Some people told William Farley that the waistbands on Fruit of the Loom men's underwear sagged after a washing or two. Others thought there was too much shrinkage in the undershirts. The company took the complaints to heart and spent $15 million on snappier elastic and preshrunk cotton.
Farley, chairman of Chicago-based Farley Industries, a $1.5 billion industrial conglomerate that owns a controlling interest in Fruit of the Loom, does some of his best market research passing himself off as an underwear salesman. "I ask people what they think of Fruit of the Loom and I get some very candid responses," Farley said.
Not every company uses such an unorthodox approach to track the quality of its products. But an increasing number of American companies are paying more attention to everything from the plumpness of their chickens to the time it takes to make a repair on a broken copier, as both foreign competition and demanding customers increase pressure to produce quality goods and services.
The payoff can be everything from tenacious customer loyalty to the ability to command premium prices for premium products and services. Corporate leadership that beats the quality drum has been found to be essential to implementing a quality revolution in a company, but the message has to be heeded by everyone from the office receptionist to the customer service representative to the line worker.
"The issue has more to do with people and motivation and less to do with capital and equipment than one would think," said Michael Beer, professor of business administration at the Harvard Business School. "It involves a cultural change."
At American Express, for example, Chairman James D. Robinson likes to say the company has four major objectives: Quality, quality, quality, quality. It may sound like the stuff of commercials, but the results in some cases have been startling and probably account for American Express' domination of the traveler's check market. In Taipei, for example, an American Express cardholder's wife was hospitalized after an accident, only to find out the hospital would not accept American money. The local customer service representative, Catherine Tsai, paid the bill herself by advancing her own money and taking up a collection at the office.
Many companies have not made the quality commitment to the same extent. But the third annual Gallup survey taken to gauge aspects of the war on poor service and quality shows progress and a growing recognition that quality should be a major weapon in the battle to restore America's competitive position in the world.
Results of the 1987 survey on how executives perceive the quality of American products and services showed that the 615 executives polled from Fortune 1,000 and smaller companies viewed the task of improving service and product quality as the most critical challenge facing U.S. business in the next three years -- ahead of such issues as productivity, government regulation, product liability and labor relations.
The poll results will be released Tuesday by the American Society for Quality Control at a conference in New York.
Eight in 10 of the executives surveyed also said quality plays a very important role in strengthening the ability of American business to compete with foreigners and that the quality of American products has to be improved to compete more successfully.
Significantly, although the executives polled showed a relatively high opinion of American-made products -- on average rating them 6.6 on a scale of 10 -- only 22 percent gave a rating of 8 or better. This compares with 29 percent who gave them a rating of 8 or better last year.
However, only 15 percent thought American products were inferior to foreign goods.
And, despite a stubbornly high trade deficit and the success of foreign products in the U.S. market, more than half of the executives interviewed said their greatest quality challenge will come from other American companies. Only 22 percent saw Japan as a threat.
Executives also seemed to underestimate the cost of poor quality to their companies; a majority surveyed said it accounts for 10 percent or less of gross sales. Most experts on the "cost of quality" said losses are more in the range of 20 percent to 30 percent for defective or unsatisfactory products. For example, a company with $1 billion in sales might lose up to $200 million annually as a result of poor quality.
When asked what must be done to improve quality, 85 percent said the answer was better employe motivation. Closely following that, 82 percent said a change was needed in corporate culture so that top management emphasized quality. About half said they had a program in place and were achieving results.
Executives involved in some of the programs to emphasize quality said the survey sent mixed signals on level of commitment and reading of the problem by corporations, but they also said the conclusions were promising in that American business was now making quality improvement a priority.
"While we still lag behind our offshore competitors in implementing quality programs, this response seems to indicate that our business leaders are now more aware that attention to quality is the critical factor between success and failure," said James R. Houghton, the chairman of Corning Glass Works who is also chairman of this year's National Quality Month campaign.
"It looks like we finally have a consensus about where the buck should stop. For too long now, we've been blaming the Japanese, the dollar, the government and just about everyone else but ourselves," Houghton added.
Corning instituted a system to improve quality in 1984. Corning's 28,000 employes have learned the basics of what the company expects -- "understanding the customer's requirements and meeting them 100 percent of the time" -- at its Quality Institute near Corning, N.Y. Training in communications and group dynamics, problem solving and statistical analysis follows.
Houghton explained that he decided to emphasize quality as a corporate strategy at a time when the company's profitability was low and several of its markets -- such as the ceramic substrates for emission control devices that it developed -- almost were lost to the Japanese.
"We made a basic invention and the Japanese were coming in and eating our lunch," Houghton said.
It's a story told many times over at other American companies. Though the concept of producing quality goods is not new to American business, it is one that often fell by the wayside as companies "Fordized" themselves. The profitable wonders of mass production and low cost -- essentially the gospel of Henry Ford -- often obscured basics, such as attention to quality.
Besides, there wasn't much competition to worry about, and "Made in the U.S.A." meant "premium" for many years to the American consumer and to the world.
