Tesla’s Total Quality Management Principles

Introduction

The growing need for quality enhancement in the business world has driven organizations to seek ways to improve management. Quality management has attained a pivotal role in organizational excellence across different industries. Businesses now view the systematic quality approach as key to achieving targets by applying various strategies and methods. Of these methods, Total Quality Management (TQM) stands out. The origin and growth in popularity of TQM in the US can be traced to the era when quality pioneers designed superior frameworks to enhance business productivity (Tan, Wong, & Choong 2013). These quality approaches were eventually adopted across the world. They are now widely used in virtually all industries.

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What is total quality management then? TQM has often been described as a management approach that targets customer satisfaction as the primary way to attaining long-term success. The philosophy encompasses all the needs of the business and its stakeholders, the most important being the customers and employees. These objectives are attained through efficient processes that are continually improved to ensure the best quality is attained at all times (Madan 2010). The effects of adopting TQM can be demonstrated through improved quality, increased productivity, lower costs, hence higher profitability, and overall business growth. TQM upholds eight principles, namely, customer focus, employee improvement, fact-based decision making, continuous improvement, an integrated system, strategic and systematic approach (strategic planning), and communication.

In TQM, all the resources of an organization are committed to the process of improving quality. Therefore, customer satisfaction is attained by way of quality improvement. The level of quality that an organization wishes to attain is determined by customer tastes and preferences. The clients are the ultimate determinants of a company’s success. Another pillar of TQM is employee involvement, which is also commonly referred to as people satisfaction (Madan 2010).

Continual improvement for its part encourages an organization to raise the quality of its products and services by identifying areas that need changes. It is based on the Japanese Kaizen, which holds that any aspect of an operation is capable of improvement. Kaizen further posits that the people who are closest to the particular process are in the best position to identify areas that need improvement (Sonobe & Otsuka 2014). Consequently, this assertion is reiterating the importance of employee involvement in TQM. Another principle of TQM supports a process-centered approach to management. This principle calls for precision in production or service delivery. All meaningful efforts are dedicated to the steps between when raw materials are obtained and when the final product is obtained. Additionally, process thinking assists project managers to identify unwarranted variations, which are then rectified early. In TQM, the prevention of a defect is emphasized over detection.

Other principles of TQM are an integrated system, strategic and systematic approach (strategic planning), communication, and fact-based decision process. Integrated systems require the distinct units of an organization to operate in unity to foster the smooth exchange of information. ISO 9001 encourages system integration by requiring the organization to keep an interaction chart (Coyle‐Shapiro 2013). Strategic planning for its part calls for organizations to formulate goals, visions, and missions. Deliberate efforts must be made to chart a plan that the organization will follow in furthering its goals in addition to the mechanism for measuring success. Importantly, as the paper emphasizes using Tesla Motors, which is a car manufacturer based in the United States, as a case study, strategic planning reverts to customer satisfaction since the core components are shaped to suit customer needs.

Aims and Objectives

As observed from the introduction section, TQM is one of the most popular approaches that are deployed to achieve quality in business. Through the eight pillars that work hand in hand, organizations can churn out quality products and services, which in turn result in customer satisfaction. Customer satisfaction is the pillar of success for any organization. For this reason, organizations must make efforts to ensure that products and services effectively reflect and address the needs of their customers. Failing to meet customer needs effectively is a leading cause of business failure in a competitive environment. This paper will review the processes at TeslaMotors, a leading car manufacturer with its headquarters in the US. The objective is to identify ways in which TQM can be employed in the organization to contribute to better customer satisfaction and hence increased sales. TQM can also promote competitive advantages, placing the organization in a better place to face giant car manufacturers such as Ford and Toyota.

Problem Statement and Background

Tesla has been fast rising to become one of the world’s fastest growing companies worldwide. Tesla’s success is attributed to its innovation in the motor vehicle industry. Founded in 2003, Tesla has distinguished itself as an eco-friendly company that specializes in the manufacture of electric cars and electric vehicle parts. Tesla is named after Nikola Tesla, a physicist, and electrical engineer. The founders of the company were Marc Tarpenning and Martin Eberhard who financed it during its initial stages. Elon Musk later joined the company as the chair of Teslas’ Board of Directors in 2004. According to Tesla Motors (2015), Musk has played a pivotal role in steering the company to its current position in the motor vehicle industry market.

