assuring the economic future of china by managing for quality

8/18/2019 Assuring the Economic Future of China by Managing for Quality

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Assuring the Economic Future of China by Managing for Quality

Gregory H. Watson

Chairman, International Academy for Quality

Beginnings of Modern Quality in China

The beginnings of modern quality in China must be credited to IAQ Academician Emeritus LIU Yuanzhang

who brought modern concepts for applying statistical methods to production to China over sixty years

ago. My own involvement in the Chinese quality movement is much more recent. Although I had

studied Asian history and the writings of the ancient Chinese masters during my university days, I did not

become interested in deeper study of China until I was conducting research in 1995 to support the first

study of the future of quality by the American Society for Quality (ASQ). The study of the future requires

an objective understanding of the past and assessment of the current trends that will be carried forward

into the coming years. The horizon of this first ASQ study was to look to the year 2010. As part of the

study I was curious to discover what a projection of the current 1995 economic situation would bring as

there had been some work on such productivity forecasts at the American Productivity & Quality Center

(APQC) by its founder Dr. C. Jackson Grayson, a well-recognized economist and thought leader in the

field of quality and productivity in the United States. My research focused on the change in the middle

class purchasing power parity among the leading economies. I was quite shocked to discover that,

according to my analysis, the economy of China had approximately a sixty percent probability of

becoming the leading global economy by 2010 as measured by Gross Domestic Product (GDP). The

reason for this was the accelerating growth of the middle class in China and the expansion of their

consumer abilities in addition to the strong economic base of agriculture and the growing contract

manufacturing businesses. During this study, I proposed a scenario for consideration that I called “China

– the Wild Card”

1

to represent the fact that the Western world did not recognize the great growthpotential of China and the strong likelihood of its future dominance. The scenario was not used in the

study because its likelihood was considered too remote by the other team members. But, in retrospect,

2010 did indeed represent a new leadership role of China in the global economy and its transition into

the leading global economy has the potential to be assured in the coming decade.

My Past Decade of Involvement in Quality with China

Some years later, MA Lin, Executive Secretary of the China Association for Quality (CAQ), invited me to

come to the celebration of the 50th

Anniversary of the revolution of the People’s Republic of China (PRC)

which also coincided with the 20th Anniversary of the CAQ. I was invited because I was President-elect

of ASQ and CAQ was an important partner on matters related to quality. On this visit I had the privilege

to meet Vice Premier WU Li, meet with the mayors of the leading cities in China and address a meeting

of senior government leaders on subjects of importance for developing a national industrial policy that

was based on quality. Over the past ten years, I have had a number of opportunities to address Chinese

1 In the card game of poker, a “wild card” can become any card in any suite at the desire of its holder. Thus, the

card adds flexibility and increases the chances of winning the hand. In much the same way the future of the global

economy was seen to rest on the development of the Chinese economy more than any other single nation.


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government and industry leaders on topics relating to the development of a strong foundation in quality

as the basis for micro-economic growth that can fuel macro-economic development. All of the events

in Shanghai were at the invitation of IAQ Companion TANG Xiaofen, President of the Shanghai Academy

for Quality:

1999: “Micro-Economic Quality and Global Competitiveness” (Beijing)

2002: “Quality Enabler of Economic Expansion” (Beijing)

2008: “Designing Elements of a Modern Quality System” (Shanghai)

2008: “Quality: Basis for a Transcendent Global Culture” (Shanghai)

2009: “Quality for the World: The Way Out of our Economic Crisis” (Shanghai)

2011: “Managing for Quality During Challenging Times” (Shanghai)

2011: “Innovation Management: Lean Six Sigma Quality Management System” (Shanghai)

2011: “The Future of Quality: Aiming at Inclusive Growth” (Shanghai)

2011: “Comprehensive Quality Makes Life Safer and Assures Economic Well-Being” (Nanjing)

2011: “Comprehensive Quality Makes Life Safer and Assures Economic Well-Being” (Zheng Zhou)

If these presentations have helped in some way to shape the deliberations of the Chinese government

and business leaders then I am pleased to have contributed to their education and assisted in their

development of a strategy that was applied so successfully over the past decade as well as the definition

of a great vision for the future based on the nation’s continuing quality activities.

