Chapter One:  Description of the problem:
     All companies need effective employees in order to complete the necessary daily tasks and attain a profit.  Many employers do not receive the peak level of performance from their workers due to the fact that the employees do not feel they are having an effect on the quality of service they are offering, or cannot see any tangible outcome from their efforts.
     This chapter describes several different aspects of the project, including the purpose of this project, the setting of the problem, and the history and background of the problem.  The scope of the project is the challenge of measuring performance and total quality within an accounting function.
Section 1 - Statement of the Purpose
     The purpose of this project was to identify and recommend methods to effectively measure performance and total quality within an accounting setting.  Total quality principles have effectively been implemented in other areas, however the accounting section has been overlooked.  By implementing this type of program, new ideas will be encouraged and enable future changes to be accepted easily.
Section 2 - The setting of the problem
     The accounting office is located in Holland, Ohio.  This facility controls all the financial related tasks within the Northwest Ohio district.  The department involved are the General Ledger, Accounts Payable, Payroll, Billing, C.O.D., and Information Services.  This facility is located approximately three miles away form the main United Parcel Service hub location in Maumee.  The accounting function employs approximately 150 to 160 non-union employees and runs continuously, 24 hours a day, six days a week.
     The accounting department is highly structured and mechanistic.  All employees report to a supervisor, who reports to a manager.  There are three managers within this office.  They consist of  a Office Manager, an Accounting Manager, and a Information Services Manager.  These three managers in turn report to the Controller, who is only responsible to the District Manager and the regional personnel.  There is a high level of standardization in the day to day activities with this group.  The jobs that are completed do however, require the employees to be specialized in certain areas.  All rules and procedures are formalized, and the power and decision making process is centralized with the management team.  The low level members participate very little in the decision making process within this group.  Since the Accounting office is located away from the main UPS building, the information network is limited.  Most employees within the accounting function are college graduates.
     The mission of the Accounting function is to quickly and accurately report the state of the business to the management personnel, so that they may follow up with the shareholders to make the necessary business decisions.
Section 3 - History of  the problem
     Discontent and low morale can be seen within the employees in the accounting function.  A recent trend in absenteeism can be seen.  Employees are lacking a sense of accomplishment, and appear to be just "going through the motions".  Some of this can be expected, due to the fact that many of these people have been in the same position for seven years now, and may be becoming restless, however the productivity and quality of work being done has directly been affected.
Section 4 - Scope of the problem
     Principles of using TQM can be used and applied to every aspect of a corporation.  For this thesis, the scope of  the problem will only incorporate the activity within the accounting function.  I will evaluate different performance measures and TQM principles for relativity to the current situation.  I will also look at case studies within other transportation companies to analyze different types of applications.  Finally, I will look at establishing a framework on which to build on based on a few simple steps. 
Section 5 - Significance of the problem
    This project is important because the negativity within the groups can only get worse if steps are not implemented to correct the situation.  Without the flexibility to make the necessary changes, the company is not able to adapt to market changes and can be passed by the competition.  The current decision making process hinders innovation and also progress.  By implementing TQM performance measurements in the accounting function, employee job satisfaction will increase, and it will also have a direct effect on the productivity levels within the departments.  A failure to recognize this problem can result in an increase in employee turnover, lower morale, and reduce the overall productivity within the organization.
Section 6 - List of terms


Chapter 2  Literary Review
History of  performance measurement in accounting and TQM.
     Many people feel that traditional accounting measures are not up to date in today's business environment.  Cooper and Kaplan and Johnson and Kaplan, masters within the accounting profession addressed this issue in their book entitled Relevance Lost:  The Rise and Fall of management accounting.  They concluded with the following;  Today's management accounting information which is driven by procedures, and the cycle of the organizations financial reporting system, is too late, too aggregated, and too distorted to be relevant for managers' planning and control decisions.  Kaplan also commented that the current systems used within accounting functions used to report cost and performance provide little motivation for companies to try and implement TQM, along with any other long term continuos improvement policies.  This point is just amplified by the fact that many top executives are not happy with the current way of reporting financial data.   