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Following Musk’s proposal, the company designed a carbon fiber body for the electric car. Tesla’s long-term strategy was to establish an affordable, yet quality product, for its customers. At the time, legislations on sustainability were fast taking shape. Nevertheless, not many car manufacturers had contemplated going green. Therefore, Tesla was launching in an unknown field. Since then, the company has attained wide success that many young car manufacturers are yet to achieve. After Tesla had gone public in June 2010, its IPO raised over $200 million to the extent of providing sufficient capital to support the company’s innovative culture.

Despite its success, Tesla has experienced certain drawbacks. In 2013, after reports of Models S fires, the company’s stock dropped by nearly 20% (Young 2013).One of the company’s weaknesses is its limited liquidity, which is caused by a slow rate at which customers buy Tesla’s products. Lack of liquidity has resulted in the loss of millions of dollars for Tesla. Another weakness is the limited manufacturing capacity. The company had only one factory in 2013. This capacity could lead to failure in meeting customers’ demand, which may otherwise affect their loyalty. Thirdly, Tesla is a young company with a limited operational history. This history may serve as a weakness in an industry where trust is built through long existence in the market (Welch 2009).

TQM and Tesla

Therefore, despite its apparent success, the company’s management is yet to fully address the current challenges bedeviling its brands. Until such a time, customers will remain unsatisfied. This situation is risky because giant manufacturers such as Ford and Toyota are contemplating venturing into the electrical car sector. The outcome could be that Tesla loses its customers to manufacturers of more efficient vehicles. Conversely, Tesla can adopt the principles of TQM to arrest this future threat by promoting customer satisfaction. Customers always value quality products and that they are likely to identify with a brand that oozes quality. By adopting the TQM approach, Tesla would be looking to promote quality by implementing all its eight pillars.

Tesla will not be the first vehicle manufacturer to incorporate TQM in its processes. Toyota, the Japanese vehicle manufacturer, has always relied on TQM to perfect its business culture. Toyota emerged a leading vehicle manufacturer in the mid-1940s during the Second World War. The company’s philosophy of “customer first” and “respect for people” coincide with TQM’s customer focus and people satisfaction respectively (Gao & Low 2014). Therefore, Tesla can benchmark from Toyota’s successful adoption and implementation of the TQM as a confirmation that no other place is TQM more applicable than in the motor vehicle industry.

Discussion and Critical Analysis

TQM Principles adopted by Tesla

Communication and integrated design

It is no doubt that Tesla has a spectacular management as evidenced by its success within a short span. Elon Musk has been successful with his previous strategies, for instance, PayPal and Space X. The two major principles of TQM that have been adopted in Tesla include communication and integrated design. Efficient communication in the company is considered a primary drive to attaining success. Employees work in lean offices where they are in constant contact with their leaders as a way of promoting efficient communication (Sharma 2016). Aspects of communication, including strategies, timelines, and methods are taken seriously in the company. For this reason, the Tesla’s management is always in touch with the employees and customers. Tesla has a robust integrated system. Despite the company being divided into various departments and specialties, efforts are made to maintain the entire company as a whole. In other words, processes and departments are interconnected to form an integrated system. Integration of functions at Tesla promotes smooth communication while ensuring that teams remain coordinated, hence facilitating the improvement of processes in line with TQM objectives.

Focusing on Customers

Tesla’s management values customer satisfaction. This mission is accomplished through creating high-quality products at affordable prices. The Model S has been lauded as one of the most innovative cars (Krebs 2016). The graph below shows Tesla’s performance following the introduction of this model.

