the organization. Such regular communication can be
achieved by giving address, e-mail, or providing suggestion boxes at strategic and accessible
points in the organization. When using such communication channels, it is important to keep all
documents regarding complaints and send back relies to the person who made the complaint. The
first reply should acknowledge receipt of the complaint by the appropriate department and the
second once the corrective action has been taken. Customer complaints are very vital in
collecting data on customer satisfaction levels. Although about 1.5 percent of customers take
their time to complain to management, the presence of complaints can be seen as an opportunity
to obtain are giving the organization a second chance; hence, the management should receive
complaints with a lot of enthusiasm because it acts as cost free feedback system. Losing
customer complaints means losing valuable information and creating obstacles for improvement.
• Market Research
Organizations carry out occasional market research to understand their customer better. The
research is occasional because it is only done when there is need for more information regarding
customers without studying each and every customer. Instead, a few customers are chosen using
appropriate sampling techniques and a detailed study is conducted on their likes and dislikes. If
possible customers should be interviewed both at the time when they become customers and at
the time of departure or defection so as to understand the reasons for the behaviour.
Market research may entail preparation of a questionnaire that will help understand a wide range
of customer expectations. Before launching the research, it is useful to pretest the questionnaire
to evaluate its efficiency. Once this has been done, a choice has to be made on the method of a
ministering the questionnaire, i.e. e-mail, post, or personal administration by the researchers.
After collecting the information, it is summarized, analyzed and the findings be reported about
customers. Although such information is normally considered confidential, it must be made
available to planners inside the company when they need it.

30. • New / Lost customers survey
These are useful ways of finding out what attracts customers to the organization and indeed why
they left. While many organizations nowadays conduct exit interviews, the most successful ones
involve management to ensure appropriate access of information and action.
• Focus groups
Customer focus groups are among the popular methods to obtain feedback from customers. It is
used to find out what customers are really thinking. A group of customers is assembled n a
meeting to answer a series of questions. These questions are asked by a skilled moderator, who
probes into the participants’ thoughts, ideas, perceptions, or comments. Meeting is designed to
focus on current, proposed, and future products and services. The people selected to participate
should have the same profile as customers that the organization is trying to attract.
• Customers visit
Making visits to customers’ businesses provides another way to collect information. An
organization can monitor its products and service performance while t is in use by making
impromptu visits to the customers. These visits should involve both senior managers and
operating personnel so they can see first and how the product is performing.
• Frontline personnel
Employee who are in direct contact with the customers may be in better positions to understand
customers expectations. However, organizations need to train their employees to listen
effectively and to make immediate steps to correct customers’ bad experiences. The also need
too have systems in place to capture the information and pass it along to the rest of the company.
Successful companies have institutionalized best practices ad have a culture where all employees
spend significant amount of their time interacting with customers.
• Critical Incident Techniques
This method attempts to identify the issue that delight the customer and those that dissatisfy
them. Critical incidents are events that contribute significantly to perceived quality of the
product or service performance; for instance, one may ask customers to think for an instance

31. when they felt very pleased and satisfied with the product or services they received and, to
describe why they felt so happy. The other question would be to ask customers to think of a time
when they were unhappy and dissatisfied with the service they received and to describe why they
felt that way.
• Mystery shopper
This method is normally used by several organization wherein mystery shoppers, who may be
managers acting incognito as customers. Apart from managers, external agencies may be
contracted to carry out the assignment. In most cases an agreed scoring systems to rate the
quality of the service or the product in developed.
• Customers related information from other sources
Information can also be gathered from research Institutions outside the company. Such
institution conduct studies on a regular basis about public taste over different products. Although
such information may not give any specific information about the product, when combined with
information collected by the company, it can be a useful guide.
1.3 Measures of customers Satisfaction
Generally speaking, customers satisfaction enhances customer loyalty. Customer loyalty is the
feeling of attachment to or affection for a company’s products or services (Mohanty and Lakhe
2002). A satisfied customer has a higher tendency to be loyal to the company. Hence, customer
loyalty feelings and by extension customer satisfaction in manifested in many forms of customer
behavior. These forms or measures can be grouped into three major categories.
• Intent to purchase
At any time in the customer relationship, it is possible to ask customers about their future
intentions to purchase a given product or service. Although their responses are simply indications
of future behaviour and are not assurances, they play a key role in measuring satisfaction levels.
According to the Technical Assistance Research Program (TARP) over 68% of dissatisfied

