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This chapter is an introduction to the concept of quality. Firstly, a background will introduce the concept of quality and the evolution of the concept. The background consists of two parts, a conceptual and a practical part. The former, is a presentation of definitions and concepts within quality, whereas the latter is a brief overview of Nordea. Secondly, a problem discussion follows and consequently, the purpose of the study is presented.
The majority of the researchers within management, believe that quality management is the aspect of strategy, that permeates every aspect of the organizations' management (Huq & Stolen, 1996). The purpose of conforming quality management, is to gain competitive advantage (Huq & Stolen, 1996). Yet, quality as a concept is not a new phenomenon (Saraph, Benson & Schroeder, 1989). What is new is that the view on the concept has changed (Saraph et al., 1989). Saraph et al. (1989), explain this transition by arguing that formerly, quality was associated with the end product. Now quality is interpreted as a more holistic organizational concept that includes all aspects of an organization (Saraph et al., 1989).
The shape of quality took a more holistic view after the Second World War, as efforts were taken to rebuild and enhance the Japanese industry (Hoyer & Hoyer, 2001). At this point, the foundation of the umbrella concepts Kaizen and Total Quality Management (TQM) were laid. Consequently, quality management became a people system where worker involvement and continuous improvement became vital aspects for success (Huq & Stolen, 1996). Several attempts have been made to define and identify the building blocks of quality management and the critical factors of the concept (Rönnbäck & Witell, 2008).
The word quality is derived from the Latin “qualitas” and means; property, character and nature (Bergman & Klefsjö, 2007). The word, was according to Bergman and Klefsjö (2007), initially used by the roman politician Cicero (106-43 B.C.). There are still separate opinions of how the concept should be interpreted (Black & Porter, 1996). Yet, there are recognized researchers within management, also known as gurus, that have given their definitions of quality. Some of the well known gurus are; Joseph M. Juran, Edward W. Deming, Philip B. Crosby and Kaoru Ishikawa (Black & Porter, 1996).
Juran (1988) claims, that a practical definition of quality is not possible. Also, to justify quality in terms of customer satisfaction and specification, would not give a holistic picture (cited in Hoyer & Hoyer, 2001). Instead, Juran (1988) argues that “fitness for use” is a more justified definition to the matter (cited in Hoyer & Hoyer, 2001) Here, “use” is associated with customers' requirements whereas “fitness” refers to the conformance of the measurable product characteristics (Juran, 1988; cited in Hoyer & Hoyer, 2001). Deming (1988), on the other hand, defines quality as a multidimensional concept that must be defined comprehensively, and in terms of customer satisfaction. Ishikawa (1985) agrees with Deming and argues that quality must be defined comprehensively (cited in Hoyer & Hoyer, 2001). In addition, Ishikawa (1985) highlights that quality is equivalent to customer satisfaction, as well as the importance of focusing on every facet of the organization, and not only on the end product. Furthermore, since consumers needs and requirements change, quality must be beheld as a continuously changing process (cited in Hoyer & Hoyer, 2001). Finally, Crosby (1988) highlights the importance of defining quality in order to be able to manage and understand it. Thus, quality needs to be conformed to the requirements. Nevertheless, the requirements should not only focus on the attributes of the end product (Crosby, 1988).
TQM has evolved from the works of the gurus (Huq & Stolen, 1996). It has however, no direct associations to the gurus (Huq & Stolen, 1996). As a strategic instrument, TQM is implemented by many companies (Thomsen, Lund & Knudsen, 1994). The concept can be evaluated as a multi-dimentional construct that is shaped by four dimentions, customer satisfaction, continuous improvments, the organization as a total system, and employee fulfilment (Tena, Llusar & Puig, 2001). Furthermore, TQM can be classified as a more theory based tool with no easily assessable instruments to measure it at the operational level (Black & Porter, 1996). Powell (1995) argues that some aspects of TQM could be applied on non-manufacturing organizations such as service organizations and non-profit organizations.
Quality management can be seen as a management philosophy characterized by its principles, practices and techniques (Rönnbäck & Witell, 2008). TQM's primary focus, on the other hand, is on the hands and minds that of those that employ the tools, rather than the tools themselves (Huq & Stolen, 1996).