Meaning of TQM and performance measurement
     At the heart of  TQM is the concept of total dedication to customer satisfaction. Quality is defined as that which meets the customer's expectations.  Quality, today is recognized as a prerequisite for survival.  Quality is seen not from the standpoint of taking time and costing money, but of saving time and money.  Total Quality describes the state of an organization in which all activities are designed and carried out in such a way that all customer requirement are met in less time and at a lower cost.  The potential pay backs from a Total Quality system are tremendous.  Recovery of just a small portion of unproductive costs can result in  a significant rise in profits.  For instance, take a cost saving initiative and implement it at all the accounting sites.  Which for UPS is a total of 84 sites.  This small initiative can add up to be a significant savings amount when you multiply it by all 84 accounting sites. 
     All businesses today, in such a competitive market, strive to achieve a competitive edge, a level of excellence, and for higher performance standards.  Performance measurement must reflect how well the organization is doing in trying to reach their goals.  To improve quality, a company must constantly identify and anticipate customer requirements.  The process of meeting customers goals and needs begins on an internal level.  This makes Total Quality essential to the management decision making process and allows managers the ability to make more informed business decisions on a daily basis.  
     Managers today need to accept that the person actually doing the work must have the control in the situation.  The employees need to be empowered within an organization.  This is a basic TQM principle.  This philosophy is based on the premise that all employees contribute to fulfilling customer requirements, whether they be internal or external, and that everyone within the organization is part of a chain.  In the following case study of  Federal Express, you will be able to see how the control lies within the hands of the employees to make the operation function effectively.
     Too much emphasis has been placed on accounting measures that are used by senior managers to report data to shareholders.  TQM takes a much simpler approach by reducing the operation into easier aspects to understand, thus having a huge impact by reducing the level of variation.  This is extremely important in a large cooperation, where reporting methods can vary from location to location.   TQM  recognizes that quality cannot be added to a product or service after it's been completed but must be designed into the work process from the beginning.  TQM focuses on the work process and not on the employee.  TQM focuses on the customers.  TQM places a major focus on utilizing teamwork to accomplish tasks.  A simple way to look at the current measures that are in place is to ask a few simple questions:  Does the measure add any value to the customer?, Does it reduce waste or create it?, Is there any direct cost reduction or benefit?.
     This increasing rate of success in due largely to the shifting management paradigm.  Thought about management is making the gradual transition form strict authoritarianism - a far greater influence than many readily recognize - toward a far greater belief in true participative management.  Richard Schonberger, in a newsletter by Computer Aided Manufacturing writes the following:
"Total Quality is no longer strictly measured by internal costs but, rather, by the improvements seen by the next customer.
Total Quality Management therefore, needs to provide each individual with the opportunity to assess the effectiveness of their own efforts and enable them to improve on their contributions in the chain.  The measures in place need, therefore, to reflect progressive movement, change and a learning process in all aspects of business operations.  The question of "what next?" has to be asked continuously in all links of the chain. 
The company that is ready, willing and able to answer it most often, is the company that has learnt to meet the challenge of Total Quality and embrace change, that company will be the winner in the race for competitive supremacy.
Total quality has to be reflected by improvements in areas such as efficiency; effectiveness; productivity improvements; quality improvements; profitability improvements; improvements in innovativeness and quality of work life among others.  
All of these things need to be directed towards two main goals:  
    1)  Getting the job done.
     2)  Constant improvement of performance. 	 
Type of TQ- based Performance Measurements
     There are many different types of measurement which can be used and associated with total quality.  Some of these measurement are the following:
     1) costs of poor quality
     2)  economic and financial data
     3)  complaints and feedback from customers
     4)  direct customer surveys
     5)  periodic audits and self checks
     One important thing to remember is that Total Quality should be measured in increments of time.  If a particular item is not working as expected, it will be easy to change and try something else.  Total quality needs to be based on total people productivity.  Good total quality measurements will all have a uniform measure of what the goal is to be.  They will also have a exact preciseness of what is being measured.  As noted above, the time frame is very important in order to be effective.  All processes should be based on objectivity and not on opinions.  And finally, all processed should be easily understood by all the employees involved. 
