Society of Petroleum Engineers

SPE 26413

Optimizing Upstream Processes Through Total Quality Management

Mauro Cevenini, Texaco E&P Inc.

Copyright 1993, Society of Petroleum Engineers, Inc.

r
This paper was prepared tor presentation at the 68th Annual Technical Conference and Exhibition of the Society of Petroleum Engineers held in Houston, Texas, 3-6 October 1993.

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Key Words: statistical quality control, process capability Japanese Union of Scientists and Engineers (JUSE)
studies, total quality management systems, policy statistical quality management system. FIgU1"e 1 below
deployment, quality in daily work, vendor/supplier quality explains the synergies among these three quality systems.
programs.
TOTAL QUAUTY MANAGEMENT IS AN
AGGREGATE OF THREE SYSTEMS
EXECUTIVE SUMMARY

This paper presents the models cud steps ··tilat forge

Deming Prize Winning Corporations- followed to
successfully implement Total Ouality Management (TOM)
statistical systems in a multibillion dollar oil/gas
operation: Texaco. These efforts were traceable to the
high end double digits multimillion dollar saving, and cost
avoidances to a lesser extent. TOM provided focus and
involvement of all personnel (executive, supervisory, line)
towards a common set of goals. Figure 1.

1. INTRODUCTION Given the fierce world-wide competitiveness of the above

The exploration and production of oil and gas is the basis
of any oil/gas corporation. This operation generates over
three fourths of the total cash flow for their world wide
operations, and holds under 8% of the Texaco personnel.
The latest fmancial reports show Texaco in the top
quartile of the competition. This is commendable,
considering that at the beginning of the decade it was at
the bottom quartile.
In 1991, these oil/gas exploration and production
operations had been briefly introduced to the Deming
continuous improvement philosophy -or the social quality
system but were lacking the other two components of
TOM: the Juran technical quality system, and the
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operations, the executives looked for a more effective
management system that would allow more focus and
develop the infrastructure for the alignment of the voice of
the business to the voice of the customer -or customers'
needs. See figure 2 below which explains the transition
from chaos and paralysis to one of linkage and alignment
at all levels. This decision to start the paradigm shift was
rooted on a clear understanding of "why" change was
necessary. Without this understanding, they would have
never made the personal commitment of time and energy
necessary to achieve its ultimate success.
With this commitment and clarity of purpose in place, the
change was accompanied with clear communications to
ensure that all employees were made aware of the reasons training program was implemented. This meant training
people as the issues for them to apply the training became
apparent. After six months there were over 300
. ,. ~RmI'"'I~
. ~~~jl.,· deliberately selected process improvements in place. All on
ffi'. . . ~.-J .'. ~.J~1.,;,:.;,..;,;::t::;
t["11;1",,,
Everyone engaged In planned and/or or around issues that were crucial to the organization's
~~~I voluntary lell-sustainlng improvement
aotlvlty. .__.. _. _ success.
3 All Improvements aiming In the same
t ttt direction
.1 -- J!..:;'-:':'" --------- The model used as an umbrella was TOM which consists
. 2 ~"t Everyone trying to do things better.
of quality/performance teams' activities (OIT), policy
)1..-'-- ----.-------..--.. -......--
1 "
. "(. A few champions trying something.
~
._-._~i'- __. .. _
management (PM), and quality in daily work (OIDW).
This model was based on four principles: respect for

~ people, customer satisfaction, management by fact, and

PDSA or continuous improvement. Figure 4 below depicts
Figure 2. this relationship.
COMPONENTS OF TOTAL QUALITY
why the change was necessary. This commitment to MANAGEMENT
change -or paradigm shift-coupled with an understanding
of the essential components of TOM (though training) set
the stage to empower everyone in the organization. Figure
3 below shows that everyone in the organization was
working as one "big-ole' team". Note the direct link of

Figure 4.

THE POUCY MANAGEMENT PROCESS
Figure 3.
the line personnel to executive level. This was achieved
through periodic functional reviews, to be explained later.
To optimize the utilization of resources, and capitalize on
the learning curve progression a staggered just-in-time
2. PROBLEM
Even though the above oil/gas exploration and production
operations enjoyed a stellar performance, there were no
methodologies -or models- in place to understand the
cause-and-effect of the actions taken that resulted in such
~: performance. These actions were a function of the
continuously changing bright people, not due to
improvements in the critical processes that drive the
business. As an aside, it is important to remember that
there is a world of difference in achieving results by
manipulating the output -or down stream of a process-,
and achieving results by improving the capability of the
processes that drive "that" output. There was also a lack of

424
a systematic process/model to assess and realistically
target process improvements (Kaizen) at the lowest