According to Rönnbäck and Witell (2008), research regarding quality within service industry is sparse, compared to research within manufacturing industry. Following Rönnbäck and Witell's (2008) recommendation, this study focuses on the concept of quality in a relationship with service organizations. To be more specific, focus is paid on quality of the services produced by the banking sector.
1.2 Nordea- an Overview
The study that occupies the following pages will exclusively focus on the management practices of quality at the corporate market department at Nordea, Jönköping. Nordea, Jönköping operates under the Nordic banking division. The corporate market department works with two types of customer segments; small- and medium sized firms. In total, there are 16 co-workers at the department (A. Hedenborn, personal communication, 2009-09-30).
In brief, Nordea Group is one of the leading bank groups in the Nordic and Baltic Sea area. They have around 10 million customers with more than 1,400 branches (Nordea Group Public, 2009). Nordea's vision is “making it possible” and their mission statement is “to be the leading Nordic bank, acknowledged for its people, creating superior value for customers and shareholders.” (Nordea Group Public, 2009)
The values of Nordea can be summarised in three corner stones; great customer experience, it is all about people and one Nordea team. In addition, the corner stones can also be underlined by their statement: “While products and services can easily be copied, people are what ultimately distinguish us from our competitors. Consequently, our people are the factor that will move Nordea from good to great” (Nordea Group Public, 2008).
Nowadays, organizations are convinced of the strategic benefits of quality (Phillips, Chang & Buzzell, 1983 cited in Bolton & Drew, 1991). Also, organizations want to maintain their position with other organizations in their market, in order to stay ahead of the competition (Rao, Ragu-Nathan & Solis, 1997) This is a reason why organizations work with quality assurances, such as ISO 9000 (Rao et, al, 1997). Consequently, this enforces the banking management to improve their quality in agreement with standards of the market.
One way to achieve quality goals, is by using TQM as a technique. The aim of the TQM system is according to Hellsten and Klefsjö (2000), to increase external and internal customer satisfaction with a reduced amount of resources. Many supporters praise TQM, while others have identified significant costs and implementation obstacles (Powell, 1996). Schaffer and Thomson (1992) criticize TQM due to the retaining costs it entails, the inordinate amounts of management time it consumes, and for the increased paperwork and formality.
Furthermore, the difficulty with implementing TQM is also recognized by Black and Porter (1996). They claim that firms could benefit from a more easily administrated tool. A tool based on a set of criteria with benchmark scores to facilitate comparison (Black & Porter, 1996). Although, there is are many types of instructive formula for how management of quality should be formed (see chapter 4), there is little written about management practices, especially within banks that operates locally.
From daily updates of several media channels it can be seen that the banking sector of Sweden has lately experienced an increased competition due to international banks and credit institutions entering the market. The major Swedish banks start to work with quality in order to improve competitiveness. Since Nordea claim that they work with continuous quality improvement it is of interest to investigate and find out the underlying factors for the application of quality management. Thus, our research questions are;
- How does Nordea work with quality improvements?
- How is quality measured at the corporate market department at Nordea, Jönköping?
The purpose of this study is to investigate how quality is managed and measured at an operational level at the corporate market department at Nordea, Jönköping.
The study aims to give an intensive description of how management at corporate market Nordea work with quality at an operational level. Due to the fact that this is a case study, it does not give an overview or a generalizable result for the overall Nordea Group. It is limited to the corporate market department at Nordea in Jönköping, and their internal work towards continuous quality improvements. Also, the study is not aimed to measure the result of the quality work. Since focus of this study is paid on the corporate market department at Nordea, Jönköping, for simplicity in the following pages of this paper, the corporate market department at Nordea, Jönköping will be referred to as Nordea.
Quality - “Is an elusive and indistinct construct. Often mistaken for imprecise adjectives like goodness, luxury shininess or weight...” (Crosby, 1979 p. 41 cited in Parasuraman, Zeithaml & Berry, 1985).
Quality Management - A management practice that has evolved from many existing practices and improvement processes. The aim for the practice is to establish a quality focus that permeates the entire organization and satisfies customer demands. (Encyclopaedia of Business and Finance, 2001)
Total Quality Management (TQM) - Is a management philosophy aiming to help organizations to become more efficient. It is a mix of ideas and practices within many management areas such as; customer satisfaction, systematic measurement, continuous improvement and team-based organization. (Encyclopaedia of Leadership, 2004)
Kaizen - Kaizen means improvement. Applying Kaizen in an organization means that the organization conforms to continuous improvements (Imai, 1986).
