Total Quality Management Case Study on the Deming Prize:

Analysis of, Demings Luster Dims at Florida Power & Light

by Jimmy Alyea
The key to managing a successful supply chain is balancing efficiency and
responsiveness. A supply chain manager must manage the little details without
losing sight of the big picture in order to achieve total quality. In this case study,
Florida Power & Light lost sight of this while trying to win the Deming Prize.
Case Background.
In 1989, Florida Power & Light (FPL) became the first American company to win
Japans prestigious Deming Prize for outstanding performance in quality control
management. FPL had established a $4 million quality-improvement program in
1985 several years after its companys chairman visited a Japanese utility company
that won the Deming Prize in 1982. Although the awards sponsor, the Japanese
Union of Scientists and Engineers (JUSE), opened competition to overseas
companies in 1986, no foreign firms applied for the award until 1989 when FPL
decided to go for the gold. According to FPLs president at the time, Bob Tallon,
applying for the Deming Prize provided FPLs 14,000 employees with added
incentive to accomplish needed quality goals (Kolody, 1989).
Implementation.
FPL entered the race wholeheartedly. Instead of continuing to implement the
companys 1985 quality-improvement initiative gradually, employees were given less
than six months to meet Deming award requirements. Rigorous weekly training
courses were developed for first-line, nonsupervisory employees, and over 1700
teams were formed to come up with problem-solving solutions to reduce costs or
improve efficiency. Managers were required to master new managerial theories and
complex statistical calculations. Supervisors spent their time tracking and
calculating dozens of cross-referenced indicators such as the percentage of street
lights installed in 21 days. A functional review team was required to document and
analyze 800 different procedures for everything from conducting energy surveys to
answering customer complaint letters. An area manager of customer service for the

utilitys commercial/industrial group summed up the rigid process and the avalanche
of paperwork by stating that preparing for the exam was grueling.
Quality improvements.
When FPL received the Deming Prize in November, 1989, company president Bob
Tallon cited numerous instances of quality-improvement benefits received from
applying Deming principles. For example, the company had reduced the average
length of customer power service outages from 100 minutes annually in 1982 to 48
minutes in 1989. In the safety category, FPL had reduced lost-time injuries from
more than one per 100 employees in 1985 to 0.42 in 1989. Additionally, customer
complaints to the Florida Public Service Commission were at their lowest level in 10
years. FPL also had reduced its fossil power plants forced outage rate from 14
percent in 1986 to less than 4 percent in 1989, saving ratepayers $300 million that
would have otherwise been spent on new generating units (FPL First International
Winner, 1989).
Problems revealed.
At the same time, CEO James Broadhead acknowledged that there were some
glitches in the system. These problems were deemed by many, however, to have
overshadowed the quality benefits. Employees felt that the system was too
bureaucratic and inflexible. Many had put in long, extra hours to prepare the
Deming application and the volumes of documentation. First-line supervisors
complained they could not get their jobs done because workers were attending
problem-solving meetings every week. Problem-solving teams were frustrated when
they realized proposed solutions were being evaluated for procedures rather than for
results and substance. The Deming method was so rigidly applied to every team
problem that something so simple as moving an office water cooler required that
seven mandatory steps be followed. Not only commonsense, but also customers
took second place to following Deming guidelines. Customer-service
representatives were so pressured to answer calls quickly that they began issuing
work orders for problems that could have been resolved faster over the phone. In
retrospect, one FLP official stated, We had an internal revolt. . . . Winning the prize
became less important than the challenge of trying to meet the judges strict
demands (Bacon, 1990).

Dismantling the program.

In response, FPL officials made sweeping changes during the months following
receipt of the award. The more stringent requirements of Demings quality program,
though not abandoned, were pushed into the background. The Quality Department
was reduced from 85 full-time individuals monitoring the quality teams to 6, and the
quality-related departments set up during the award application process to do
statistical quality reviews were disbanded. The number of tracked quality
indicators were cut from 41 to 3. First-line supervisors were included in training
programs which began to focus on areas other than quality, such as supervisory
skills and customer sensitivity. Most significantly, the mandatory, often-dreaded
seven-step process no longer had to be used for all problem solving.
Conclusions.
The experience provided valuable lessons, including the need to bring all levels of
employees into the program and to show them how all will benefit from it. Mike
Brunetti, FLPs executive vice-president, now advises companies just beginning to
implement quality management programs to start with the top and work down to
middle management, then first-line management, and finally to first-line employees
(Bacon, 1990). Brunetti said FPLs experience also showed that in addition to team
activity, it is equally important to have policies that stress external and internal
customer satisfaction, that improve coordination within the company, and that
concentrate company efforts on a few priorities at a time.
Without question, FPLs commitment to quality was 100 percent. Although service
quality was obviously enhanced and a new corporate direction resulted, FPLs
profitability did not reflect improvement comparable to their winning the award. The
path FPL followed in pursuing the Deming Prize marked the company as one of the
most-cited companies that failed to implement total quality management (TQM)
properly (along with the bankrupt Wallace Co.). FPLs experience with TQM is an
example of what can happen when companies adopt new management techniques
too wholeheartedly. As one outsider remarked, people seemed more interested in
the appearance of quality and jumping through the internal TQM hoops than on
quality itself (Harari, 1997). Today, the Deming methods share the spotlight at FPL

with other management tools such as benchmarking and reengineering, and

employees have the freedom to innovate and solve problems without having to
follow one particular methodology.
Copyright 2012 James L. Alyea. All Rights Reserved.