actionable levels to develop "paradigm pioneers" instead
of "paradigm shifters", and thus move at least three times
faster ahead of the competition. Figure 5 below depicts
this time relationship in perspective.
Figure 5.
TIME
3. SOLUTION
A system wide TQM program was systematically
implemented using the Juran technical system, the JUSE
management system to complement the existing Deming
quality social system that embraced the philosophy of
continuous improvement in all processes. The forging of
these three systems makes up TQM which
operationalized through policy management,
quality/performance improvement teams, quality in daily
work processes, and vendor supplier quality improvement
programs. The following lines will attempt to summarize
the above model:
THE TQM MODEL:
3A. Quality/performance improvement teams:
While it had long been recognized that groups of people
working together are more successful than individuals
activities, the informal teams which had been formed
throughout the history of the company had not been
uniformly successful. Figure 6 below depicts the "usual"
approach to problem solving the initial teams follow. The
fact that one is spinning does not mean that one is
producing, or more succinctly, activity does not mean
productivity. Organized team activities were introduced in
the late eightee's for the following three reasons:
1) to improve the quality of products and services,
2) to develop employees' skills, and
3) to enhance the quality of work life.
THE USUAL APPROACH TO
@ ~PROBLEM SOLVING
@~:~
?
Figure 6.
Thus, it was recognized from the very beginning that the
success of team activities should not be measured just by
the costjbenefit of each solution. Of course, economics
was important and the sum of the benefits was compared
to the cost of the team activities on an annual basis. This
is comparison always confirmed the cost effectiveness of the
process, but at each location supervision was encouraged
to recognize positive contributions by teams even if the
savings were minimal or hard to quantify. In other words,
the priority number one for recognition was not so much
hard dollar savings, but the level of improvements achieved
in the critical processes. Recall that process improvements
stay, and output manipulations -to achieve results- come
and go. This helped to ensure that objectives two and
three were also accomplished.
To assure that each of these teams were following a
consistent and sound problem solving methodology, a
common problem solving process was introduced
throughout the entire organization. This process was
rooted on the Shewhart continuous improvement wheel
(PDSA), and revolved around the "Deming" 7-step quality
425
improvement story summarized on figure 7&8 below. This
~ .--....
:!!!!!!!..l!!!!
- ~
• I'DSA PMJerss. _lOX
Figure 7.
systematic/analytic problem-solving process laid out the
infrastructure necessary for a common language in the
organization, which increased the information sharing and
job adaptability by several levels of magnitude.
Team activities prospered to over 300 documented
process improvements supporting crucial business issues,
over a ten month period. Maintaining this level of
performance with a just-in-time type of training required
careful attention to the frequency, and the types of
personnel trained, especially middle management. Until
they were not trained, they tended to view team activities
as non-productive and sometimes would discouraged
426
personnel from attending team meetings. It is to note that
initially the ratio of task -or project- teams to functional-
or voluntary- teams was about 80/20 to provide focus, and
allow time for a significant culture change to take place.
DEMING SEVEN STEP QUALITY IMPROVEMENT
STORY LINKAGE WITH THE SHEWHART
CONTINUOUS IMPROVEMENT WHEEL
Figure 8.
3B. Policy Management:
Although team activities created tremendous employee
involvement -and buy- in towards TOM- and there were
many excellent results, it was obvious that solving random
problems would not be enough to change the organization
to advance faster towards success in a very competitive
environment. It was determined that a systematic approach
was needed to focus corporate resources on a few priority
areas to achieve dramatic improvements in corporate
performance and enhance customer satisfaction. As an
aside, it is important to note at this point that customers
were defined as anybody the employees of the organization
interface with. Even our suppliers we considered
customers. Yes, customers of our specifications.
Continuing with the previous discussion, the above
systematic approach was called Policy Deployment. It
included three major components: Develop/establish
policy, deploy/implement policy, and review policy. Figure
9 below depicts how they fit in the TQM triangle.
COMPONENTS OF POLICY MANAGEMENT
compare existing performance levels to the level necessary
to achieve customer satisfaction and delight. Then, the
activities which are very important to the success of the
business (voice of the business) and have unsatisfactory
performance are prioritized and selected. This process
consists of both tops down and bottoms up approaches. At
this point the customer needs (voice of the customer) are
prioritized and organized, so that the voice of the business
is aligned to the voice of the customer. Figures 10, 11, U,
& 13 below provide a graphical summary of this process.

Figure 9.

Customer
Following are four operational definitions for the above
terms:
Policy Management: the strategic planning,
implementation, and execution process that aligns the
organization's critical success factors to corporate
objectives, to achieve the corporate vision.
Policy Development: the management process that creates
a strategic planning document that aligns the voice of the Figure 10.
business to the voice of the customer.
Policy Deployment: the management process to focus
business units' resources on implementing the
organization's strategic plans at all levels of the
organization, and provides linked common priorities with
a trail of accountabilities.
Policy Review: the management process to focus business
units resources on ensuring execution of the organization's
deployed plans at all levels of it, and producing an aligned
feedback loop. Figure 11.

Following is a brief explanation of each of the above
defined components:
3B1) Policy Development
In order to move forward it was necessary to develop a
Vision, to analyze customer needs, analyze the business
environment to identify critical success factors and
3B2) Policy Deployment: Once the priorities have been
identified, it is necessary to align the activities within the
organization. The priorities are documented with
indicators, targets, and goals, and then communicated to
all personnel. This approach is called "the flag" system,
graphically shown in figure 14 below. At each location, the
activities that can be completed to enhance performance

427
are documented with the expected improvement and
resource requirements, if applicable. These activities are
ObjectiveS/requirements
IW
I-
Processes I-
To assess priorities
Figure 12.
Qualily Function Deployment (QFD)
Is A Stnactured Approach For Capturing The User's Requirements
ADd Mapping Them Inlo Product ADd Process Parameters.
NOTI:', IN POLler O':P/,OrMF.NT, TIlF. ARF..~ Ot'
./I,\'INI::>:> UX'IIS:> IS H/P/JOWN, ..Ifill) Tilt:
T.~R(iI:TtriO.·tLSETTI!Y(i I~' fII/XiOTl.-I TI::D HIlMI
HfllTOUS I' P,
Figure 13.
then compared to the required improvement at the
corporate level to ensure alignment. Through this
"catchball" process, a series of activities are identified,
which will allow the corporation to achieve it's objectives.
This plan is then integrated with the budgeting process to
ensure the resources will be available.
3B3) Policy Review: With the planning complete, it
necessary to begin to execute the plan. Individual and
team activities are initiated to achieve the progress which
was committed to during the planning process. In order
to verify that the expected progress is being made, a
series of routine progress -or functional- reviews are
conducted. These reviews are normally conducted in an
informal environment by line management on a monthly
FLAG METHOD
(KOMATSU MFG.)
35t2: 15~
Figure 14.
basis. Executive management is also involved in reviewing
progress on priority items on a routine -scheduled- basis.
It is important to mention, at this point, that Policy
Management is not a "repackaged" Management by
Objectives (MBO). Figure 15 below summarizes these
differences. This Policy Deployment system has been used
very effectively to ensure that the resources of the
company were aligned to achieve breakthrough
performance on the few priority issues that were vital to
improving the organization's performance. These results
have been remarkable, and sustainable over the past year.
3C) Quality in Daily Work (QIDW): this component of
the TQM process focuses on incrementally improving the
business processes of the company. It includes three major
components:
IS 1) Continued process improvements.
2) Employee Suggestions.
3) Vendor/Supplier Quality.
Each one of the above will be summarized below:
3C1) Continued Process Improvements: this is the
application of the traditional Statistical Process Control
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techniques to improve every phase of the business. The tend to say that there is no value added to write down the
approach shown in figure 16 below is applied to the major steps of a daily activity that all know. The point is this:
DIFFERENCES
aUAI!.!.'!.. IN DAILY WORK FLOW PROCESS (WOW)
MBO POUCY MANAGEMENT
FOCUS ON RESULTS FOCUS ON PROCESS
TO GET RESULTS
RIGHT METHODS
UNDERSTAND CAUSE.EFFECT

TOP DOWN TOP DOWN/BOTTOM UP

"STRONG ARM" TACTICS GOALS & ACTION NEGOTIATED

FOR GOAL DELEGATION USING FACTS AND DATA

FOCUS ON WHO FOCUS ON HOW

INDIVIDUALISTIC GROUP ORIENTED

RELIES ON "SUPER STARS" DOESN'T NEED "SUPER STARS"

WORK HARDER WORK SMARTER

(MOTIVATION BASED) <KNOWLEDGE BASED)
OFlEN CAUSES FAVORS GOAL CONGRUENCE
SUB-OPTIMIZATION

WHO FAILED? WHAT WENT WRONG"

(HOW DO WE IMPROVE?)

CAN DEMORALIZE CAN ENERGIZE

Figure 15.

business processes identified through Policy Deployment Figure 16.

and the top job process for each team/employee. As
shown, one of the first steps is to identify the customers
of the process, and their valid requirements. In many
cases, this proved to be very interesting as employees
searched for the customer of their work. In a few cases,
no customers were identified, and the process was
discontinued. If the customer was found and valid
requirements negotiated, the flow charting process caused
