Managing Quality:
a discussion with David Garvin

by Joe Flower


This article appeared in the Healthcare Forum Journal, September-October 1990, Vol. 33, #5

International Copyright 1990 Joe Flower All Rights Reserved


In the early 1980s, when everyone was talking about Japanese management, "quality circles," and "Theory Z," David Garvin of Harvard Business School did something truly interesting. He felt that, "If quality is to be managed, it must first be understood." So he studied one industry which was active in both the United States and Japan -- the room air conditioning industry -- analyzing the products to determine which plants in which country were turning out the highest quality. Then he analyzed every step of the manufacturing process, to find the differences that made the difference. He administered hundreds of questionnaires, toured plants, and questioned everyone from line supervisors to CEOs. His findings were often surprising. Some things that everyone thought guaranteed higher quality (such as exhaustive testing) did not, while some things rarely mentioned in the literature (such as the way the factory dealt with layoffs and seniority, and the length of production runs) made a big difference.

This detailed examination of a single industry provided a wealth of insights that apply to quality management in other industries. He explores his findings, and what they mean for other industries, in his book, Managing Quality: The Strategic and Competitive Edge.

In a wide-ranging conversation, I asked Dr. Garvin to tell us how his findings can make a difference in the health care industry. He started by mapping out a somewhat different, and more detailed, view of what exactly quality is.

The Eight Dimensions of Quality

Most companies talk a good deal about quality. But they often misinterpret what their customers need. In fact, when customers are talking about quality, they are talking about something very precise.

I separate quality into eight dimensions: performance, features, reliability, conformance, durability, serviceability, aesthetics, and perceived quality. Customers very seldom talk about all eight dimensions. Usually they are talking about one or two which are the most salient to them. When customers say, "I want higher quality health care," they may be talking about performance. If it's an operation, that means: is it performed effectively so that the problem is corrected, the patient is up and out quickly, and there is no infection or complication. They may be talking about features, which are add-ons, bells and whistles -- how they're treated by the staff, or whether there is a television with multiple channels in the room that they don't have to pay for. They may be talking about reliability -- the frequency with which the service actually works. Or conformance -- getting exactly what they expect to get, at the price they expect to pay.

So the manager who is trying to improve quality has to develop the ability to listen with more precision.

When Japanese cars first entered the market their performance wasn't very hot. They didn't go very quickly, they weren't especially luxurious or comfortable, there weren't a lot of features. They scored the bottom of the list for durability, and for safety. But if you asked auto customers what they thought was the most-desired quality characteristic in a car, the answer was reliability. That's the quality niche the Japanese targeted. It started every time. And it only broke down once every five years. That's what customers were saying when they told GM, Ford and Chrysler, "Your cars aren't high quality." GM would say, "But look at all the features we give you in a Cadillac." But that didn't meet what the customers were really saying, which was, "Your cars break down too much."

Quality as a Strategic Tool

You can target your quality strategy. You don't have to be first in all eight dimensions of quality. If you try to, you end up being Rolls Royce. Instead, you can discover the dimensions of quality that your customers want, or the ones that are not being well served by competitors. This is called "quality niche strategy." It's not just a choice between the cost niche and the quality niche. There are a variety of quality niches.

There are hospitals that are luxuriously appointed, that have more nurses than are medically necessary. That's a feature strategy. Others go for a strategy which says we will be very explicit up front about what you are going to get, a conformance strategy.

Others have a "perceived quality" strategy. That is, when they introduce a new service they fall back on their legitimate reputation in other areas. So let's assume that Mass General, which has historically been renowned for its heart care, opens an entirely new pulmonary wing. People may have no basis for judging objectively how good the pulminary care is. They do know that the heart care is world class. The assumption is going to be that these folks are likely to do a good job in pulmonary as well.

