ACG - Agency Consulting Group

The PIPELINE

A national monthly newsletter for agency principals dedicated to agency management topic

Quality Isnt Free

Philip Crosby wrote a timeless book in 1979 titled, "Quality Is Free". I highly recommend the book to you, but I disagree with his title. Quality isn't free. It is VERY EXPENSIVE. It costs a great deal of money and a great deal of time. It also costs the owners implementing a Quality Strategy more than most are willing to give in personal change and commitment. That's why most of the businesses in the U.S., both large and small, will decline in the next ten years compared to the innovative businesses of the Far East and the new Europe.

This may not concern the small and medium insurance service businesses who are the audience of this publication. However, the same Quality Strategies developed by Crosby, Deming, Drucker, Juran and a host of other "Quality" gurus are also being adopted by American insurance companies, both stock and direct writers. This had better be a greater concern for you small businessmen out there. You see, after a few false starts due to interminable internal politics and hidden agendas, the surviving companies will realize that the commitment to continuous quality improvement and a complete re-tooling of management philosophy from a total "Results Orientation" to a "Process Orientation" will be the only way they can maintain profits and grow into the future. If you, the insurance distribution system, are not prepared to lead the companies into the Quality Strategy era - if you are not prepared to at least follow them into it - you had better sell and get out of the way - you're going down! A new distribution system will grow to sell insurance products and services using 21st century quality methods as opposed to 19th and 20th century production methods.

This sounds like pretty tough talk. We, as consultants, constantly train ourselves into the tools and methods that will preserve and profit our clients into the future. Our frustrations exist because most of our clients can not cope with the development of Strategic Plans that include a complete re-tooling of two hundred years of business strategies.

* No, employees are not expendable, hired to accomplish a task. * No, customers do not stay with you or leave solely on price considerations.

* No, training and education are not discretionary expenses nor are they dictated by state requirements or the esteem of professional designations

* No, customer orientation is not simply lip service. You must practice what you preach in clear and highly visible terms.

* No, the companies are not the problem - they must become part of our solution.

* Your successes and your failures, like those of all private industry, are due to your own actions (and inactions). They are only influenced by outside situations insofar as you do not plan properly for them in your Strategic and Tactical Plans.

* No, you as the owner are not the 'Cause D'Etre' of your company. You were the initiator - the spark - that got the fire going. But that fire now has a life of its own. Very few firestarters have the ego to think that, once started, the fire would go out due to their absence. After the fire has started, you must assume the position of fire tender. Make sure that the fire has sufficient fuel and resources and it will burn bright through your tenure as manager and well beyond.

How do we go about Change with a capital 'C'? Change with a small 'c' is easy. We change constantly and always have the opportunity to change again. Change with a capital 'C' implies PLANNED, LONG TERM, TARGETED Change, that Change that can be identified by clear identification of what you want to do or be differently than now and a fixed dedication to get there. It is Change that, once committed, can not be reversed any more that the proverbial "Leap of Faith".

How do we start? First, read about Quality Management, TQM or the other buzz words used for the quality revolution. Call us for a bibliography of articles and books. Next, commission a study to determine how Change can turn your insurance business into a Quality Strategy business that will be viable for you and your successors whether or not you are still selling the same products or in the same way or in the same markets 25 years from now. The Change to Quality Strategy will be as viable then as now because it stresses PROCESS OVER RESULTS. The secret is that if the process is correct and the quality improvement is on-going, the results of growth and profit will follow - along with a host of other benefits to you, your employees, your customers and your suppliers. We are available to conduct the study, if you wish.

Two situations have resulted in the implementation of Quality Strategies in large, but not small companies; 1) the egos and shortsightedness of some owners, and 2) the cost.

We can do little to change the egos or the limited strategic sight of some owners. This problem may result in the demise of most of the insurance agencies in the U.S. (if not the demise of the independent agency system as we know it). The TQM gurus claim that only limited quality strategies can be implemented in industry in the U.S. because of the egos, training and background of the business owners. They claim that we who have been raised and trained in current business practices will find it impossible to fully transition to a new dimension in management. Our experience with small business owners over the last fifteen years concurs with that view. Too many of us have been raised to feel that the owner is "boss" whose word should be carried out without question. Even "participative mangers", who pride themselves for including employees in the planning and management practices feel that, in the end, they, as owners, must make the hard decisions.

In the world of TQM, the owners and managers are guides and consultants for the employees who are the decision-makers for the processes that permit them to do the best job possible for their customers. To the degree that you are able to assume that role, TQM can work for you. To the degree that you can not adapt to this role, your newer and younger competitors will be more productive for their customers.

The second issue that stops TQM from taking root in small businesses is its cost in dollars and time. In order to fully transition to quality management, corporations are spending millions of dollars and decades of transition time. Little can be done about the transition time.

A NEW GENERATION OF EMPLOYEES

Employees who do not want to be part of the quality management philosophy must be replaced. More will be replaced through retirement than through termination because these people are valuable assets and are doing a reasonably good job in the current Productivity Management companies. Few owners become so committed to Quality Management that they are willing to replace productive employees to gain the long term benefits of the quality revolution. Employees who are capable of learning a whole new approach to business, in which they decide the path that will yield the greatest benefit to their customers, must be extensively trained in the methods of teams. Unless you can spare your employees for weeks at a time to attend workshops and schools for quality management, this process will be time consuming.

A NEW GENERATION OF BUSINESS CONCEPTS AND MODELS

Juran calls them paradigms (pronounced PARADIMES). Examples include: Decisions made at the top - Company oriented to procedures - Quality Control Departments and jobs - Getting the product out is the most important thing.

These are some of the beliefs taught at our business schools and through on-the-job training in smaller businesses since the advent of the steam engine. Turning these concepts to Quality Strategies will take time. We, as owners, must convince ourselves and our employees that this system can work. Without doubt, our grandchildren will be as comfortable with the Paradigms of Quality like: Decisions are made by the workers involved - Company oriented to Process - Quality control is a part of every job - Follow the right process and the results will meet or exceed your expectations.

These changes will take time.

PROCESS CONVERSION TAKES TIME

The four steps in the Continuous Quality cycle are:

1.Clearly Identify the customer, his needs and his wants

2.Evaluate the current process to determine if it meets the needs and wants of the customer.

3.Improve the process

4.Evaluate the results - return to 1. above and re-start the cycle

We are living through a unique period of history. From a business standpoint, we can actually see and feel our own evolution. If you can orient yourself to an evolution in the way businesses operate, please read our future articles on Quality Strategies and the books in the Quality Bibliography (call us for a copy). If not, call us and we will help you seek a partnership with individuals or companies who will carry your organization, together with theirs, into the 21st Century.