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The quality of service processes has a major effect on the costs of the organization and hence on profits and value. In service organizations, the “garbage time” should be measured by its real economic value, that is, by economic value of the wasted time. The authors’ experience, backed by the relevant literature, shows the garbage time of IT software developments, for example, is 40 to 70 percent of the labor cost. Methods like “quality costs” usually show a much lower amount of waste and should be scrutinized.
The business approach to quality encourages the prevention of both poor service quality as well as over-quality for which the customer is neither paying nor valuing (Coman and Ronen, 2009; 2010).
TOC has never developed a coherent methodology for quality improvement in an organization. TOC’s contribution to quality is limited to the issues of where to focus the efforts for quality improvement and the recommendation to eliminate bad multitasking (BMT) as a way to improve the quality of execution in project management.
How to Implement the Change?
Value enhancement projects are more complex in service organizations than in manufacturing organizations for reasons mentioned previously. Hence, it is of great importance to have a structured approach to value creation in service organizations. The preferred methodology in this case is the Value Focused Management (VFM) approach.
VFM is a practical five-step methodology for implementing shareholders’ value enhancement projects (Ronen and Pass, 2008a, Chapter 19). VFM provides a common language across all functional areas; thus, it enables aligning all the organizational decision-making with the goal and creates a clear link between management actions and shareholders’ value. The stages of VFM are:
1. Define the goal.
2. Determine the performance measures.
3. Identify the value drivers and evaluate their potential impact.
4. Decide how to improve the value drivers.
5. Implement and control.
The buy-in for TOC in service organizations is much more difficult than in manufacturing organizations. Thus, it is important that the management team should be aligned with the goals and methods of the implementation project. Once top management decides to launch the value creation project, thorough education and training seminars should be conducted for top- and mid-management. Value creation teams will then focus on the main value drivers and conduct projects for their improvement (Ronen and Pass, 2008a, Chapter 23).
The Remaining Chapters in This Section
The remaining chapters in this section are as follows.
Theory of Constraints in Professional, Scientific, and Technical Services by John Ricketts. These types of organizations require the selection of a properly customized portfolio of concepts and tools. Our experience shows that in many cases the team leader or the senior partner is the bottleneck and should be managed as such. In addition, the complete kit concept is crucially important, especially at the beginning of the process.
Customer Support Service According to TOC by Alex Klarman and Richard Klapholz. Customer support units are major elements in organizations in telecommunication, insurance, credit cards, and retail. The unique character of these units calls for use of the right subset of concepts and tools described in this chapter.
Viable Vision for Health Care Systems by Gary Wadhwa and TOC for Large-Scale Health Care Systems by Julie Wright. Physicians usually manage medical organizations, either small or large, because in many countries it is required by law. In this industry, the effect of implementing TOC and other managerial concepts have huge leverage on the performance of these organizations. Not only does it enhance the organization’s value but also it substantially improves the quality of the medical service.
References
Coman, A. and Ronen, B. 2009. “Overdosed management: How excess of excellence begets failure,”Human Systems Management (forthcoming).
Coman, A. and Ronen, B. 2010. “Icarus’ predicament: