Total Quality Management: The Pareto

Total Quality Management: The Pareto Principle and TQ pioneers According to the Pareto Principle, a manager should "focus on the 20% that matters. Of the things you do during your day, only 20% really matter. Those 20% produce 80% of your results" (Reh 2010). In terms of Total Quality Management, "Pareto charts are used to graphically display the relative importance of groups or segments of data. This makes it easier to identify which problems are most important.

Typically, the data groups in a Pareto chart are displayed as a histogram or vertical bar chart, in descending order of significance" (Reh 2010). The philosophy behind Pareto charts is that problems can have a multitude of causes. However, by examining the most important contributing factors or most salient features of the problem, the best possible solution can be determined. or, conversely, the quality of what the company does 'do well' can be improved by focusing on its key strengths.

One frequently-repeated cliche that is consistent with the Pareto Principle is that "80% of a company's business comes from 20% of its customers" (Setting priorities, 2010, Pareto toolkit). A business that is experiencing losses should focus on how to improve service for its core 20%, rather than try to please everyone. A good example of the Pareto Principle in action might be found in the fast food industry.

When health concerns about fast food were widely reported in the mass media, some chains began to create healthier versions of fast food, or incorporate salads into their menu offerings. However, soon it was discovered that health-conscious consumers usually dine elsewhere, while the core demographic of fast food consumers usually wants to eat a burger. This is why McDonald's, Burger King, and Wendy's have developed larger burgers, bacon-laden burgers, and dollar menus filled with staple burger-related items, rather than focused on diversifying their array of healthy products in recent years.

The companies have maximized their core market strengths, and enhanced the features of their menu that appeal to their core demographic: beef, bacon, and low cost. The importance of Total Quality Management has grown in today's increasingly competitive environment, particularly given the quality and safety concerns that have proliferated in the wake of Toyota's epidemic of problems with its current fleet of vehicles.

The shock of the current spate of recalls derives from the fact that Toyota's management team was once widely considered the pioneering force behind TQM: "The Japanese combined their greater cost-effectiveness with a sustained drive for the largest possible market penetration, founded on high levels of investment, innovation, and downright ingenuity. The conventional Western approach to long-term strategic planning, with its three to five-year cycles, mostly failed to match this Eastern thrust" (Heller 2005).

Toyota was famous for its Kaizen philosophy of eliminating waste and tolerating no defects, an ideal accomplished by continually auditing its products and processes. Although it is not clear what caused Toyota's problems, some analysts have attributed the company's faltering to its passion for waste elimination. This resulted in Toyota's product line encompassing relatively few designs, and a focus on building relationships with relatively few suppliers to keep inventories low.

Although interchangeability and intercompatibility of components is efficient, when there are problems, a total systems failure results, if quality control is not sufficiently enforced. Despite the fact that the TQ pioneer Toyota has been knocked from its pedestal, this is not a reason to disdain the TQ philosophy. Rather it is best to study what worked from the Toyota miracle during its heyday. Maximizing efficiency is.