CHAPTER 1
Quality: Foundation of Success
Principles of Total Quality Management
For the past ninety years successful organizations have subscribed to some or all of the principles espoused in Total Quality Management (TQM). Most of these organizations have been for profit and many in the manufacturing sector. Indeed, it was for these organizations and within them that the theories were devised and in which they have been best and most often practiced.
Over the past twenty five years the base of the world's economy changed from the predominance of the manufacturing sector to the service sector. Many areas of the world have seen the disappearance of manufacturing firms in favor of technology companies and the growth of service industries, such as, hospitality, entertainment, education, retail, health and social services.
At the same time traditional nonprofits (501)(c)(3) have struggled for survival, and some have not prevailed. We read and hear monthly of symphonies that have either reduced their offerings or folded. Museums have reduced staff, programming and visiting hours. Arts organizations have competed for new audiences; some sacrificing their mission to "win the battle". Social service agencies have competed for diminishing government, corporate and philanthropic resources. Nonprofit boards and staff in attempts to address the situation have hired consultants, merged with other organizations, and downsized; all in the name of survival.
This book is written as an attempt to address the very real challenges facing the (501)(c)(3) nonprofit organizations. It posits that the principles of total quality management, which were designed for the manufacturing sector of the last century, have relevance and significance for the nonprofit today. It further takes the position that the solutions to many of the contemporary challenges nonprofits face can be found in the tenets and practices of total quality management.
At the outset it is appropriate to summarize the operational principles that drive a total quality management approach.
First and foremost, the preeminence of a focus on the customer/client and her/his needs is essential to an organization's quality performance. All systems are designed to meet and exceed these needs and to make it easy and pleasurable for the customer/client to approach the organization and to benefit from its services and offerings. Ken Blanchard (2007) in his work, Leading at a Higher Level, refers to this as an organization's "relentless focus on customer service." It is the main objective of a quality organization to engage the customer/client in a long term positive relationship. Some management theorists have actually said that the goal of a quality organization is to create "delighted customers".
Some within non-profit organizations resist this total customer focus because they believe that in order for the organization to accomplish this customer focus the organization has to subscribe to the adage: "the customer is always right." Especially in education and health care this concept is looked upon with suspicion, because the service deliverers believe they have knowledge or skills that the customer/client lacks. This indeed may be the case, but the principle of a customer/client focus doesn't imply that the knowledge and skills don't exist or that they are to be put aside, but rather that in their delivery the recipient of the service or offering is treated as valued, important and ultimately "delighted".
Customer focus informs all of the other principles and practices; hence, is essential. It often requires a systemic restructuring to ensure that all facets of the organization are equally committed to the customer/client orientation and the quality delivery of the organization's services and offerings.
The second principle governing a quality organization is the concept of continuous improvement. Simply put, an organization that commits to quality management can never be satisfied that what service it offers and how the service is delivered is perfect, and therefore not in need of any improvement. Often this aspect is frustrated by a chorus of "we've always done it this way". Rather, today's success is but preamble to tomorrow's new or improved service or its revised or improved delivery. This function should not be relegated to a particular department to oversee, but rather be ingrained in the corporate culture, for while there are technical aspects to the process; it is an attitudinal characteristic.
In addition to the attitudinal support of the organization's associates and leadership, continuous improvement requires systemic support in terms of developing, implementing, and monitoring a process driven by the customer focus.
The same customer focus that benefits the external user applies, as well, to the internal customers: the associates and organization's leadership. In such an environment, information flows openly and regularly with a goal of rendering the associates as engaged employees. It is only by such practices that the common development of a culture of quality caring in the delivery of services can exist. With the exception of personnel matters, there are no compelling reasons why all other information cannot be shared with everyone in the organization, thereby creating an engaged partnership to develop and sustain the process of continuous improvement.
The cultural aspects of continuous improvement drive the quality process, but the improvement process needs to be equally supported and directed by a consistent assessment of the services delivered and a sharing of the data with the associates. Based upon these data, decisions can be made to change either delivery systems or the services delivered.
Change is a constant in an organization truly committed to continuous improvement. Not everyone is comfortable in such an environment, but if the connection to customer satisfaction is made and those associates most engaged in the development and delivery of services are involved in the process, change can actually be a liberating and enhancing experience for the associates and the harbinger of the organization's quality performance and its ultimate success.
Organizations committed to the principles of customer satisfaction and continuous improvement support these goals structurally by the development of operational teams. Ideally, these teams should be interdisciplinary or cross functional. Membership on cross functional teams is determined by who in the organization has information that is critical to a decision and who will ultimately be most impacted by the decision.
Formal reporting arrangements are abandoned in favor of a sharing of knowledge. The quality of the decisions these teams make is directly relational to the people who constitute the team. Such a structure allows for the easy and regular flow of information that has been cited earlier as essential to the continuous improvement process.
For these teams to be effective, and not just an administrative restructuring, they need to be truly empowered to make decisions and implement them. Such "ownership" is at the foundation of a quality organization and needs to be valued and rewarded as such.
The organization's internal administrative arrangements should be designed to energize the internal customers (the associates) and to make it easy for them to do their jobs well and to deliver services efficiently and effectively to the external customers/clients.
Earlier reference was made to the assessment of services and its relationship to continuous improvement. The quantifiable results of such assessment form the basis for all decisions within an organization committed to quality. And, these decisions are best made by those closest to the customer/client, not executives, senior management or boards.
It is important that decisions, especially those that call for changes to the organization's structure, its delivery systems, or the services delivered be based on fact and not any individual's or group's hunch, or worse, whim. Quantitative analysis will ensure that these decisions have objective bases for implementation and improved customer satisfaction as their goal. An open sharing of the data will also facilitate organizational support for any changes proposed.