Lean-production - Is a management theory with its origins from Japanese manufacturing in the 1950's. The fundamental idea of Lean is to create value by excluding Muda (waste in Japanese) which means doing more with less. (Womack & Jones, 2003)
Service - A service can be defined as an intangible, heterogenic and inseparable good that is hard to count, measure and test. Therefore it is hard to define and measure service quality in a simple manner. (Parasuraman et al., 1985) 5
Frame of Reference
This chapter is an introduction to the concept of quality. Firstly, a background will introduce the concept of quality and the evolution of the concept. The background consists of two parts, a conceptual and a practical part. The former is a presentation of concepts within quality whereas the latter is a brief overview of Nordea. Secondly, a problem discussion follows, and consequently, the purpose of the study is presented.
This chapter serves two purposes. Firstly, it will provide the reader with an understanding of previous research done within the topic of quality management, with an emphasis on TQM. Secondly, concepts within quality management that organizations practice in order to achieve total quality, is presented.
This chapter covers the research method used for this study, a case study. Firstly, it gives a presentation of the foundation for the choice of method to the study. Consequently, the presentation is followed by an description of the methods used for data collection. Finally, the strengths and limitations of the methods chosen is discussed.
In this section the empirical findings are presented both verbally and graphically. The information is derived from the informal meeting, semistructured interview and questionnaire. The results are presented according to the themes of the both methods.
In this chapter, theory is applied to the empirical findings from the semistructured interview and the questionnaire.
The purpose of this study is to investigate how quality is managed and measured at an operational level at the corporate market department at Nordea, Jönköping. This chapter attempts to answer our research questions. By reflecting the analysis of the empirical findings, a conclusion will be drawn in order to fulfil the purpose of the study. 6
2 Frame of Reference
This chapter serves two purposes. Firstly, it will provide the reader with an understanding of previous research done within the topic of quality management, with an emphasis on TQM. Secondly, concepts within quality management that organizations practice in order to achieve total quality is presented.
2.1 Choice of Theory
The theoretical framework is compiled for the understanding of the concept of quality and its practical aspects. The chapter consists of two parts. Firstly, a literature review is compiled with the purpose to provide us with an understanding of the magnitude of research done within the topic. Yet, the literature review highlights research mainly regarding TQM as well as quality management, to a certain extent.
Also, the concepts of Kaizen and Lean-production are presented, since they are incorporated in the quality work at Nordea. Thus, in order to be able to investigate the quality work at Nordea it is of importance to grasp the concepts of Lean and Kaizen. All the mentioned concepts are needed for the understanding of principles, procedures and rules of applying TQM.
2.2 Literature Review of TQM
Extensive research has been done within the topic of quality management (Rönnbäck & Witell, 2008). The research is however, mostly conducted within manufacturing industries (Rönnböäck & Witell, 2008). Also, studies and research done within the topic are mostly based upon case studies, anecdotal evidence and the prescriptions of the leading gurus (Black & Porter, 1996). Furthermore, Dean and Bowen (1994) argue, that despite endless articles in the business and trade press, total quality remains a hazy and ambiguous concept. Consequently, due to this ambiguity, total quality is by some seen, as an extension of scientific management (Dean & Bowen, 1994). Others however, view total quality as a new paradigm for management (Dean & Bowen, 1994).
Dean and Bowen (1994) conducted a theory- developing study that compared total quality and management theory. Consequently, Dean and Bowen (1994), through their study, suggested directions for theory development within total quality since there is sparse research done within the topic.
Huq and Stolen (1996), has performed an empirical study, based on 19 dimensions of TQM, where it is hypothesized that TQM should be selectively employed in the manufacturing business and the service operations in order to turn TQM into a powerful instrument of continuous improvement. Huq and Stolen (1996), came up with the result that there exist important differences in the way TQM is implemented in the manufacturing and the service industries. Yet, Huq and Stolen (1996), argue that TQM is generic and will apply equally in service organizations as well as in manufacturing organizations. Prajago (2005) is of the same opinion as Huq and Stolen (1996) in regards of TQM being equally applicable to both service and manufacturing industries. Nevertheless, Prajago (2005) points out that service management is slightly different from manufacturing management.