Since Model S Introduction
Source: (Tesla Motors 2015)

Additionally, the company is reaching out to potential partners to build hybrid products that will further promote customer satisfaction. This goal is mainly being achieved by creating open patent products such as the car battery and Superchargers. Nevertheless, various complaints have risen regarding the quality of Tesla’s components (Young 2013). Negative customer feedback at Tesla may be indicative of ineffective customer satisfaction strategies. In defining TQM, the term ‘quality’ refers to a state where the customer appreciates the product or service extended to him or her as being ‘excellent’. While quality is rather subjective, the bottom line on what amounts to excellence depends on the customer. For this reason, feedback is critical in fostering quality in management.

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Satisfaction is attained when customers believe that the goods offered to them are durable, reliable, easy to use, appropriate, and adaptable (Krebs 2016).Additionally, the customer’s experience with the organization shapes his or her perspective of quality. The exposure is relevant in the modern society where companies and their customers can interact real-time through social media. Organizations realize the importance of staying tuned to customer feedback. Tesla is competing for the same customer base with large manufacturers such as Ford and Toyota, which have colossal funds at their disposal that can be used to influence the market outcome. Therefore, quality would be Tesla’s key strategy for competing with larger car manufacturers.

Continuous Improvement

TQM places great importance on continuous improvement at all levels of the management. This principle is based on the belief that mistakes in the management process can be avoided. The underpinning philosophy of this principle is continuous improvement of results in all aspects to achieve better outcomes. In Japanese, continuous improvement is known as kaizen (change for the better). Therefore, kaizen is is not a denial that mistakes can or will occur. Rather, the philosophy advocates ways of eliminating the mistakes in subsequent processes through continuous improvement. Where mistakes cannot be rectified, early detection can assist in preventing them from being passed down to the valued added chain (Sonobe & Otsuka 2014). If mistakes keep on recurring, continuous improvement calls for project managers to stop production until a time when the faults can be corrected.

As a pioneer in the electric car sector, Tesla must learn the concept of continuous improvement. Subsequent models must contain a rectification of errors contained in the earlier models. Importantly, the cars must be created in a way that allows the upgrade of both hardware and software. This plan would make it easier to correct any detected errors by replacing the non-functional parts with improved ones. Thankfully, Tesla already understands this aspect.

In 2013, when fires were reported, Tesla deployed a battery protection system and distributed it free of charge to customers (Young 2013). However, more components of the electrical car need to be improved. The supercharger, Tesla’s version of “gas station” takes 30 minutes to recharge a car’s battery. Clearly, this period is long for a client to wait for the car to recharge. Additionally, the battery capacity is not as high as customers would wish. Despite the annual improvements of about 8% in the battery capacity, uncertainties have been raised as to whether this trend will continue into the future (Young 2013). Tesla must arrest these concerns. Hence, TQM would be the best approach to address them.

Employee Satisfaction

Recently, Forbes named the company as the most innovative company (Alexander 2015). Employee involvement has the additional advantage of reducing employee turnover and workplace dissatisfaction. The company understands that involving employees in decision-making and other production processes can boost innovation. However, while Tesla’s policy of employee engagement is effective in fostering innovation, certain areas should be improved. The areas include job security, employee health and safety, effective communication, and promotional training (Madan 2010).

People’s satisfaction in TQM refers to measures put in place by an organization to promote a good working environment for its employees. TQM appreciates the central role of employees in fostering business success. Employees amplify the culture of the organization, either positively or negatively. Kaizen supports employee involvement by maintaining that those who are close to the process perform process involvement best (Sonobe & Otsuka 2014). In a manufacturing setup, employees are in the best place to observe and rectify anomalies within the process. Alexander (2015) found that employee engagement at Tesla is valued greatly.

TQM Principles that Tesla failed to Use

Strategic and Systematic Approach

Although Tesla has described its long-term strategy as building a wide range of automobiles, which will include affordable cars (Tesla Motors 2015), the company will need to refine its strategy to fit a long-term scope. The company has been passionate about eliminating gasoline-dependent vehicles out of the market. Organizations such as Tesla that do not have a clear strategy may find themselves acting like the proverbial jack-of-all-trades, yet a master of none because without a clear strategy an organization is likely to wander from goal to goal instead of charting a clear path forward.