Current State and Future Direction of Quality in China

During the eighth Shanghai International Symposium on Quality (SISQ-8) and Forum of the International

Academy for Quality, I was most pleased to hear the remarks of TIAN Shihong, Director General of the

Department of Quality Management of the General Administration of Quality Supervision, Inspection,and Quarantine of the PRC (AQSIQ), as he described the current status of quality in China. He quoted a

statement made on 27 September 2011 by WANG Qishan, Vice Premier of the State Council: Quality is

the foundation, and safety is the bottom line. The work of quality is our eternal theme.” Director TIAN

noted the many accomplishments over the decade of the last 10-year plan for quality development [I

was most pleased that many of these actions were contained as recommendations in my 1999 address

as the critical programs available to a national government to encourage the development of private

enterprise quality by providing enabling national infrastructure]:

The AQSIQ was established on 10 April 2001 for comprehensive management of quality under

the PRC State Council for matters related to quality management, metrology, standardization,

certification and accreditation, and administrative law enforcement.

Since 1999 China has tracked its overall product quality using a Quality Competitiveness Index.

The legal infrastructure of national and local laws, rules, regulations and treaties has been

established to define expectations for quality performance and set boundary conditions for the

acceptable level of performance.

In 2002 the Chinese Certified Quality Engineer (CQE) designation was developed and more than

102,000 individuals have achieved this professional qualification.


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A national system of quality management institutions has been established for supervision of

the development of quality and the technical supervision at the national, provincial, municipal,

and county levels of government which includes over 2,800 organizations under the umbrella

supervision of the authority of AQSIQ.

AQSIQ has established recognition systems for national units and individuals to recognize quality

performance excellence and identify role model behavior.

AQSIQ has developed a document “The Outlines of Quality Development (2010-2020)” which

has been approved by the PRC State Council to establish the goals, methods and major actions

to be taken to drive innovative quality development and strengthen China through embedding

quality into its cultural core.

Today, China has more organizations certified to the ISO9000 standard than any country in the

world which has opened many new opportunities for seeking international trade partners.

Remarks at the same conference by IAQ Companion LANG Zhizheng, Professor at the Beijing Institute of

Technology, provided a detailed historical account of Chinese leaders’ emphasis on quality as a national

policy dating to the mid-1990s. He also defined the rationale for developing “Big Q” or macro-economic

quality as the next step forward in advancing the development of China. The goals that have been set

for strengthening China through quality include:

2015: The quality level of major fields, pillar industries and superior companies should reach or

approach that of moderately developed countries.

2020: the overall quality level should attain or approach the moderately developed countries.

2050: the overall quality level should attain the level of developed countries.

These goals to attain a leadership position in global quality reputation are aggressive and will require

increased capacity through a higher level in the technical means by which quality results are delivered.

Since such macro-economic performance is delivered through a coordinated approach at the micro-

economic level there are some important implications for the future development of quality in China

over these coming decades. In the closing section of this paper, I wish to report recommendations for

continuing this persistent advance of quality development into the future and recommend some focus

areas and actions that will accelerate the developments that are contained in the AQSIQ challenge for

the coming decade.

Challenges for the Future Development of Chinese Quality

In an address to the SISQ-8 Conference, IAQ Honorary Member H. James Harrington described results of

two surveys by the American Productivity & Quality Center (APQC) on enterprise quality measurement

as a means to improve business value. In their 2004 study, APQC noted that the American consumer’s

perception of the value of brands from China was low. However, in the 2010 study, brand reputation

had actually decreased compared to the 2004 performance. With the emphasis that China has placed

on quality, why did this happen? I believe that there are two reasons, both of which are contained in

limitations of the strategy pursued over the past ten years and must be addressed in the near future.