32. customers defect to other providers of products or services. Therefore intent to purchase is a
strong indicator of future behavior.
• Primary Behavior
There are four categories of activities that show actual repurchasing behavior; frequency,
amount, retention and longevity. Although they are important measures of actual behavior, they
only provide a glimpse of overall share and are not most useful as an indication of changes
time. Frequency and amounts of purchase are significantly better measures of loyalty.
• Secondary behavior
Customer referrals, endorsements an spreading the word are extremely important forms of
customer behavior for an organization. Word of mouth is perhaps the most critical factor in
acquiring new customers.
1.4 Customer Satisfaction Model
The Kano Model is perhaps the most widely used model of customers satisfaction. Th Model
describes three levels of customer satisfaction; expected quality, desired quality and excited
quality. The expected quality level represents the eecpted basic attributes which could be rated as
important, but they are totally expected. The attributes define the functionality of the product and
establish the threshold of acceptability. They form the basic requirements that are expected
quality indices can make or break buying decisions. For instances, hotel guests expect certain
things during their visit; they expect the size of the bed to be normal and the towels to b changed
daily. If these basic requirements are not fulfilled the customers become dissatisfied.
The second level represents desired quality which is referred to as one-dimensional attributes’
these are articulated needs or more precisely what customers will say they need. The desired
quality is the level of quality the customer hope to receive – the “wished for” level of
performance ( Valerie, Zaithalm and brinter, 2005). Using the hotel example, customers desire to
be served in the hotel within the shortest time possible, say within 4 minutes. The shorter the
wait, the greater will be satisfaction; hence the better you are at providing the desired features,
the greater the satisfaction.

33. The third level is the excited quality which is characterized by delighted attraction attributes.
These delighted attraction attributes are unexpected, but if offered, generate delight and perhaps
even delight to he customer. Customers are not in expectations of these features of the product or
service and when provided pleasantly surprise the customer. For instance receiving a glass of
juice while waiting to check into the hotel may be a pleasant surprise. In most cases this level
represents unstated or unspoken requirements and hence the organization should employ a
proactive strategy to be able to identify what may excite the customers.
1.5 Determinants of Customer Satisfaction
According to Valerie, Zaithaml and Bitner (2005), customer satisfaction is influenced by a host
of issues as follows:-
• Product and service features
Customer satisfaction with a product or service is influenced by the customers’ perception of the
product or service features. A bank for instance, has important features such as speed, courtesy
of staff, appropriateness of technology and so forth. It is important to know he key features that
determine quality.
• Customer emotions
Customer emotions can also influence their perception of a particular product or service for
instance, when a customer is in bad mood, the negative feelings may carry over into how the
customer respond to products or services which may cause the customer to overreact or respond
negatively to a small problem. Positive emotions such as happiness, pleasure, elation and warm-
heatedness enhance customer satisfaction, while negative emotions such as sadness, sorrow,
and anger leads to customer dissatisfaction.
• Perception of equality and fairness
Customer satisfaction is influenced by perceptions of equity and fairness, for instance, customers
ask themselves whether they have been treated fairly compared with other customers, whether
other customers were given better treatment, whether prices were equal to others, among other
questions.

34. • Other customers, family members, friends and co-workers
Customer satisfaction is also influenced by other people, for example satisfaction with a
particular hotel is influenced by the reactions and expressions of individual family members of
friend including co-workers. What family members, friends and co-workers express in terms of
satisfaction or dissatisfaction with the hotel service will be influenced by stories that are narrated
among the group and even selective memories of events. Therefore customer satisfaction is
influenced by individuals personal experiences as well as by what others say about it.
Basically, customer satisfaction is determined by the interaction of customer perceptions and
customer expectation. The higher the match between perception and expectation, the higher the
satisfaction levels, however, any mismatch results in dissatisfaction. Customer expectation are
beliefs about a product or service that function as benchmarks or more precisely, the reference
points against which performance is judged. These standards help customers to evaluate their
perception. The level of expectation can vary widely depending on the reference point the
customer holds. Gonroos (2000) identified thre types of expectations that customers can hold.
• Fuzzy Expectations;- These expectations exist when customers expect a roduct or service
provider to solve a problem, but do not have a clear understanding of what should be
done.
• Explicit Expectations:- These are expectations which are clear in customers’ minds in
advance , which can either be realistic or unrealistic expectations.
• Implicit Expectations: Refers to elements of a product or service which are obvious to the
customers that do not consciously think about them but take them for granted.
Because expectations are play a critical role in customer evaluations of their products and
services, organizations need to understand the factors that influence them. As shown in the
model below, the most important factor is customer needs and values. Customer needs and
values fall into different categories, including physical, social, psychological and functional, for
instance, a customer may need say delivery of insurance cover to their premises if they do not
have adequate staff. Similarly, marketing communication such as advertising, direct mail, sales

