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I believe there is an awakening that is taking place throughout U.S. manufacturing and service organizations to the fact that if we are to compete successfully worldwide, we must improve the quality of our products and services. More and more companies are turning to the quality management concepts as a way of improving the quality of their products and services. As they begin applying the quality management concepts, more companies are recognizing the fact that better satisfying customer needs by improving the quality of their products and services will improve productivity and reduce costs. Therefore, quality management is becoming the strategy to compete successfully worldwide. As this transformation takes place, however, customers are demanding even higher levels of quality. Therefore, this is not a journey that has an end but an ongoing process of continual improvement to better meet future needs of customers worldwide.

Two key factors in our improvement strategy are to provide everyone within our organization the knowledge to continually improve their operations and to provide recognition and reinforcement for the application of this knowledge. Our government has established a process that encourages continual improvement and the sharing of knowledge among all organizations within our country. This process is the Malcolm Baldrige National Quality Award. The Award provides recognition for organizations that have achieved preeminent quality leadership and provides a process for sharing knowledge among all U.S. organizations. With respect to other areas in which our government can help improve the competitiveness of American industry, the Chairman of the Board and Chief Executive Officer of Eastman Kodak, Colby Chandler, made the following statement:

"In the last decade manufacturing has reordered our priorities,
putting a premium on long-term results and quality. We are doing
everything we can to compete, and we will be better able to do so
when our government lets us compete. We are seeking neither
protectionism nor a handout. We are seeking economic policies
which promote economic growth, not just for manufacturing, but
for the economy at large. We need an informed and thoughtful
debate on these matters.
adjustments."

We face very hard choices and difficult

Mr. ROE. Thank you, Mr. Jackson. Now, we have with us Mr. Elbern H. Alkire, Air Products and Chemicals, Inc., Mr. Alkire.

STATEMENT OF ELBERN H. ALKIRE, AIR PRODUCTS AND
CHEMICALS, INC.

Mr. ALKIRE. Thank you, Mr. Chairman. You have before you my written testimony which I would like to have entered into the record.

Mr. ROE. No objection, and so ordered.

Mr. ALKIRE. What I will do is just briefly comment on a few of the points, and touch on a few concepts that have already been mentioned by my colleagues on the panel.

A recent issue of "American Demographics Magazine" in February, 1987, reported on the results of a poll conducted by the Roper organization in which they asked people from various countries what percent of those people said that "Made in America" was a mark of quality. And the results are as follows: Americans, 69 percent; Italians, 34 percent; French, 25 percent; British, 9 percent; West Germans, 6 percent.

So, the reputation that we once enjoyed for quality has certainly deteriorated as indicated by the poll. Fortunately, they did not ask the Japanese what they thought "Made in America" meant.

In my testimony-written testimony-there are a number of points about quality that I would like to reinforce. First of all, that is "quality" itself does not refer to high price or high purity or the goodness of a product, it is instead a measure of how well a product or service meets the needs and wants of its customers or users. So, therefore, it is something different than you might have thought when you think of a particular product that is-that has won the reputation of high quality.

Secondly, that this concept of quality applies to all functions of an organization, not just manufacturing and not just sales or engineering and marketing but all of the other functions that an organization conducts in order to operate as a business entity. This would include accounting functions, the billing process, all of the various transactions that a user or customer would have and come in contact with that company that creates this image of quality if you will.

So, therefore, the attitude of the person who answers the telephone and takes the original order is important in creating this atmosphere and this idea of whether or not dealing with your company is a quality experience. If you have ever purchased something in a department store, and then had the bill come to you and have the bill be incorrect, and then the frustration of having to go back and correct the bill, deal with their accounting people and everything, creates a feeling that maybe you are not too happy about the way that store handled the transaction. And whereas the product that you bought may be very good, if you do not like the way they handled all the other things that were part of that transaction, that has an impression on you with regard to quality.

Third, the individual who determines the quality of any product or service is the customer. The persons who use the product determine whether or not it meets their needs, it meets their expecta

tions. So, in order to determine if you truly are achieving quality in the products and services that you provide, you have got to measure customer satisfaction.

And finally, as has already been mentioned, the achievement of quality all throughout an organization is an ongoing process and it is this process of continuing improvement. It starts by measuring customer satisfaction. Next, it identifies problems that occur in achieving that satisfaction 100 percent of the time. Then, putting in place corrective programs in order to fix those problems in a way that they cannot recur, in fact, improving the operation, improving what it is that you do. And then finally remeasuring the customer's satisfaction.

There is a PIMS data base, which is the Profit Improvement of Market Strategy data base that is compiled by the Strategic Planning Institute in Cambridge, MA. They gather independent data from business and industry all around the country. They have information from about 2,000 different business units. In analyzing that information and analyzing the strength of the companies involved, the strength of the business units, they find that one of the most significant factors in determining profitability, return on investment, and market share of any business is the relative perceived quality of its products and services by its customers.

I believe the challenges before us in any institution or any company really revolve around a few key points. First of all, we are going to have to change the systems within which we are operating, because the systems that we have now, some of the traditional systems of managing and operating, are not working as well in the global marketplace as they used to work domestically.

Secondly, we must create a whole new set of attitudes on the part of employees and management. We must empower the employees to take charge of their own activities and their own operations. And we must imbue in everyone this spirit of working toward continuous improvement of what it is that they do.

Air Products appreciates the opportunity to testify before this committee on a very vital issue. And we look forward to commenting further during the question and answer session. Thank you. [The prepared statement of Mr. Alkire follows:]

TESTIMONY

OF

ELBERN H. (ED) ALKIRE

AIR PRODUCTS AND CHEMICALS, INC.

BEFORE THE

COMMITTEE ON SCIENCE, SPACE AND TECHNOLOGY

U. S. HOUSE OF REPRESENTATIVES

June 27, 1988

BETHLEHEM, PENNSYLVANIA

Overview

QUALITY IMPROVEMENT AT AIR PRODUCTS

Air Products and Chemicals, Inc. is engaged in a comprehensive effort aimed at achieving quality -defined as consistent conformance to customer expectations--throughout its operations. Evidence of this quality process is everywhere--from the thousands of employees who wear quality pins, to a

videotape in which the company's chairman, Dexter F. Baker, tells employees, "Let it never be said that Air Products is second to any company in the quality of its products and services." By late 1988--only three years after formal efforts began--all 12,000 employees will have received training in the quality process. All employees will be involved because the concept of customer satisfaction goes beyond the traditional interpretation and includes fellow employees who in one way or another depend on their colleagues for services.

The quality improvement process is not a corporate reaction to poor products or services, or to an inability to meet customer needs. On the contrary, Air Products is widely recognized for the quality of its management, operations, and employees. It has earned a reputation as the premier industrial gas company, in part because of its strong customer orientation and proven record of developing new applications for its products. In its other core business, chemicals, where Air Products enjoys leading business positions, the company has a reputation as a high quality supplier. During the past several years, Air Products has received major awards from satisfied customers, including Motorola, General Electric, Ciba-Geigy, General Motors, and AT&T. This spring Air Products earned a supplier award for excellence from Motorola for the second time.