significant work simplifications. As the existing process
was made visible, the employees eliminated unnecessary
work steps so that the process could be streamlined.
Progressively, the continuous improvement of these
processes was achieved through the use of statistical tools,
and analytical problem solving techniques. Figure 17
below shows the linkage of these two in a matricial way.
As an aside, it is very important to note that most people
"how can one continuously improve something if it is not
written down? Also, if a result is achieved through a
process improvement, it will stay after the "inventor" moves
on to other career opportunities.
3C2) Employee Suggestions: soliciting suggestions from
employees has long been recognized as a good way to
increase employee morale, and identify cost savings. The
real business value of such system is not readily obvious;
however, until an effective process is put in place to collect
employee input. Once each employee is critically analyzing
their work and identifying small improvements, the real
power of this system can be recognized. Instead of relying
on supervision to identify every enhancement, and modify
the existing procedures and guidelines, the employees

429
become the primary agents of change. They are more
familiar with the work and have a vested interest in
simplifying the routine work processes.
HOlN TO ~ THE 7-« TOOLS IN THE DElliIING 74JE" CI STCR'I
~ 11,11 ~ ~ II-II
DC
!f a~ ai al I al al
J. TOOLS
-=. ! I
~- I; Ii Ii UIi illllIll!
....C1NO
o powerful management system which leads to the dramatic
o o 0 ®
o 0
® 0
o done in addition to the "regular work," it is the assurance
Figure 17.
3C3) Vendor/Supplier Quality: many enterprises are
dependent upon raw materials and goods received from
others, and their ability to supply defects free products on
time. The initial reaction is to force suppliers to improve
their production and delivery systems. In many cases,
however, their ability to perform is limited by the
customer's procurement systems. Thus, the fIrst to
improving quality was to improve the customer's ability to
provide the goods with timely, accurate information, and
enter into a win-win long term relationship with suppliers
who shared our desire to improve quality. In a highly
regulate environment it was necessary to establish fairly
elaborate processes to facilitate a closer working
relationship with suppliers. This will evolve into highly
progressive program which will provide training and
·assistance to suppliers of critical services/products, and
rewards them for their progress by providing them with a
competitive advantage, and a "single" preferred supplier
status.
TQM integration:
While the author has divided the TOM system into
several components to make it easier to describe, in actual
practice the components work synergistically and
complement each other. For example, once a major
organizational priority has been selected using the Policy
Management process, the process is identified and
improved using QIDW. Breakthrough improvements in the
priorities are achieved by individuals and teams using the
"I
common Quality Improvement Story analytical process.
Individuals contribute suggestions for improvement, and
functional teams tend to select problems which are aligned
with the Corporate Priorities. Thus TQM is a very
improvements in Corporate performance as mentioned
® earlier in the discussion. TQM is not something that is
system for accomplishing the organization's objectives.
4. RESULTS
Eighteen months after the implementation, the TOM
systems provided the needed focus of resources to
systematically identify the critical business success factors
that linked all the operations and their respective
benchmarked targeted improvement activities' levels by
means of Quality Function Deployed stream of indicators
deployed using the flag system discussed earlier. In this
way, integrating process management with the voice of the
business and the voice of the customer. This approach
increased this multibillion dollar operations performance
by several orders of magnitude, and this includes soft
issues like moral, and absenteeism.
5. CONCLUSIONS
There are many quality program being tried in large and
small corporations today, but the vast majority have quality
as a "side show" failing to integrate the planning,
organizing, monitoring, and controlling processes into a
Total Ouality Management based operation. A true TQM
program exists only in corporate cultures that have
commitment, and thrive when realizing the value TOM
brings when anticipating customer needs and translating
them into products and services that consistently delight
430
customers.
6.RECO~NDATIONS
The experience of continued success at FPL and
numerous other companies world wide, demonstrate the
tremendous value of implementing a TQM system. The
successful examples include implementation of the basic
systems described in this paper. Freedom from defects
and timely delivery are being taken for granted by
consumers and sophisticated purchasers, so the future
survival of an enterprise requires being able to achieve
these difficult objectives as a minimum. To be truly
successful in the future, the leading corporations will have
made the three to four year investment to change their
organizations to a TQM system, and they will be prepared
to move forward by "delighting" their customers. It is a
formidable task to embark on the change, but it is
relatively easy today because there are many role models
in both Japan and the Western World. The change is not
easy, even though the technology is readily available
because it involves changing the way people behave/think,
and that takes time.
This is because the longer we go without changing our
paradigm, the more we think we are successful. The
transformation complicates matters because when we have
a change of paradigm, everyone goes back to zero and
everything we are good at is irrelevant. A good point
about the change though is that a paradigm change allows
the people that had no power before, have the power
now.
Even though the technology to facilitate the
transformation is here, when we adopt it we tend to still
"play" by the "old" rules. "New" rules need to be invented
and aligned with the "new" tools. These "new" tools allow
us to do the same we did before faster. If we are enjoying
success now and we sit on our assets, the future will come
and eat our lunch. We cannot afford to be settlers
anymore, we must become pioneers again and "invent" the
future by creating "new" paths for the customers.
Christopher Columbus once said: " the real voyage of
discovery consists not in seeking new lands, but in seeing
with new eyes."
431
Albert Einstein once said: "the kind of thinking that got us
here today is insufficient to get us to the future". The call
to change is now! Those companies that hesitate will fall
further behind, and perhaps take a position from which
they cannot recover. I commend all of you for taking the
time to read this paper and your attention to this serious
matter; and, while the change is difficult, the benefits far
outweigh the investment.
7. REFERENCES
1. Deming W.E., "Out of the Crisis," MIT Center for
Advanced Engineering Study, Cambridge, MA, 1986.
2. Ibid, "Quality, Productivity, and Competitive Position,"
MIT: Cambridge, MA, 1982.
3. Ishikawa K., "Guide to Quality Contro~" Asian
Productivity Organization: Tokyo, Japan, 1990.
4. Juran J.M., Gryna F.M., "Quality Planning and
Analysis," McGraw Hill, 1980.
S. Barker J.A., "Future Edge," Morrow, 1992.
6. Cevenini R.M., "Practical TQM Notes in Operations
Management," FPL, 1987.
7. Imai M., "Kaizen," McGraw Hill, 1986.
8. Cevenini R.M., "Notes on TQM Consulting," QQS, 1991.
9. Sharkenbach W., "Deming Route to Continual
Improvement," SPC press, 1991.
10. Shewhart W., "Economic control of quality of
manufactured product," ASQC press reprint 1980.
8. BIOGRAPHY
R Mauro Cevenini
10849 E. Crestridge Circle
Englewood, CO 80 III
(303) 793-0371
Mauro Cevenini is Regional Director of Total Quality
Management Systems for Texaco Exploration & Production
Inc. He develops, and directs the implementation of all TQM
activities. He is also member of the board of directors of
Dynatek International which provides consulting in
integrating quality engineering, applied industrial statistics &
reliability to service & manufacturing industries world wide.
Prior to joining Texaco, Mr. Cevenini was Project Manager
and Consultant for Qualtec Quality Services, Inc., an FPL
an FPL Group company. In this capacity, Mr. Cevenini
was responsible for assisting national and international
service and manufacturing organizations achieve a
competitive advantage through the implementation of
TQM Systems. Prior to joining Qualtec, Mauro held
nuclear/fossil power plants positions of increasing
supervisory accountability.at Florida Power & Light, Co.
(FPL) culminating with power plant superintendent. In
that capacity, significant improvements were achieved
through the application of Policy Management, Quality in
Daily Work, and Quality Improvement Team activities as
well as Procurement and Supplier Quality Improvement
Programs. He held a leadership role in the successful
challenge of the Deming Prize awarded by the Japanese
Union of Scientists and Engineers (ruSE) in November
1989. Prior to his five + years with FPL, he spent over six
years with Rolls-Royce Manufacturing, and Metalmaster-
Prodenca where he held operations management positions
of increasing supervisory accountability including
production engineer, quality control & design engineer,
and manufacturing & marketing engineer.
Mr. Cevenini holds undergraduate degrees in Industrial,
Electrical/Mechanical engineering, and three Master
degrees In Industrial engineering, Business
Administration, and Management Science. He has several
professional registrations and certifications in the areas of
engineering, reliability, and quality.
He held an operations management adjunct professor
position in the Florida International University for five
years. He is a speaker in Quality issues for the
International Platform Association, and is widely
published in national and international conferences. He is
a member of ASME, ASQC, IEEE, AIlE, TIMS, Phi
Kappa Phi, and Tau Beta Pi. He is listed in seven "who's
who": among them who's who in industry & finance,
science & engineering, emerging leaders, and who's who
in the world. Mr. Cevenini has lived on three continents
and is technically fluent in Italian, Spanish, English,
French, and Portuguese. Mauro, his wife Carol, and their
two sons Dino and Marco live in Englewood, Colorado,
USA.

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