35. promotion, internet communications and sales campaigns shape the expectations of customers
because it promises customers the kind of a product or service they should expect. Customer
experiences with other competitors, including previous encounters with the organization are
most likely to influence their expectation. Prior encounters make customers not only clear
about what they want, but sharper in terms of assessing the product or service. The word of
mouth and the image of the organization also sets standards for what the customers expect for
instance, a five – start hotel raises the customer expectations. The customer may complain if the
waiting time is say 10 minutes, however, the same customer would not raise a complain if the
waiting time is even more than 10 minutes in an ordinary hotel.
Customer perception on the other hand, is influenced by a host factors which includes employee
product or service delivery (.e is the receptionist courteous, helpful and knowledgeable? Does
the employee handle the inquires fairly and efficiently? Does say a doctor treat the patient
humanely?) Similarly, physical facilities create a perception on a customers’ mind, for instance,
is the waiting area clean? Are the service delivery systems fast? The pricing of the
organizational products may also create apperception, the higher the price, the more ideal
expectation become, in fact cheap products are perceived to be of poor quality for example,
expectation of a customer in a first class flight will be at different level as that in an economy
class, and lastly, customers emotions, such as anger and depression guilt or happiness, delight
and hopefulness, affect the cognitive perception of the product or service. Studies in consumer
behavior of Knowles, grove and Pickett (1999) indicated that customers’ mood has an effect on
their evaluations and behavioural responses to, among other things, product or service delivery.

36. Therefore the model – figure 3.2 illustrates the interaction of expectation and perception and
underscore the fact that customers always engage in the matching process. A match between
perception and expectation enhances the customer satisfaction which in turn results in repeat
purchase and product or service quality. On the other hand , mismatch causes dissatisfaction
which result in customer complaints and in some cases brand switching.
Figure 3.2 Expectation – perception Matching Model
1.6 Strategies to Enhance Customer Satisfaction
The strategies to enhance customer satisfaction include
1. Measures and monitor satisfaction consciously. Such measurements are needed to track
trends, diagnose problems and to link to other customer focused strategies.
2. Establish and maintain contact wit customers and develop effective yardsticks to measure
progress at all levels and undertake customer surveys to enable effective follow-up with
customers.
Repeat Purchase Satisfaction Product / Service Loyalty
Match
Customer
Perception
Product/
Service/
Delivery
Customer
Expectation
Employee
Service
Delivery
Physical
facilities
Pricing
Customer
Emotions
Mismatch
DissatisfactionComplaint
Customer Needs
and values
Marketing
communication
Previous customer
encounters
Customer experience
with competition
Organizational
image
Word of mouth

37. 3. Focus on analyze processes for successful customer orientation .
4. Promote a culture of empowerment, leadership and customer care. A customer satisfaction
strategy requires that the Company’s customer focus and quality values be integrated into
day-to-day leadership and management to the extent that it becomes part of the
organizational operations.
5. Develop a commitment of trust, confidence and commitment to customers. The success of a
customer satisfaction plan requires an explicit and real commitment on the apart of the
organization to its customers. To promote trust and confidence in its products and services,
the Company must show commitment to deal with customers concerns. Commitment to
customers involves not only examining their current needs and expectations, but also
anticipating expectation.
6. Design the product or service delivery system to meet customers needs. This starts from the
definition of the product / service concept culminates in planning the characteristics of the
product / service to b supplied. Designing the characteristics of the production delivery
system starts from the customer’s needs and expectations. This requires eliciting both he
implicit and explicit customer requirements and expectations have been elicited customer
priorities must be highlighted which help in developing and standardizing the product
service.
7. Provide education and training for employees. Practices regarding employees education and
training should be designed to ensure that these activities provided the knowledge and skills
employees nee to achieve customer satisfaction. Content of education and training may
include quality awareness, leadership, problem solving meeting customers requirements, and
processes analyzing among others. Employees need appropriate coping and problem solving
skills to handle difficult customers as well as their own feelings during such encounters.
8. Rewards and recognition are the fundamental requirements for motivating people. With the
appreciation of the importance of customer satisfaction, the management reward and
encourage behavior based on personal initiative and on enhancing customer satisfaction,
rather than on hierarchy.