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The first reason is straight-forward: the true consumer perception about products is masked through the

high amount of Business-to-Business (B2B) products produced by Chinese contract manufacturers

where the original equipment manufacturer (OEM) is not evident to the consumer as the well-known

international brand receives the “credit” for the product value (e.g., mobile phones produced by firms in

China and sold under their international brands).

The second reason is not as evident: goods as Chinese imports tend to be purchased in the low-value

consumer market rather than as high value luxury goods, thus the original expectations are lower and

comparisons made by consumers do not always allow for equivalence in the value that is invested into

the products in terms of materials and production processes; instead consumers make their judgment of

perception based on the circumstances of use or the attributes of the actual product as they use it. This

poor performance perception is not a head-to-head comparison between products but a subjective

judgment that has an inherent bias toward the utility in application. This circumstance describes the

“physics of quality” in which business leaders are faced by two simultaneous trends:

First Trend: Customers always want more performance and expectations tend to rise andmarkets develop to maturity; therefore increased capability is required from organizations.

Second Trend: Processes degrade in performance over time due to depreciation and the

natural effect of entropy; therefore processes tend to decrease in capability to perform.

Capability to produce an outcome is based upon a judgment by recipients of that outcome

(customers) as a comparison in effectiveness of an organization as a ration of their expectation

for results to be produced compared to the performance of the organization’s process of

managing to produce those results. The gap between these initial expectations and achieved

performance gives rise to a continuous need for improving the processes of management. It is

the confluence of these two trends that is driving the decrease perception in the value of goods

produced in China.

Perhaps the most important implication from these study results is the conclusion that must be drawn

about a need for continual improvement in quality programs that were deployed over the past decade.

Note that my emphasis is on the world “continual” rather than “continuous” improvement. The reason

behind this distinction is important as it signifies the importance of a strong central organization of the

quality policy and practices of a nation and its industry. This distinction follows the original meaning as

drawn from the first modern statement of the need for continuously improving performance as

set forth as a fundamental management principle by the French mining executive Henri Fayol in

1916. Fayol emphasized the imperative for "a constant search for improvements" and he set

“management’s need to have an unrelenting intention to effect improvement" as a cornerstone

of business leadership (in his book General and Industrial Management ). Fayol presented this

imperative in a way that defines the driving of “constant improvement” as a core obligation in

the practice of management.


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W. Edwards Deming stressed that “quality must be built in at the design stage … downstream

there will be continual reduction of waste and continual improvement of quality in every

activity” (in his 1986 book Out of the Crisis). In this statement, Deming linked continual

improvement of quality to the innovation process as well as the need for continual

improvement in the daily management systems of organizations. This is the current emphasisin an ISO9000 quality management system where continual improvement is defined as

“recurring activity to increase the ability to fulfill requirements.” In ISO9000 this activity is

addressed by discovering improvement opportunities through a constant search using audit

findings, data analysis, management reviews and other means as a way to focus on

opportunities for corrective of preventive action. So while both Deming and ISO9000 use the

term “continual improvement” to describe the constant effort to increase performance, we

also observe the term “continuous improvement” commonly used. This is typically a

translation for the Japanese term “kaizen.” What is the distinction between the concepts of

“continual” improvement as compared to “continuous” improvement?

“Continual” is an older word than “continuous” and it comes from Latin origins (continuous)

with its first usage in English cited in the 14th

century. The world “continuous” comes through a

French usage of the same Latin word and first appeared in 1673. What is the difference in their

usage? Does it imply something more profound than two linguistic interpretations of the same

source word? In observing the subtleties of usage in these words it is possible to resolve this

distinction. Continual implies a constant state of alertness – always vigilant to determine if a

possible change makes sense. Thus continual improvement incorporates a requirement for the

rational review of opportunities in order to make strategic choices that will guide improvement.