"We have lived in a sheltered environment for the last 30 years," said Dana Cound, vice president of DiversiTech General in Akron, Ohio, and chairman of the American Society for Quality Control, which sponsored the Gallup survey. "We mistook lack of competition for superb management."
In the meantime, competitors, such as the Japanese, emulated the American ideal of quality and ended up doing a better job at it as they stole market share in important areas, such as autos and consumer electronics.
American business tried to respond with imitations of Japanese management innovations, such as quality circles and quality gurus, but only in the last few years have a growing number of American companies reorganized their corporate cultures around the notion of quality.
At Hanes -- Fruit of the Loom's major competitor -- customers get an unconditional guarantee because the company is convinced that it has in the last three years geared its employes and managers toward producing a superior product with heavier fabric, an improved fit and, of course, a better waistband.
"It's a way of doing business," said Collett Thach, Hanes senior brand manager.
At LaSalle Partners in Chicago, a real estate service firm that manages and leases 45 million square feet of commercial space, a program called Quality Tenant Service is viewed as key to maintaining fully occupied buildings and bringing in better investment returns for building owners.
J.R. Ewing, the star of the television series, "Dallas," may have moved out of Renaissance Tower in Dallas this season, but LaSalle managed to hang onto more than 80 percent of the building's tenants when it underwent a $40 million face lift, according to Robert Spoerri, managing director of LaSalle Partners.
An intensive tenant relations program that included shoeshines when the dust was being kicked up, free coffee and doughnuts, newsletters and tenant appreciation parties convinced many to stay in the building even though competitive rents in the overbuilt Dallas market beckoned.
In the actual management of its buildings, LaSalle has revolutionizeed the image of the unhelpful building superintendent by putting MBAs through a two-year training program -- which includes a "cleaning practicum" that involves working side-by-side with building janitors cleaning bathrooms, scrubbing down desks and washing floors -- before they become building managers.
Xerox, after several years of internal improvements, has made customer satisfaction "corporate objective number one," said J. Douglas Ekings, manager of customer satisfaction for Xerox. Part of the objective was to continue regaining market share in small copiers, which was being lost to the Japanese, and to continue to improve customer satisfaction from the 30 percent gain made between 1983 to 1986.
"It's a war of survival," said Ekings. "Twenty years ago, quality was everybody's job and nobody's job. The strategy now is to have the employe know they will be doing things differently."
Many experts in the field point out that quality has become a faddish concept that is part and parcel of another faddish concept -- the debate over competitiveness.
"Quality has become almost fashionable, and it's hard to know from the talk who is doing what," said David Nadler, president of Delta Consulting Group, which advises companies on how to effect organizational change. "Some talk and not much else."
Nadler said companies that make real progress on the quality issue regard it more of a management task than an issue of employe motivation.
"The easy fix people think they just train people into giving good quality," said Nadler. "The serious companies realize senior managers are part of the problem because they created the systems that permit poor quality."
Nadler estimated that 15 percent of gains in quality are at the employe level, but 85 percent of the potential gains in quality are in the systems that employes have to work with.
Cound, who pointed out that four foreign manufacturers moved up or onto this year's top 10 list of companies perceived to have the best quality, said the place to measure success is in the marketplace and at the bottom line.
One measurement is the cost of low quality -- the tally of such elements as defects, work that has to be redone, scrap costs and lost sales. In Japan, where preventive techniques, such as statistical process control, are applied vigorously, the number is thought to be as low as 2 to 3 percent of sales. Analysts believe costs of low quality at many American companies are at least 20 percent of sales.
One reason why American executives may underestimate the cost, which they thought showed up most in lost sales, is because only about half of the companies participating in the survey prepare periodic reports on quality for top management.
Those that do track their progress, such as AT&T, come up with tidbits like this: An internal study of a Bell Laboratories project concluded that a 2 percent investment in quality-related activities in the design stage of a project yielded conservatively an 18 percent net cost savings.
"There are big, big savings to be made," Nadler said.
Another key indicator is the customer. Three out of 10, or 30 percent, of executives polled in the Gallup survey said they rely on customer suggestions to determine the quality of their products or services, while only 13 percent use customer complaints.
Quality may be in the eye of the beholder to an extent -- and smart marketers and advertisers capitalize on the perception of quality that some manufacturers have successfully cultivated -- but companies have found that quality must be more than skin deep in the era of the tough customer.
The combination of more choices since the advent of deregulation in many industries, more disposable income and more sophisticated consumer tastes has put pressure on many companies to pay attention to how they produce and service their product.
Smart corporate leaders include Frank Perdue, who has masterfully gauged consumer tastes for better quality in what a few years ago was a simple commodity -- the average chicken. Perdue decided to tout his chickens as better, broader-breasted and yellower. For his efforts, his birds command a premium price.
Perdue and the other American companies that have heeded the new gospel of quality are patient believers who know that quality and customer responsiveness result in fatter profits and cost savings.
Executives like Corning's Houghton give them kudos, but Houghton adds: "We are nowhere near being there. This is a lifetime journey.