38. 9. Honor the promises made to the customers. Promising exactly what will ultimately be
delivered would seem logical and the most appropriate strategy to manage customer
satisfaction, hence marketers need to be careful when designing marketing campaigns and
activities, so that they avoid making promises that are difficult to honor. Indeed, it may be
wiser to try to keep promises on a lower level than actual customer experiences because it
offers an opportunity for the organization to provide customers unexpected surprises it is
better to under – promise and over-deliver.
Sample Examination Questions
1. a) Describe the importance of customer relationship on customer loyalty
b) Identify the various steps in customer relationship management
2. Discuss the conditions that would cause customers to be lost.
3. a) Explain some of the solutions to conflicts between employee interests and customer
service.
b) Outline some of the strategies for building a loyal relationship with a customer.
4. The main issue in building customer satisfaction is to acquire satisfied customers the
indicators of customer satisfaction
5. Explain the factors that influence customer perception of quality. Discuss in the context
of an industry of your choice.
Case study
Hairdressers’ Saloon
Most hairdressers that are located in the Nairobi’s busy streets have employed a good
relationship management strategy. They are able to generate extraordinary levels of loyalty
from their customers. This loyalty transcends price differences and the convenience of their
location. Many women living in Nairobi will go to their favorite hairdresser because of the level
of Customer – relationship Management. Ven when they move from one estate to another or
from one job to another they will still leave other establishments to g to their favorite ones.

39. Those who visit the saloon, go there because their favourite member of staff will do their hair,
even when there is a more trained person. Most saloons that have a rate of loyalty from its
customers can charge increasingly more for their services.
In most cases however, such loyalty are expensive to earn from the customer. They have a
unique ability that will constantly dwell on the style and the color of the service being provided.
The key thing however, is to manage every aspect of the relationship with customer in such a
way that the customer is always satisfied.
Some o the obvious levels of satisfaction are that the saloon is always clean, stylish and
attractive. Attention to details ensures that first impression becomes lasting impressions. A less
successful saloon can be understood by looking at the business from the customer’s perspective.
Required
a) Identify the features of the relationship of customer care
b) Describe the ways staying close to customers
c) Discuss the important steps that would ensure a successful customer service
d) Explain some of the customer dynamics in a hairdresser saloon business

40. WEEK 5-7
CHAPTER THREE
TOTAL QUALITY MANAGEMENT
Objective of the study:
To learn the concepts of TQM A and definition
To learn principles of TQM
To identify and describe TQM MODELS AND FRAMEWORK
To know the steps necessary to make TQM systems work in an organization.
Introduction
Total quality management (TQM) became popular sometime in the 1980s and was widely
adopted both in manufacturing and service sector. TQM is a consideration of the views of the
quality groups recognizing that poor quality is expensive in terms of cash and market share and
that good quality provides a tool for competition. TQM first took its roots in improving quality
of physical products, however, subsequent developments have emphasized on organizational
transformations – specifically in bringing about a cultural change, in improving employee morale
and in facilitating an empowering working climate for attaining excellent human performance.
TQM focuses on the integration and coordination of all activities in a work process and aims at
continuous improvement in quality.
Definition of TQM
TQM has been defined n a variety of ways by different authors. Mohanty and Lakhe (2002)
defined TQM as a quest for excellence, creating the right attitude and controls to make
prevention of defects possible and optimize customer satisfaction by increased efficiency and
effectiveness. Oakland (1989) defines TQM as an approach to improving the effectiveness and
flexibility of a business as a whole. It is essentially a way of organizing and involving the whole
organization, every department, every activity, and every single person at every level. Zaire and
Simintas (1991) defines TQM a the combination of socio-technical process towards doing the
right things (externally) everything right 9internally) first time and all the time, with economic
viability considered as each stage of each process.

