Faced with increasing competition in the! face of the globalization of the economy, exacerbated by greater consumer involvement and knowledge, firms have to offer better products, adapt and induce change in order to survive and if possible, lead the market. Traditional management techniques towards quality and risk have proved to be inefficient compared to the ones used by leading companies. This section will propose an approach to deal with these issues within the framework of systems theory.
According to Total Quality Management (TQM) advocates, quality is "meeting or exceeding the expectations of customers" sometimes "at lowest cost, on time, every time". TQM was a response to the Japanese success in exceeding western quality and production costs in only a few decades. It originated in the 1980s with the work of Crosby (1979), Deming (1986) and Juran (1989). Over the years it has brought enlightening experiences of how to achieve better products but it is now under criticism because of its failure to honour its name. It has not been able to fulfil the needs of all the people that intervene in the process. As a result, in most instances, it has not been able to exceed consumers expectations and thus, companies have not reached a leading position.
TQM is a good system to follow the lead but it does not provide the tools to produce active adaptation, which is the precondition for product flexibility and innovation. This is caused by the very nature of its principles, which rely excessively on incrementalism and poor information of customers' expectations.
A project manager has to consider all internal and external customers. He or she has to be concerned with the quality of the outputs of each part that is consumed internally by other parts or externally by an outside client. There are levels of customers from intermediaries to final consumers. Providing a good service or product that satisfies customers, involves the complex task of focusing on their particular needs and purposes. Working in this area will reduce conflicts and outputs that serves the needs of each one of the stakeholders.
Knowledge of the needs of customers is an area where many projects have failed to achieve, since in many instances from the conceptualisation and design stages to the operation, maintenance and decommissioning, customers or beneficiaries were not really considered. Decisions were made without the appropriate consultation by departments that seldom have a fair knowledge of its consumers. The most obvious case occurs in infrastructure projects funded by International Agencies, where whole irrigation schemes have failed because they do not fulfil the needs of the communities; the final customer.
In commercial ventures, traditional market research has proved to be inefficient in finding out customer's needs. Statistics and questionnaires could be easily biased. Best results are obtained when it is possible to achieve a continuous interaction between consumer and provider, leaving the passive thought of beneficiaries to one that promotes their participation in all the stages of the project. Interaction with the client will also yield less claims and reduce costly legal procedures to settle differences.
To round up the concept of quality, it is important to emphasise the link between the quality of inputs and that of the outputs. Ackoff took it one step further stating that quality of work life has direct implications on work output. Motivated personnel with increasing opportunities for self development in a democratic organisation will likely meet and exceed customers expectations.
The increased participation achieved through the kind of management advocated by this theory brings about a sharp reduction or risk. Participation has to be clearly reflected and defined in the contract strategy, which ultimately allocates risk to the different parts. Inclusion of the stakeholders in the development of means and ends for the provision of a product or service is linked with two major reducers of risk for any given enterprise:
- Reduction of risk through increased knowledge of customer needs;
- Reduction of risk through transfer or empowerment.
Going back to the typical systems diagram shown in figure 1, we find risks associated with the process, the environment and with the inputs and outputs of the system. Thompson (1994,2) following the Guidelines on Risk Issues points to three major areas linked to the environment; to safety and health; and to the activity itself.
The biggest risks in most projects occur in its operating environment, where we find the customers, suppliers and the competition. The next level (General Environment) can inflict serious damage on the success of the project, through changes in regulations, monetary or tax policy and instability with such aspects as power balance or global trade.
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Out of the Crisis -- W. Edwards Deming !
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Figure 1 Location of Risks in a System
When looking at the risks related to the implementation, the analysis must include the ones that affect the other stages of the project. It has been found the great majority of risk occurs in the operation phase, with maximum exposure being when investment has reached its peak. Figure II.7 shows a cash flow diagram in relation to the major stages of the project, and it is possible to observe that in this case the maximum exposure to risk occurs just after the implementation phase has finished, and the firm has started to invest in its start-up expenditures.
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Figure 2 Project cash flow diagram
"- Obtaining additional information;
- performing additional tests/simulations;
- allocating additional resources;
- improving communication and managing organisational interfaces." (Thompson,1994)
Once implemented, collaborative management performs these activities automatically taking them one step further by focusing on active participation, meaning complete feedback from the very definition of objectives and the way to achieve them (means and ends). Practising this policy requires more investment in terms of time, human resources and money, but will lead to the reduction of uncertainties and risk, with a service or product that is more likely to adapt to changes and respond to the quality requirements of clients.