Obviously, the organizational transformation that an adoption of and a commitment to these principles requires the organization's leadership to consistently think and act with a strategic focus on long term success. This coupled with the constant espousal of the organization's mission and a systems approach to the organization's operation, will provide the direction and support needed to develop and sustain a quality organization.
CHAPTER 2
Nonprofit's Triple Bottom Line
The Nature of a Nonprofit Organization
It is important to understand what is meant by a "nonprofit organization". Put in the simplest terms, and as non-technically as possible, a nonprofit organization is one that has been granted a tax exempt status based on its mission to serve as an organization in the public interest. The organization therefore more than likely serves the public interest as a charitable, educational, scientific, religious or literary organization.
The nonprofit does not declare a profit, but rather uses any operating surplus in the service of the public interest for which it is designed. Its corporate structure designated by the IRS as a (501)(c)(3) is similar to a for profit organization in many ways, with the exception that the nonprofit has no shareholders. The nonprofit organization is exempt from federal, most State and local taxes. The nonprofit's employees however are subject to all Federal, State and local taxes. This legal definition of the organization's tax status does not mean that it cannot have clients/customers; that it can't charge for its services; that it doesn't have to market itself and its services; and, that it shouldn't raise money to supplement fee for service revenue. It is only through the successful growth of these functions that the organization will compete with similar providers and excel as a quality organization.
As has been stated above, the nonprofit organization cannot declare a profit, which in the for profit world is the financial statement's "bottom line": How much money was made for the organization's shareholders? Instead, because of its nature as an organization serving the public interest, the nonprofit has three bottom lines: fulfillment of mission; client/ customer recruitment and service; and adequate return on its human and financial investments to sustain the organization and its commitment to continuous improvement.
The Organization's Mission
Nonprofit organizations are founded to meet a public need. The organization's purpose is to be found in its mission. There is no document that is more important to an organization's long term success than its mission. Its aspirations should be a motivating force for all engaged in the process of leading the organization and those who develop and deliver its services. Effective mission statements therefore of their nature should be simple statements of what service is to be offered, to what population, to what level of level of quality. From the mission statement flows the organization's vision and core values statements. To render its foundational nature operative, the mission statement should be written in simple, but inspirational language. It should not exceed one page and its essential points can be remembered by anyone after one reading.
One key function of an effective mission statement is the differentiation of the organization from organizations of a similar nature. This distinctive competency often is difficult to develop and state, but the process to do so will render great returns in terms of specifying what the organization does well and for whom. The iteration should simply state what is unique or special about the organization in order to differentiate it from others.
Too many mission statements fail the simplicity test, especially those describing educational and religious institutions. These tend to be so filled with complex pedagogical, philosophical or theological concepts that the essential message is lost or obscured. The length of these statements often does not encourage even those involved with the organization to want to read them. How motivating can such documents be?
Mission statements form the bases for all quality management efforts within the organization and therefore need to be clear in their statements about function, client/ customer base, standards of excellence and distinctive competency. These four categories will serve as the foundation for all the organization's activities and the bases for the ultimate measure of its success. The clearer and simpler the document is written; the easier it can be accessed and understood. The frequency of its public reference will determine its viability.
An organization's mission does not usually change over the long term. But, at the same time, it should be revisited annually by the organization's leadership to ensure that the need for the service for which the organization has been founded is still current; the number of people served warrants the efforts expended; and, that the quality of the service delivery exceeds the clients'/customers' expectations. In this way the mission continues to be the vibrant, living document it needs to be: one that inspires and directs everything that the organization does and the level of quality at which it aims to perform.
None of the above is intended to indicate that a revision in the organization's mission may not be needed based on the assessment of its fulfillment over time. A vibrant organization, committed to total quality, will regularly assess factors external to the organization, as well as, how the essential mission is being fulfilled. If the external assessment yields significant changes in the population, the extreme duplication of services, or similar organizations that deliver the same service better, the organization's leadership should explore a tweaking of the mission to allow it to describe what the organization does best. The assessment may also encourage the organization to engage in client/customer development activities to attract new populations.
It is often difficult for organizations that have existed for the better part of a century or longer to admit that the "times have changed" and that the service offered by the organization may no longer have the same audience it once did, thus rendering the organization's offerings/ services no longer needed, desirable or relevant. Such an honest assessment should be coupled with the courage to close the organization or seek to merge with another similar organization. If the steps outlined regarding the development and the assessment of the mission are conducted annually, such an extreme, dire situation should not occur.
More often there is a greater challenge that arises for the organization's leadership and associates when there is a service or offering that doesn't specifically meet mission, but can be lucrative. Engaging in such activities can have short term benefit in terms of the dollars earned, but begins an erosion process to the organization's prime purpose and can easily slip into a "downward spiral" leading to the organization's extinction. Certainly with major donors, especially foundations, such a move away from mission can have a negative impact on their level of support.
This is not to imply in any way that organizations cannot develop and try new ventures designed specifically to attract new populations. The key is to ensure that these are developed with the purpose also of fulfilling and extending mission. Such efforts at creativity are often met with "but we've never done that before". Any organization that allows such naysaying attitudes to exist unchecked, is dooming itself to potential irrelevance and possible extinction. An organization has to adapt to changing times, especially with regard to the changing demographics: the population served, and the competition. Again, as long as the intention of these new initiatives is to fulfill and expand mission, they should be encouraged and be seen as a "lifeline" for the organization's sustainability and long term success.
The mission's role as the primary bottom line will be further developed in later chapters dealing with strategic planning and program / service assessment.