41. Pfau (1989) views TQM as an approach for continuously improving the quality of gods and
services delivered through the participation of all levels and functions of the organizations. Tobin
(1990) also views TQM as the totally integrated efforts for gaining competitive advantage by
continuously improving every fact of organizational culture. Kiritharan (2004) defines TQM as a
commitment to continuous improvement of quality. It can be viewed as process, wherein the top
management along with other people in the organization works to improve the product and
service quality including the work environment at every stage with the aim enhancing
customer and employee satisfaction.
Therefore, TQM is” total because it involves everyone, not just top management but
encompasses all. It is often termed as a journey, not a destination (Burati and Oswald, 1993); it
requires a complete turnaround in corporate culture and management approach (Quazi and
Padibjo, 1997). According to Mahanty and Lakhe (2002), TQM is a pragmatic long term system
approach initiated and driven by the top management to bring about a total culture change,
interlink and integrate every function, process and every activity of an organization through
cross-functional involvement and participation of people to meet the dynamic needs of customers
and to create a loyal but at the same time a diversified customer base. Stvenson (1999) refers
TQM as a quest for quality that involves everyone in an organization. He cites three
philosophies in TQM approach; first, is the never –ending push to improve, which is referred to
as continuous improvement, secondary, is the involvement of every one in the organization and
thirdly is the goal of customer satisfaction;; which means meeting or exceeding customer
expectations. TQM suggest that for an organization to remain competitive the customer
requirements should be met at lowest cost possible.
Principles of TQM
There are several principles that guide the success of a TQM program as follows:
1. Customer Orientation
The goal of satisfaction of customers is fundamental to TQM and is express by the
organization’s attempt to design and deliver products and services that fulfill the customer’s
needs. Lee Iacocca once advertised that Chrsitler has three rules;” satisfy the customer satisfy the

42. customer, and satisfy the customer” for anybody who believes in quality management
philosophy, customer is a golden word. The customer is the king in the market place. According
to Drucker (2002) it is the customer who determines what business is. The customer is the
foundation of business and keeps it in existence. The customer expects value at reasonable
price. Mohanty and Lakhe (2002) argue that everyone in the organization should appreciate the
fact that customers are:
• The most important people in the business
• Not an interruption to work but are the purpose of it.
• Not dependent on the organization but the organization depends on them.
• Doing a favor when they seek business
• People who come with their needs and the job of the organization is to satisfy them.
• Deserve the most courteous and attentive treatment.
• Life blood of the business.
TQM focuses every aspect of the organizations activity towards the customer needs. In order for
top management to ensure that organization’s activities are carried out to meet customer
requirements, they should consider the needs and expectations of their clients. If possible they
may even include their customers during their planning stages by conducting customer
feedbacks, analyzing past complaints or studying their satisfaction levels. The new clause for
customer related processes under ISO 9001:2000 requires the organization to identify and
document requirements, and to clarify with the customer the requirements it is to fulfill as part of
the contract. Management therefore needs o establish performance measurement instruments that
would reveal the level of customer satisfaction, and having known that an organization should be
in a position to respond appropriately to customer needs. A very useful fishbone model was
developed by Roberts (1999) detailing the activities of becoming customers oriented as follows;-

43. 2. Leadership
Top management commitment is very important for the successful implementation of TQM in an
organization. According to Hackman and wagenman (1995) quality is viewed as ultimately and
inescapably the responsibility to top management. Because top management create the
organizations systems that determine how products and services are produced, the quality
improvement process must begin with managements’ own commitment to TQM. Pheny and Teo
92003) also observed that top management must communicate to TQM to the entire
organization to create awareness, interest, desire and action. They should provide the vision of
where the organization is going with its quality efforts, and create cultural change within the
organization. Mohanty and Lakhe (2002) noted that top management should demonstrate
commitment to TQM by:
• Becoming the first set of recipients of training in the philosophies and methods of TQM.
Management commitment
and Action
Employee
employment
Training Rewards
Recognition
Product or
Service
Specialization
Resources / Technology
Benchmarks and
Standards
Customer research