Woon (2000), on the other hand, made a study regarding the implementation of TQM between service and manufacturing industry. In the study, Woon (2000) found that service companies showed a lower level of TQM implementation than manufacturing companies did. The difference was shown in elements such as information analysis, process management and quality performance. There was however, no significant difference in terms of leadership, human resources and customer focus (Woon, 2000). Beamount, Sohal and Terziovski (1997) made a study among 261 manufacturing firms and 85 service firms. The study indicated that service firms use fewer quality management tools, especially in statistical process control (Beamount et al., 1997).
Rönnbäck and Witell (2008), also treat the relationship between the service and manufacturing industry. In a literature review between quality management and business performance, Rönnbäck and Witell (2008) compare service and manufacturing organizations. In the study, it is found that there are inconsistencies in supplier relationships, leadership commitment and customer orientation when comparing service and manufacturing organizations (Rönnbäck & Witell, 2008).
In regards of TQM, several researchers have tried to give their definition to the concept as well as to point out critical factors that are crucial for the success of teams. Powell (1995) examines TQM as a potential source for competitive advantage and reviews existing empirical evidence on the subject. Powell (1995) found that certain tacit, behavioral, imperfectly imitable features such as open culture, employee empowerment, and executive commitment, can produce advantage.
Saraph et al. (1989) conducted an empirical study by using questionnaires to find out critical factors. In the study Saraph et al. (1989) have identified eight critical factors (see table 21) of quality management that decision makers could use to assess the status of quality management in order to make improvements in the quality area. Black and Porter (1996) also made an empirical study in order to define the critical factors of TQM that will lead improved quality work. Black and Porter (1996) argue that the current models for quality management such as; the Malcolm Baldrige National Quality Award, the Deming Prize Award, are not constructed or validated by empirical means. Black and Porter (1996) therefore aimed to define critical factors to success that was empirically found and validated. This resulted in that, by using well established techniques, ten critical factors were identified (see table 21) that proved to be valid and reliable and could be used as an instrument for quality improvement (Black & Porter, 1996).
As previously discussed, sparse research is done within quality management in the service industry (Rönnbäck & Witell, 2008). According to Powell (1995) the quality principle might have a different role in a manufacturing organization in comparison to a service organization. Huq and Stolen (1996) argues that there are three main differences between service industries and manufacturing industries. Firstly, since customers are a part of the service the employees must have a greater individual judgment (Huq & Stolen, 1996). Secondly, achieving the same level of quality is more difficult in service industries since the service is connected to the employee (Huq & Stolen, 1996). Finally, services are, due to their intangibility hard to measure (Huq & Stolen, 1996).
Parasuraman et al. (1985), states three well documented characteristics of services; intangibility, heterogeneity and inseparability and these must be acknowledged in order to fully understand the quality of services. The reason for this is that we cannot understand service quality by just having knowledge about quality of goods. As a consequence, assuring quality is a difficult task since most services cannot be counted, measured, inventoried, tested and verified in advance of sale. (Parasuraman et al., 1985)
2.3 Quality According to The Quality Gurus
“There are as many definitions of quality as there are people defining it, and there is no agreement on what quality is or should be.”
(Imai, 1986 p. 8)
There are several well-known researchers within the topic of quality management, also recognized as quality gurus. All of the gurus have given their specific definition to the concept of quality. Four of them will in this chapter be further presented; Joseph M. Juran, W Edward Deming, Philip B. Crosby and Kaoru Ishikawa. (Black & Porter, 1996)
Juran (1988) defines quality by the definition “fitness for use”. By this customer related definition, Juran claims that quality is the essential property of products and that high quality products are those that meet customer needs. Juran means that use is associated with customers' requirements, while fitness refers to the conformance of the measurable product characteristics. A practical definition of quality is, according to Juran, probably not possible; meaning that justifying quality in terms of customer satisfaction and specification would not give a holistic picture. (cited in Hoyer & Hoyer, 2001)
Deming (1988), on the other hand, claims that quality must be defined in terms of customer satisfaction. Since customers have changing needs and requirements, quality is dynamic. Therefore, Deming argues that quality must be defined comprehensively and viewed as a multidimensional concept. Furthermore, Deming argues that there exist different degrees of quality. (cited in Hoyer & Hoyer, 2001)
Crosby (1979) claims that quality has to be conformed to the requirements of the customers (cited in Hoyer & Hoyer, 2001). These requirements should not only focus on measuring quality in terms of goodness, luxury, shininess, or weight (Hoyer & Hoyer, 2001). Furthermore, Crosby(1988) points out the importance of manager's active participation in the quality work. In conclusion, Crosby (1979) claims that there exist only two levels of quality; acceptable and unacceptable (cited in Hoyer & Hoyer, 2001).
