"Quality" seems to have displaced "cost control" as a bank management buzzword. Everyone seems to be invoking superior quality of service as the way to beat the competition and protect customer relationships.
However, quality is an elusive and subjective concept. It does not lend itself to clear definition and measurement.
Therefore, quality risks being relegated to the status of overused terms such as "synergy" and "empowerment." Everyone might declare quality a good idea and pay it lip service, but no one is quite sure what it means or how to act on it.
The Malcolm Baldrige National Quality Award program has tried to define quality more precisely. Its criteria offer a useful framework.
Pleasing the Customer
First, since quality is judged by the customer, product and service attributes should offer value to the customer and lead to satisfaction. Customer preferences should be addressed in using quality systems.
The concept of quality includes not only product and service attributes that meet basic requirements but also those that enhance services and differentiate them.
The latter factors may include new offerings as well as unique product or service combinations that pertain to the total experience of being served and satisfied.
A Demanding Strategy
Customer-driven quality is a strategic commitment. It is designed to increase market share and customer retention. It demands constant sensitivity to emerging customer and market requirements and continual measurement of factors that determine customer satisfaction.
It also demands awareness of developments in technology and the time required to respond rapidly and flexibly to customer and market requirements that extend well beyond zero defects and error reduction.
A bank's approach to recovering from defects or errors is crucial to improving service quality and customer relationships.
Role of Leadership
The second criterion for the Baldrige Award involves leadership.
A bank's corporate culture and mission should include clear and visible quality values and expectations.
Reinforcing those values implies substantial personal commitment and involvement by management.
The managing team must take part in developing strategies, systems, and methods for achieving excellence. The quality message should guide all activities and decisions of the bank and encourage participation and creativity by all employees.
New managers should serve as role models, reinforcing values and encouraging leadership in all levels of management.
Leadership by example can be exercised through all stages of management, including planning, review, quality performance management, and employee recognition for quality achievement.
Other quality criteria, as defined in the Baldrige program, include:
* Continuous improvement. This might be manifest in error reduction, responsiveness to problems, and gains in productivity and effectiveness.
Continuous improvement is a cultural value that needs to be reinforced by words and deeds and continually assessed by performance evaluations and other methods.
* Participation of a fully committed and well trained work force. Reward and recognition systems should be designed to encourage attainment of corporate quality objectives. Employees need education and training in quality-related skills and problem-solving.
* Quick response to changes in the competitive marketplace and in customers' needs. Fast action itself is often a major quality attribute. Response-time improvement should be a major goal of all quality improvement processes.
This, again, requires the ability to measure response times and organizational flexibility. Improvements may require simplification of work processes, which could improve quality and productivity simultaneously.
* "Design quality." Problems are prevented by building quality into products, services, and production processes - by getting it right the first time. Excellent quality in design stages typically leads to major reductions in problems down the road, and in their associated costs.
* Long-range outlook. Strategic plans and resource allocations need to reflect long-term commitments to customers, employees, shareholders, and vendors. They must address training, employee development, supplier development, and other factors that bear upon quality.
Key parts of long-term commitments are periodic review and assessment of progress toward long-term goals, as well as a clear strategic focus. Profitability hurdles for the next quarter will not be the principal perspective for allocating resources.
* Management by fact. The information needed for quality assessment and improvement may include customer-satisfaction surveys as well as data relating to operations, market shares, employees, and overhead costs. These facts support other purposes, such as planning, performance review, operational improvement, and competitive comparisons.
Indicators tied to customer and company performance requirements offer a clear and objective basis for aligning all activities toward common goals.
* Partnership development. A company should seek to build external and internal partnerships serving mutual and larger community interests. Partnership issues may include employee relationships, cooperation with suppliers and vendors, customer relationships, and links with the community.
* Public responsibility. This includes business ethics, equal opportunity lending, community reinvestment, environmental responsibility, and other elements of corporate citizenship.
In a quality context, this implies not only satisfying all laws and regulatory requirements but also viewing them as areas for continuous improvement.
Making It Work
Even if the Baldrige program's definition of quality does not conform completely to your institution's, it can serve as a useful framework for describing a mission and developing appropriate performance indicators.
Most important, banks that place a high value on customer service and community responsibility must integrate this concept into the day-to-day lives of management and employees alike.
This is particularly so when quality is a major differentiation factor in achieving competitive advantage - and in the customer retention and profitability that affect the bottom line.
