One apparent advantage of being relatively small is that you needn't bother with the big nostrums that gurus and consultants love to sell to big companies. Or is it an advantage? What if TQM (Total Quality Management), say, is the right road to making money?
In many businesses, top-class quality is actually becoming the only road. If you're supplying giants (for example, in cars) they may well insist on quality certifications like BS5750. Getting these can be expensive and burdensome; they don't require plunging into TQM - but if you're going to all that trouble, it makes sense to launch a total quality drive.
Total quality made much sense to Jack McGavigan, just retired, in his 80s, as chairman of John McGavigan & Co, founded by his grandfather in 1860. The family firm was a traditional printer, but developed from the Sixties into specialists in 'graphics related plastics technology.' Touch switches and backlit fascia panels in cars are examples of the uses. McGavigan, rightly keen on innovation, has constantly expanded into new technologies and product lines. Consequently, the group's car parts have a 12% world market share.
None of this might have happened if McGavigan hadn't reacted to impending crisis in mid-1987. Costs were rising, the company was being squeezed between strong suppliers and stronger customers, and competition was intensifying. The firm had been using quality circles for years - with employees banding together to tackle quality issues, Japanese-style, in a voluntary, bottom-up effort to improve. But more was needed to avert disaster.
Quality was the answer, passionately advocated by Edward Smith, 47. Managing director of John McGavigan Automotive Products, he joined the company as a stripling in 1963. 'Employees are the experts', he says. 'We wanted to exploit the potential of people,' which demands 'training, teams and communication.'
You also need something else: 'the will to win.' Smith stresses that 'you have to have that very clear in front of you. You're not nice guys.' Rather, you're tough, determined managers who don't let anything or anybody stand in the way of 'exceeding customer expectations'. And in Smith's business, which is where McGavigan's total quality drive started, those expectations are sky-high.
Once, his customers would live with 1.5 to 2% rejects. The maximum is now '500 parts per million - that's .005%.' The TQM methods which achieve this super-performance are basically bottom-up, like the quality circles. But in total quality, everybody in the firm gets involved - otherwise the 'total' is meaningless. The lofty aim is to produce only perfect goods by only perfect processes, and to deliver the goods only in perfect ways to customers who are perfectly satisfied with the results.
If that sounds impossible to you, you're right. It's the striving for impossible perfection - 'continuous improvement', in the jargon - throughout the business, from start to finish, that's the name of the game. The name of Smith's quality circles has thus been changed recently to 'improvement circles'. And improvement is truly the word for what's been achieved.
The automotive company, accounting for 70% of the McGavigan business, was producing 1.6 million parts a month with 190 people in October 1993. Last October, production had reached 2.3 million, with only 152 employees. That's a rise in productivity of 80% - and Smith puts it down to 'employee involvement.' Don't think that comes easily, though. Is it tremendously difficult to 'change the culture'? 'Let's say we found it very, very challenging.'
The exercise started in April 1988, with all employees, in groups of 10-15, listening to the managing director as he stressed key points: first, that TQM isn't a 'flavour of the month', but lasts for many years; second, as noted, it involves absolutely everybody. In fact, everybody left the meeting with a Corrective Action Form on which as many items as they liked could be put: 150 forms were filled in.
TQM work, very detailed and demanding, has never stopped since. Does it pay off? Smith is adamant that 'you've got to have continuous improvement to give your customers what they want.' For solid proof of the consequences, the McGavigans sold out to Pressac Holdings in December - for £9.75 million.