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Strategic planning involves setting goals and defining the company’s vision and mission. Many organizations overlook the importance of operating with a clear-cut strategy. In building a formidable strategy, the company must take into account customer trends. TQM is now a widely accepted strategy for business improvement, especially in the light firms that are facing survival issues. Strategic planning is the component that can safeguard a business’s long-term success if well adopted alongside other aspects of TQM. A strategic plan is a pattern that identifies the steps that a business will take to achieve its objectives.

As a young company, Tesla requires a formidable strategy to build a lasting market presence that can challenge the existing key players. Musk has termed Tesla as a ‘high-end’ disruption (Sharma 2016). This description points to the company’s current plan of rolling out products that are outperforming the existing ones from competitors. As observed, Tesla is enjoying a wide market because electric car manufacturers are few as of now. However, as more companies embrace the disruptive technology, Tesla will need to devise other ways of staying relevant in the competitive field. This move may call for global expansion, forming strong partnerships, and a gradual shift from few high-price units to many low-price ones as shown in the Figure 1 below (Sharma 2016).

Tesla Nodel S 85 KWH battery
Source: (Sharma 2016).

Fact-Based Decision-Making

Tesla also failed to use fact-based decision-making as a TQM principle. This principle calls for organizations to understand the market dynamics before reaching a particular decision. An organization often fails or succeeds depending on the quality of its decision-making. Decision makers depend on facts, assumptions, and sometimes a ‘hunch’ when reaching a decision. While all the above aspects are important, facts reign supreme. Fact-based decision-making calls for a thorough search of relevant data and evidence. The four steps of decision-making include establishing, weighing, sifting, and deciding. Fact gathering often occurs during the first stage, namely, establishing. For Tesla, adopting fact-based decision-making will require the company to place a serious emphasis on verified data about the market, customer trends, and competitor behavior. As the company moves to launch new car models and the powertrain, it is important to assess the expected market reception.

Conclusion

TQM is a successful management approach that aims to promote business success. The business environment has become more competitive in recent times. As a result, firms are looking for ways to enhance productivity and business excellence to avoid being driven out of the market. For instance, Tesla operates in the competitive motor vehicle industry with established stakeholders such as Ford and Toyota. Although Tesla has cut itself a niche in the electric car sector, it should make efforts to enhance customer satisfaction. TQM consists of eight principles that work together to enhance process quality, hence promoting quality outcomes. By Adopting TQM, the company will promote customer satisfaction while enhancing profitability and a competitive advantage for the car manufacturer.

References

Alexander, S 2015, How Tesla Engages its Employees to Drive Business Results, Web.

Coyle‐Shapiro, J 2013, ‘The impact of a TQM intervention on teamwork: a longitudinal assessment’, Team Performance Management: An International Journal, vol. 17, no. 3, pp. 63-74

Gao, S & Low, S 2014, ‘The Toyota Way model: an alternative framework for lean construction’, Total Quality Management & Business Excellence, vol. 25, no. 5, pp.664-682.

Krebs, S 2016, ‘Silent by design? Tesla’s Model S and the discourse on electric vehicle sound: Tesla Motors Germany, Model S 85D (2015)’, Sound Studies, vol. 1, no. 1, pp.1-3.

Madan, P 2010, ‘An award journey for business excellence: the case study of a public sector unit’, Total Quality Management, vol. 21, no. 12, pp.1343-1364.

Sharma, S 2016, The Tesla Phenomena A Business Strategy Report, Web.

Sonobe, T & Otsuka, K 2014, Cluster-Based Industrial Development: KAIZEN Management for MSE Growth in Developing Countries, Springer, New York, NY.

Tan, B, Wong, K & Choong, C 2013, TQM and family owned business: Performance and sustainability, Web.

Tesla Motors 2015, Fourth Quarter & Full Year 2014 Shareholder Letter, Web.

Welch, D 2009, A Long Bet on Electric Cars, Web.

Young, A 2013, Tesla Model X Release Date: Superficial Production Next Year; Deliveries To Customers in Full Effect Later, Web.

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