44. • Imparting training to others
• Attending regularly the TQM meetings and seminars.
• Establishing customer satisfaction as their basic policy and determining the long term goals.
• Establishing TQM vision for the future and personally communicating.
• Generating enthusiasm for TQM activities and enforcing code of conduct.
• Providing opportunities to the subordinates to grow in their area of work.
• Delegating authority to subordinates to make them more responsible.
• Incorporating TQM programs in the organization’s overall strategy.
• Recognize employees for quality achievements
• Demonstrating by both words and actions that quality is a number one operating priority of
the organization.
3.Employee Involvement
Giving employees the responsibility for improvements and the authority to make change
accomplish them provides a strong motivation for employees. This puts decision making into the
hands of those who are closest to the job and have considerable insights into problems and
solutions.
Mohanty and Lakhe (20020 argues that the people who know the most about what is right or
wrong with system or process are those who do it. A key element in employee involvement is
that each worker assumes the responsibility of inspecting quality of his own work. This is a
practice commonly referred to as” Quality at source”, eliminates inspection as a method of
quality control.
Employees should also be encouraged to communicate upwards to top management. As
employees are organization’s human resources, they should be involved in top management
resources management procedures. Chadnler and Mc Evoy (2000) pointed out that because
employees are the prime source of human resources, their education, skills and experience
needed for a job need to be assessed and matched with the job requirements. Similarly, there is
need for the establishment of quality improvement team and the use of employee suggestion

45. system and surveys to obtain continous internal customer feedback. Atmospheres must be
created where employees feel they are encouraged to participate.
4.Team Working
The purpose of teamwork is to have all people involved in a process working to achieve common
goals. The use of team for problems solving and to achieve consensus takes advantage of group
synergy, gets people involved, and promotes a spirit of cooperation and shared values among
employees. The key to developing team work is establishing a common goal for all team
members.
Team work practices include identifying the needs of all groups involved in the decision making
trying to find solutions that will benefit everyone involved, and sharing responsibility and credit.
Management should design programs geared towards promoting team culture as such as training
to help people work better in teams.
Training components should include development of improved communication, conflict
resolution, coordination and team building. Team training helps to enhance self-esteem of the
individuals and also provides the tangible evidence about commitment of management to the
quality.
5.Continuous Improvement
TQM is not an accident but rather a dynamic process which requires continuous improvement.
This philosophy seeks to improve all factors related to the process of converting inputs into
output on an ongoing process. Under continuous improvement, the old adage ‘if it ain’t broke,
don’t fix it’ gets transformed into ‘just because it isn’t broke doesn’t mean it can’t be improved’.
The long-term heath of an organization depends on treating quality improvement as a never-
ending quest. According to Deming (1986) opportunities to develop better methods for carrying
out work always exist, and a commitment to continuous improvement ensures that people will
never stop learning about the work they do. Continuous improvement efforts may either be

46. incremental or breakthrough improvements which can be achieved by use of improvement tools
and techniques such as organizational learning, business process re-engineering, benchmarking,
si-sigma techniques, among others.
Continuous improvement for a quality management system is a mandatory requirement of ISO
90001:2000. Planning for continuous improvement must identify data to be collected, how it will
be analyzed, who will decide on outcomes of processes and how continuous improvement will
be implemented. ISO 9000:2000 provides two continuous improvement strategies and is
concerned with identification of non-conformities and how they can be avoided in future. The
second strategy is prevention and requires the anticipation of circumstances that cause non-
conformities rather than waiting for it to happen before responding.
Top management has to ensure that they implement systems that seek, overtime to continually
improve the overall performance of the organization, similarly, education and training reinforces
this role for everyone in the organization. The various steps that management need to adopt in
order to continually improve the process include the following as shown in figure
Select a process
Document
Evaluate
Implement the improved
process process
Design an improved
Process
Seek ways to
improve it
Document the Process

