Key Points

• There is no question that Total Quality Management requires significant metrics to track.
• The good news is that tracking these metrics is very easy.
• The hope is that by tracking these metrics, companies can easily course-correct to achieve greater success.

The whole notion of successfully implementing a new business methodology doesn’t come without numerous challenges. First and foremost among those challenges is getting internal stakeholders, like the day-to-day workers, to sign off on new processes. Total Quality Management has plenty of success stories, but even the best efforts didn’t go off without a hitch. 

As a result, it’s essential not only to assess how well your employees are handling changes, but also to understand how to measure success in other ways. This essentially is an ask to focus on several Key Performance Indicators (KPIs) that can best define the short-term and long-term performance of any Total Quality Management rollout. 

What Are Key Performance Indicators? 

For the most part, you can look at Key Performance Indicators as a measure of how well a company is doing long-term. While there are definite short-term applications, organizations typically use KPIs to monitor their progress against the goals or business objectives they have set out to achieve.

In many ways, KPIs will help a company stay focused on maximizing shareholder and employee value by aligning with its goals. These goals may be strategic, operational, or financial, but they all work toward the same primary business objective. Many companies use past performance as a way to gauge their current performance.

There is no question that in the world of Total Quality Management, measuring performance is a definite need. Whether it’s to identify areas that need improvement, establish benchmarks, or track performance over time, understanding how KPIs impact TQM is a definite must. 

Different Types of TQM Metrics

For the most part, you have three different types of KPIs that you should focus on in a Total Quality Management methodology system. These three systems: customer-focused, process-oriented, and employee-related metrics, are undoubtedly the most critical for tracking success in the TQM world. 

Customer-Focused Metrics

The purpose of customer-focused metrics is undoubtedly to gauge quality from the customer’s perspective and to understand if the work you are doing will increase their loyalty, which in turn increases brand reputation. 

One of the most important metrics is the Net Promoter Score (NPS), which measures the likelihood of a customer recommending the company to others. Traditionally ranked on a score of 0-10, you have promoters who rate a company a 9 or 10, while detractors will rank a company from 0-6. To determine the percentage, you will calculate the percentage of total detractors from the total number of promoters, which results in an NPS score between -100 and +100. 

A Customer Satisfaction Score will help you look at how customers are rating their experiences on a survey. You aim to achieve a CSAT score of 90% or above every six months, when the survey is administered to customers, by completing 4 out of 5 or 5 out of 5 (or 9/10 or 10/10). 

The Customer Complaint Rate will help you examine the number of complaints per 1,000 units sold. This review is likely to occur every month, and it’s up to the company to investigate these complaints and determine their point of origin, such as a product defect or service delay. The goal is to continually identify and address issues within a TQM system to reduce the number of complaints. 

Lastly, the Customer Retention Rate measures the percentage of customers who return and make a repeat purchase. To calculate this number, take the number of returning customers, divide it by the total number of customers, and then multiply the result by 100. The goal is to maintain a retention rate of 80% or higher. 

Employee Related Metrics

With employee-related metrics, you are looking to properly measure how engaged and motivated your staff is as part of the TQM process. 

At the very top of the list to measure employee KPIs is the Employee Engagement Score, which looks to measure employee satisfaction. This is generally done through either annual or quarterly surveys, which ask about topics such as morale, resources, and how involved individuals feel in the changes taking place. If a company scores above 85%, this is generally considered a successful outcome. 

Focusing on Employee Turnover Rate is another critical metric related to employees, as it looks at whether employees are leaving voluntarily or involuntarily every year. This calculation divides the number of employees leaving by the total number of employees and then multiplies the result by 100. The hope is that a company can reduce turnover as much as 10% every year. 

Arguably, the most important metric is to examine the Error Rate per Employee, as this number assesses how well individual teams are performing. If you are looking to improve your customer service team, you can track data entry errors to reduce errors by 25% per quarter through targeted training that addresses specific issues. 

Process-Oriented Metrics

The most important of the three different KPI groups in the TQM world, Process-Oriented Metrics, aim to measure the efficiency, consistency, and effectiveness of all business processes. 

At the very top of the list is a Defect Rate, which measures the number of products or services that fail to meet an organization’s quality standards. Calculating this number requires a company to take the number of defective units, divide it by the total number of units, and then multiply the result by 100. If the current defect rate is approximately 5%, the goal may be to reduce it to 2% by the end of the year. 

Another important metric to evaluate is the Downtime Percentage, which measures the time production is halted due to quality issues or maintenance. Take the number of downtime hours, divide by the number of total available hours, and multiply by 100 to get this number. 

The Process Capability Index, or Cpk, will evaluate how well a process meets the specification limits that an organization has imposed. For example, a CpK greater than or equal to 1.33 indicates a capable process, while anything less than 1 indicates issues that need to be addressed. 

A First Pass Yield (FPY) helps measure the percentage of units that meet current quality standards without needing to be reworked. In this case, you want to try and get the number by calculating the units passing the first inspection divided by the total units and multiplying by 100. If an organization is achieving an FPY of 95% or higher, this is a good sign that things are going well.

Finally, Cycle Time will examine the time taken to complete any process from start to finish. This might be the time it takes to assemble a product or resolve a customer inquiry, with a focus on continuously dropping this number every six months or annually. 

Significance of TQM Metrics

Ultimately, there is no doubt that TQM metrics play a crucial role in a customer’s pursuit of success. These metrics will provide an organization with a data-driven approach to decision-making, enabling it to make more informed decisions about resource allocation, investments, and any strategic initiatives it is currently considering. 

Other Useful Tools and Concepts

If you’re looking to read more about Total Quality Management, you can learn all about the importance and the role of leadership during TQM implementation. In addition, you can dive even deeper into TQM life by taking a look at some of the most important case studies that highlight why this methodology is not just one of the most popular but also one of the most successful. 

This might also be an opportunity to read even more about Six Sigma in Healthcare, and how important it can be in helping those who need it most. Alternatively, what about reading more about the Role of Scrum Masters and how they are able to help drive their teams to often achieve the impossible. 

Conclusion 

There is no question that the role of TQM metrics is of great importance. They are completely necessary to understand how well employees are driving toward their objectives, as well as engaging with the TQM process. These metrics will also be critical in determining whether a TQM rollout is progressing well or if additional work is needed from the leadership level down.