Once you have done the work to make your quality what it needs to be, you can use quality to position yourself strategically, exactly as Ford did. For years they told people that "Quality is job one." They made it a potent marketing weapon. Similarly, Maytag's marketing ("The lonely repairman") works because it's true. Neither of these market positions would have worked if they were not true.

Four Steps

There are four things you need to do to position yourself strategically on quality.

Quality saves money

It's a myth that quality costs money. If you define quality in Cadillac terms, which would be features and luxury, then quality does indeed cost more money. But if you define quality in Toyota terms -- a car that breaks down less, that meets the standards that we set for it -- this kind of quality, in fact, means lower cost. It saves you money.

A manufacturing analogy: Suppose you build it right the first time. Then you don't have to scrap any parts. Everything fits. You have no warranty expenses. It turns out that preventing problems from happening is vastly cheaper on a per unit basis, than fixing them after the fact. The cost moves up by a factor of 10 each time you move down the production and operations chain.

If you catch a mistake in a bill from a health care organization, what do you lose? You lose the piece of paper and about ten seconds of the typist's time. If it has to go through the reprocessing, it goes to a customer complaint form, it has to be re-entered into the system, it has to be mailed out again, there's a delay of a certain number of days in collection -- all of that adds up. In that sense, higher quality means lower cost.

Think back for a minute to the four steps I gave you. One of the steps, the third one, was to compare the assumed flow chart to the reality. Suppose you can eliminate 10 of those redundant steps. You're going to give more responsive service, and it's going to be cheaper. Higher quality can mean lower cost.

Hospitals run lots of unnecessary tests. Suppose we could get more precision on the circumstances under which tests are required. We would have more accurate diagnoses, and fewer ancillary illnesses and complications, which are sometimes due to the tests themselves. We would make more people well. And it would cost less.

Quality is systemic

A study was done here at a local hospital, Emerson Hospital in Concord. They traced incorrect diagnoses, and found that one of the major causes was the failure to connect different pieces of information on an extended chart. The doctors knew the theory. They knew that if x, y, and z were present it should be the following. But the information was on different pages of the chart, they were rushed, they were interrupted. That's preventable. There's a system problem. The doctors were adequately trained, but they were not generating the right diagnoses. Well, let's think through what are the circumstances in which they would be better able to do it. Maybe they should hold all calls once an hour, except for emergencies. Maybe there should be less interruption in the actual diagnostic process. Maybe there should be a new format for charts.

The old way of approaching quality was an "inspect-and-check" mentality. That still is the dominant theme in the medical care area. That is something that is going to have to change. It needs to be more system-oriented. The old historical approach is the "bad apple." Of course, there are bad apples, bad doctors just as there are bad assembly-line workers. But more often than not, the problem on the assembly line was that the worker did not have the proper tools, did not have the proper parts, or did not have the proper instructions. Every one of those problems is under the control of management, and somewhat systemic in character.

The increasing back-office costs of health care show that the systemic response has to extend outside the four walls of the hospital. It's exactly what companies are doing today when they say, "We manage our suppliers." The same thing has to be done in the health care sector. There have to be relationships with outside groups, common standards, and an acceptance of common quality procedures.

Quality In America

In selected companies, such as Hewlett Packard, Ford, Motorola, and Xerox, we have improved our quality enormously in the '80s. But our competitors are a moving target as well. And in all too many industries, the rhetoric about quality has vastly exceeded the reality. One of the arguments that we hear in virtually every industry is, "Our industry is unique." Health care clearly believes it's unique. And there are characteristics that make every industry unique. On the other hand, there are commonalities. There are aspects of the way you manage a health care organization that are very similar to the way you organize an R&D lab or a mail-order firm or a factory.

It is very easy to talk a good game about quality. Yet to make it work requires a fairly substantial change in management attitudes and practices. You really have to listen to the customer, you have to assume that they know as much as you do, and sometimes more, about what makes for quality. You have to say, "Gee, maybe we don't have the best practices in the world, and somebody else does."

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