47. 6.Process Improvement
Process is defined by Davenport and Short (1990) as a set of logically related activities
performed to achieve as set of defined business outcomes. For example, in a bank, processing a
customer’s cheque may involve the signature of the official for authorization of payment, a
cashier, a computer input operator and a filling clerk. Each of these individuals may work in
different departments within the bank to facilitate payment to the cheque. Process improvement
is a critical activity in quality management. The starting point o process improvement is a
process charting which helps to provide an overall picture of a connected set of activities from
the start to the end. It begins with collection of information about the process; identifying each
step in the process and analyzing each step in the process. For each step in the process, determine
the inputs and outputs of the process, he people involved and all decisions that are made. It is
important also to document such measures such as time, cost, space used, waste, employees’
Morale and turnover, accidents, safety and hazards, working conditions, revenue /profit customer
satisfaction, etc. Once a process has been identified, analysis is done. Of particular concern is the
recognition of error or failure in the process. The purpose of analyzing the process is to eliminate
unnecessary or irrelevant activities and to identify the triggers’ which start other processes. The
following questions need to be addressed in order to analyze the process:
• Is the flow logical?
• Are any steps or activities missing?
• Are there any duplication?
For each step, the following questions can be raised:
• Is the step necessary? What happens if it is eliminated
• Does the step add value
• Does any waste occur at any of the steps?
• Could the time be shortened?
• Could the cost to perform the step be reduced?
• Could some steps be combined?

48. Using the results of the analysis, redesign the process and document the improvement efforts
needed to enhance the potential of the process. Process development requires a range of
techniques which can be used to identify alternatives to the established process and ways of
overcoming quality problems. It relies on creative thinking about the situations, which in turn
requires an open mind. A lateral approach is useful especially because it attempts to find fresh
angles from which to view the process. Other tools that can be used for process improvement
include:
• Brainstorming: Brainstorming s a technique in which a group of people share thoughts
and ideas on problem in a relaxed atmosphere that encourage unrestrained collective
thinking (Stephenson, 1999). Brainstorming sessions can be very useful at this stage
because e it involves groups of individuals normally between 4 and 12 to general ideas
for problem solving. The main aim of brainstorming session is to generate ideas on
problem identification, finding the causes of the problems, providing solutions and ways
to improvement the sessions. An effective brainstorming exercise welcome wild ideals
and no criticism or evaluation occurs during brainstorming sessions, similarly, no single
of few members are allowed to dominate the brainstorming session.
• Quality Circles: Quality circles comprise a number of workers who get together
periodically and voluntarily during the normal working time under the leadership of their
supervisor to discuss ways of improving the organizations products, service and
processes. A quality circle usually select a project to work on through discussions within
the circle members. The leaders of the circle May then advice the management on the
project selected and if no objections are raised, then the circle proceeded with the work.
Sometimes the quality circle may invite exerts or consultants to assist them in say
diagnosing the problems and in generating eh solutions.
• Interviewing: Interviewing is one other method that can be used nto collect information
about a problem and use t to identify the problem. Interviewing may be carried out both
internally one employees ro externally with the customers and competitors. Because
customer satisfaction is the ultimate goal, interviewing the customers is very critical in
any quality improvement process.

49. • Benchmarking:- This s an approach that helps to compare the organizational
performance with he best performing companies. It measures an organizations’
performance on key customer requirement against the best in the industry. The purpose of
benchmarking is to establish a standard against which performance is judged.
• The 5w2H Approach:- The abbreviation stands for (5W; what, where, why, when, who
and 2’H’, how and how much). This approach involves asking the above questions
about the current process. These questions provide insights about why the current process
is not working well as it is expected, and also providing the potential ways to improve it.
Therefore the new process developed should aim at reducing time, cost, space, waste,
employee turnover, working conditions, quality, and customer satisfaction.
TQM MODELS AND FRAMEWORK
Several models and frameworks have been developed to define TQM. The following are
some of the models developed.
• The five Pillars of TQM
Creech (1994) identified the five pillars of TQM as shown in figure 6.2, which argued
provide the strong foundation upon which the system must rest. He proposed that a holistic,
humanistic management system is required that blends these new principles into every aspect
of the organization. The five pillars identified included: the organization, the product, the
process, leadership and commitment. He observed that the product is the focal point for
organizations’ purpose and achievement. Quality n the product is impossible without quality
in the process; similarly, quality in the process is impossible without the right organization .
The right organization is meaningless without proper leadership without adequate
commitment is sterile; hence a strong bottom- up commitment is the support pillar for all the
rest. Therefore, each pillar depends upon the other four, and If one is weak all are. This
perspective provides a total approach to put quality in every aspects of management.