This review process is implied to be systematic and continuing indefinitely in time without any

interruption – it recurs regularly in a steady rapid succession – it is ceaseless and thus this word

is aligned with Fayol’s concepts (as well as the review process that drives the front-end analysis

processes supporting Japanese Hoshin Kanri). In opposition the world “continuous” implies an

uninterrupted sequence in time, space, or succession – changes that keep occurring without

the benefit of managerial review. This implies to me the “white water” of a raging river that is

flowing continuously from its headwaters down a vertical pathway and cascading through its

channel to its ultimate destination. The first picture evokes the idea of management – the plan

to review and decide what to do about change – management’s attempt to place a system into

a state of control. However, the second picture is one of reaction to a chaotic stream flooding amanagement system with a reactionary approach to steer clear of the boulders hidden within

the white water. Based on this analogy, my preference is also to use the term continual as it is

a more faithful representation of Fayol’s original intention for this concept.

What should be implied by continual improvement? Continual improvement certainly is not a

constant state of change merely for the sake of change. Robust continual improvement must


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be embedded into a business strategy or plan that includes incremental or evolutionary change

as well as discontinuous, breakthrough, or revolutionary change. The stimulus for choosing the

change initiative comes from learning and the choice of the most appropriate change to be

initiated should be part of a structured decision-making process. Successful change will

therefore involve management’s process to constantly seeking the means to achieve growth inits organization’s performance.

Such improvement requires a never-ending stream of innovation which must be achieved by a

systematic generation of creative ideas that engages all diverse aspects of an organization as a

means to expand perspective and increase decision making quality: the diversity of ideas comes

from inclusive engagement of everyone! Thus, continual improvement requires the perspective

of a strategic organization process but it begins with a democratic process soliciting ideas and

opportunities for improvement and ends with an autocratic decision that makes a final choice

and identifies the organizational direction because the role of the leader is to interpret these

ideas and define the vision and plans to move an organization forward. Thus, following Fayol

and Deming, continual improvement must be conceived of as a function of management.

Since Fayol first established the concept of continual improvement as a fundamental concept in

management, the concept has evolved into a global quality movement that has embraced all

types of enterprises and all work disciplines. The quality movement often calls this a “total

quality” approach as a way to signal the need for inclusiveness by engaging all people from all

levels of an organization for achieving a common purpose or aim; defined in its most exhaustive


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sense as increasing the quality of life for all people in all areas of their lives. Therefore, we can

conclude that quality is also an aspect of management and that management should not be

positioned as a subset of quality. If this is proper then what should we consider quality?

Thus, it is planned or managed change that is important – the role of quality improvement is a core

principle in the process of management. What does this mean for China? Consider the graphic above

which illustrates three layers of quality system development. In the past decade China has focused on

the foundation (regulations and standards) as well as the structure (ISO9000 System for Management of

Quality). However the next decade needs to change from one that is focused on management of quality

to one that is focused on quality of management. This is the transition to “Big Q” that was described by

Academician LANG as a component of the next ten year plan. While macro-quality is a combination of

micro-quality activities, the whole is greater than the sum of its parts and leadership guidance is

essential to assure that continual improvement (the rational step-by-step progress in a coherent

direction) does not become a more chaotic and wasteful approach for continuous improvement where

each organization sub-optimizes the resources of society by doing what is best in their own subjective

judgment without regard to the impact on society and humanity as a whole. Thus, the concept of social

responsibility becomes as important as management responsibility for the design and execution of the

business system and engineering responsibility for the design and execution of the production

processes. How can organizations develop the insights into developments that are necessary for

continual improvement by growing profitability in the short-term and developing strength for the long-

term?

Learning for Quality Leadership

Innovation is an important aspect of continual improvement in both its incremental form (such

as evolutionary improvement) and in its breakthrough form (or revolutionary improvement). Itis through innovation that an organization assures that the quality features of its products and

services are developed into attractive quality where the customer-perceived value exceeds that

of alterative choices that are available. Thus, quality incorporates innovation as a component

of its core delivery process, just as quality includes problem-solving and management of routine

work. Organizations must consciously develop an express approach to embedding quality in all

of their activities and learn to take positive action because the development of quality is not a

natural act. The means to sustain quality originate from a quality mindset that must be learned

from conscious experience. This process is called “triple loop learning” and is applied at three

different levels to be effective:

Single-Loop Learning: this approach is applied at the work process level in organizations and

is focused on assuring the consistency of performance of work that is required to deliver to

consumers the level of performance that constantly meets their expectations.