The last presented quality guru is Ishikawa. Ishikawa (1985), as well as Deming (1988), argues that quality must be defined comprehensively. By this, Deming (1988) and Ishikawa (1985) mean, that one should focus on every aspect of the organization, and that it is not enough to focus on the quality of the product. Ishikawa (1985) as well as Deming (1988) believe that quality is equivalent to customer satisfaction. Thus, Ishikawa (1985) argues that, a product cannot gain customer satisfaction if it is overpriced. Consequently, since consumers needs and requirements change, quality must be viewed as a continuously changing process. (cited in Hoyer & Hoyer, 2001)
2.4 Quality Management
There have been many attempts over the years to identify and define the building blocks of quality management (Rönnbäck & Witell, 2008). Rönnbäck and Witell (2008) argue that quality management is characterized by its principles, practices and techniques. They emphasize; continuous improvement, increased employee involvement and teamwork, process orientation, competitive benchmarking, committed leadership, constant measurement of results and closer relationships with suppliers.
Furthermore, Rönnbäck and Witell (2008) argue, that a principle can be implemented through a set of rules of practices, which has organizational routines or patterned activities. The practices are supported by techniques in order to make them more effective (Rönnbäck & Witell, 2008). Hackman and Wageman (1995) on the other hand use core values and interventions such as structures, systems and work practices as their building blocks of quality management.
According to Juran (1986), quality management produces value through different benefits, such as; improved understanding, improved internal communication; better problem-solving, greater employee commitment and motivation, stronger relationship with suppliers, fewer errors and reduced waste. Furthermore, Juran (1986) argues that there exist three basic processes of quality management; quality planning, quality improvement, and quality control. Juran mentions three processes, whereas Dean and Bowen (1994) state three principles that most quality management research is based upon. These are; customer focus, continuous improvement and teamwork.
Bergman and Klefsjö (2007) take a step further and include six principles of quality management; focus on customers, focus on processes, decisions based on facts, continuously improve, let everybody be committed and utilise top management commitment.
2.5 Total Quality Management (TQM)
The origins of Total Quality Management (TQM) can be traced to 1949, when The Union of Japanese Scientists and Engineers (JUSE) formed a committee of scholars, engineers and government officials in order to improve the postwar Japanese productivity. Influenced by Deming and Juran the committee developed a course about statistical quality control for Japanese engineers followed by extensive statistical training and the widespread dissemination of the Deming philosophy among Japanese manufacturers. (Walton, 1986)
Total Quality Management (TQM) can be defined as an organization-wide quality program aimed at continuously improving products and services (Powell, 1995). It is delivered to customers by developing supportive organizational culture and implementing statistical and managerial tools (Powell, 1995). Consequently, TQM is a holistic concept that considers the improvement in all organizational activities and processes. With TQM, every employee is an inspector of his own work and all employees work for the same organizational goal (Madu, 1998). Ross (1993) defines TQM as an integrated management philosophy (cited in Powell, 1995). Furthermore, Ross (1993) states that TQM can be defined as a set of practices that emphasize, among other things; continuous improvement, meeting customers' requirements, reducing work, long-range thinking, increased employee involvement and teamwork, process redesign, competitive benchmarking, team-based problem solving, constant measurement of results and closer relationship with suppliers (cited in Powell, 1995). Huq and Stolen (1996) also stress the importance of team performance over individual performance in order to achieve quality.
As mentioned previously, the literature concerning TQM is based largely upon case studies, anecdotal evidence and the personal prescriptions of the recognized gurus (Black & Porter, 1996). In addition, diverse quality awards such as the Malcolm Baldridge National Quality Award criteria, the Deming Prize Award and the European Quality Award, have an influence over the TQM banner (Black & Porter, 1996). Furthermore, Black and Porter (1996) and Saraph et al. (1989) have derived a number of critical factors from TQM research and recognised awards.