50. The five Pillars of TQM- Source Creech (1994)
• The Oakland’s Model of TQM
The Oakland (1989) model of TQM as illustrated in figure 6.3 presented TQM to comprise
the following distinct components; management commitment, customer – supplier chain,
qualify system, statistical process control tools and techniques, and teamwork.
The management commitment is the most important factor in ensuring the successful
implementation of TQM. Top managers are seen to be engineers of culture hat respects the
individual and fosters creativity. In this capacity, their most important tasks are to provide
employees with an understanding of why quality s important, help them conceive of quality
in strategic terms, set achievable quality standards and provide training on quality;
customer supplier chain is at center of the pyramids. It refers process ownership, process
management and process improvement
propelled throughout the chain. Similarly, the model identifies the good quality management
system, statistical process control and teamwork are essential ingredients required to meet the
customers needs.
Product
Process
Organization
Leadership Commitment

51. The Oakland Model of TQm – Source: Oakland (1989)
The Four PS and Three Cs – A new Model for Quality Management
Oakland (2004) developed a new model compromising four Ps and three Cs for quality
management. The four Ps include; planning, performance, process and people, while the
three Cs include; culture, communication and commitment. According to Oakland (2004) the
“four Ps” form the basis of the simple model for quality management as shown in figure 6.4
and provide the hard management necessities to take organizations successfully into twenty-
five century. He argued that performance is achieved using a business excellent approach;
and by planning the involvement of people in the improvement to the processes.
Planning entails the development and employment of policies and strategies; the setting up of
a partnership and resources; and designing in quality. Performance involves establishment of
a performance measurement yardstick for the organization; carrying out regular audits and
reviews and benchmarking the organization with others . a process entails gaining an
understanding on the activities and events in the organization, management systems, quality
management system and continuous improvement efforts. People entails the management of
human resources; culture management; teamwork; management of communication systems
and network; innovation training an learning.
Teams
Culture
Process
Customer
Supplier
Communication
Systems Tools
Commitment

52. The ‘three cs’ on the other hand includes; culture, communication and commitment. Oakland
(2004) agues that although the ‘ three Cs’ are derived from the early quality management
frameworks as shown in figure 6.4, there is need to integrate them into the new model to
move organization successfully forward. He further contends that to ensure successful
implementation of TQM, effective leadership and commitment is essential.
The four Ps and Three Cs - New Model for Quality Management – Source: Oakland (2004
An Integrated Model of TQM
Sohal, Tay and with (1989) proposed an integrated model of TQM. The model proposed that
continuous improvement in quality is achieved through an integrated approach of managing
quality via action plans in different operation of the business cycle. The five critical elements
identified in the model are: customer focus, management commitment, total participation,
statistical quality control and a systematic problem solving process. The model emphases that
involving people at the grass root level. Improving their morale, else the belongingness and
responsibly using statistical techniques to collect and analyze data and adopting PDCA cycle and
Culture
Communication
Commitment
Planning
People
Performance
Process

53. the pursuit of continuous quality improvement helps significantly to deliver satisfying product or
service to customers. The authors presented the model in the following diagram figure 6.5:
Integrated Model of TQM – Sohal, Tay and Wirth (1989)
The building Blocks of TQM
Zaire (1991) proposed the Building Blocks of TQM model which looks at TQM at three levels:
the foundation level, the pillars levels, and the top level. The foundation level entails continuous
improvement, added value management and employee involvement. The pillar level constitutes
statistical process control, statistical quality control, user suppliers chain, management control
systems, process flexibility and workplace design. The top level of the model comprises quality
planning, leadership and vision for world class competitiveness.
The model as show in figure 6.6 argues that TQM depends on these building blocks with
together determines the strength and safety of h organization. Weakness in one area will affect
QUALITY
IMPROVEMENT
TEAMS
TOM MISSION
CONTINOUS
QUALITY
IMPROVEMENT
STATISTICAL
QUALITY
CONTROL
TOTAL
PARTICIPATION
SYSTEMATIC
PROBLEM
SOLVING
FOCUS
CUSTOMER
FOCUS