Double-Loop Learning: this approach is applied at a business process level in organizations

and it focuses on how to improve the process for delivering quality at the work process level


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and this is the task of the local management.

Triple-Loop Learning: This is the higher level learning process that provides guidance to the

system about what must be learned to be competitive in the future and this learning is the

governance responsibility of the organization. This is management of the context to permit

the environment for sustained success. This learning process may be exercised by seniorleaders in a large organizations and it is part of the national system for industrial policy that

assures the global competitiveness of its firms.

This approach to learning is illustrated in the following graphic:

“Triple Loop Learning” focuses on learning what an organization needs to learn or learning how

to learn differently. This type of learning provides the basis for permanent change in the way

people work at the institutional or cultural level and is the realm of leadership which has the

organizational power to mandate new directions and align resources to reshape the way an

organization operates through evolution of its quality mindset or the attitude that motivates its

employees to align their personal energy with the vision and direction of the organization.

Thus, single loop learning occurs during problem-solving of work processes while double-loop

learning occurs during management review of improvement projects by integrating lessons into

the organization. Triple loop learning occurs through reflective review of change management

efforts and scanning the organizations environment and by identifying what new insights occur

that bring new knowledge for adaptation into the organization’s culture. A triple loop learning

process is a significant component in a management process and it is essential for innovating

quality improvements to the process of management.


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Specific Suggestions for National Quality Development

So, what should Chinese managers in government and industry do to improve over the coming decade?

In what new directions should China work to build its national quality system? The following suggestions

are offered:

The requirement for continual improvement in the base levels of the quality pyramid means that a

renewed effort at increasing the effectiveness and international alignment of national regulations

and standards is essential. Such systems should be built upon scientific investigations supported by

research by the national universities.

Moving beyond ISO9000 is essential and development of a quality model that recognizes all of the

special circumstances of the Chinese approach to quality development is an essential step forward.

This national model can be used as a basis for developing quality maturity in firms and also as the

basis for praising firms by recognizing their achievements in the quality content of their products

and the effectiveness, efficiency and economy of the processes by which they produce them. The

criteria for such an award should reflect the national Chinese mindset and historical philosophicalapproach to quality (e.g., the “Tao of Quality” rather than a Western model that is foreign to the

culture and lifestyle of the Chinese workers).

Education of professionals should become more systematic and should also focus on a systems

approach to integration as well as the current development of fields of specialization. The expanded

learning will help assure cross-functional performance of production and service systems so that the

requirements for customer quality delivery is not lost in the translation process from initial market

research to final installation or delivery of the product into the hands of the consumer.

Government and industrial leaders need to be developed to understand what the world’s leading

executives have done to drive quality improvement in their organizations to successfully achieve

high brand value, productivity and profitable growth. Thus, national policy must develop qualityawareness and expertise among the senior leadership of government and industry to assure that the

quality governance issues and social responsibility objectives are achieved in addition to the more

tangible product quality and profitability performance factors.

The development of macro-quality for a nation has never been attempted before. If China is able to

take great strides in this direction, then it will accomplish the goals that it has set for the coming decade

as well as the next half-century. The strong commitment of the central government for achieving high

quality, reducing waste, eliminating corruption and elevating the quality of life for its people, is very

convincing evidence that China has the national will to make this effort a success. When this is done on

a broad scale then the economic future of China will be assured. ___________________________

Gregory H. Watson is Chairman of the International Academy for Quality, Fellow and past-Chairman of

the American Society for Quality and Fellow and Senior Vice President of the Institute for Industrial

Engineers. He is Chairman of Business Excellence Solutions, Ltd. and Adjunct Professor of Engineering

Management at Oklahoma State University. He lives in Helsinki, Finland.

assuring the economic future of china by managing for quality

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