History of United Parcel Service
United Parcel Service was formed in 1907 in Seattle, Washington.  At that time it was named the American Messenger Company.  Business at this time consisted of messengers who ran errands, carried notes, and any other miscellaneous package deliveries, such as food from restaurants.  UPS then branched into the small package delivery service for the many retail stores in the Seattle area.  After two years of success in this market, the name then changed to Merchants Parcel Delivery in 1913.  The first expansion came to the south into California, and in 1919 the name again changed to what it is today, United Parcel Service.  After this expansion, business increased rapidly.  This expansion was so great, that by 1927, UPS serviced all the major cities along the Pacific coast.  Delivery service on the east coast began in 1930.
     United Parcel Service pioneered the service which is now called common carrier.  This type of service includes daily pickup calls, automatic return of non-deliverable packages and weekly billing.  This service was only available on the west coast until 1957 when UPS began to move east into Chicago.  The following years marked massive expansion and fierce legal battles with the Interstate Commerce Commission.  By the year 1975 UPS was actively serving every address in the 48 continental states.
     UPS was the first company to embrace the idea of air service.  It was introduced in 1929, and at the time there was little volume to sustain the service.  Due to the lack of business, it was abolished in 1931.  United Parcel Service got back into the air business in 1953 with a 2 day service to many major cities.  UPS Next Day Air was introduced in 1982, and by 1985 the Next Day Air and Second Day Air services had reached to every address in the continental United States and into Puerto Rico and Alaska.
     Today, UPS offers service to more that 185 countries and territories along with all addresses in the United States.  UPS is privately owned by its' management and employees over 300,000 people worldwide.  UPS also owns several smaller businesses relating to the package delivery industry.  Some of which are:
 	Martrac - Established in 1979, transports agricultural commodities by rail in 	temperature controlled trailers.
    	UPS Truck Leasing - Established in 1982, provides delivery vans and over-the-         	road tractors for lease or rental.
	UPS Properties, Inc. - Established in 1990, earns revenue by leasing facilities 
	near UPS package delivery operations.
	Roadnet Technologies - Specializes in computerized mapping, scheduling and 	routing systems.
	II Morrow Industries - Specializes in vehicle communications systems including 	the electronic clipboard (DIAD) which all UPS drivers carry.
	Sonic Air - Acquired in 1995, provides same day; next flight out delivery for 	extremely urgent shipments.
	As you can see; the history of UPS in one of continued growth.  For many years, the challenge for UPS management was how to manage a company that was increasing in size so fast.  The structure of UPS is therefore very bureaucratic.  Methods and procedures are highly standardized; a package driver in Toledo, Ohio uses the same work methods and procedures that a driver in Madrid, Spain would use.  All locations must have a Master Operating Plan on site which covers what actions will take place under a variety of different circumstances; for example, the MOP for the Accounting site is over a 1000 pages long and covers every imaginable disaster and contingency plan.  All UPS managers and supervisors are given a Policy Book which defines the company's mission, strategy, goals and gives the manager basic guidelines to follow.  This method of management has worked very well for UPS; who is the largest package delivery company in the world.
Case Study:  Federal Express
     Federal Express is a major competitor of UPS.  It is also a service company and relies heavily on repeat business.  Because of this, a major focus needs to be on customer satisfaction in order to succeed.  Total quality at Federal Express focuses on achieving total customer satisfaction.  This is perceived by the upper management as the most critical focus of their success.  Federal Express was founded by a group of  former UPS managers who saw a potential market within the industry that was not being addressed by UPS.
     Federal express was one of the 1990 winners of the Baldridge award.  There were 98 companies in all competing for the award that year (45 from manufacturing, 18 in service and 34 from the small business sector).  Within the Baldridge framework, the company was given the opportunity to identify areas of strengths and weaknesses.  They were also able to introduce a new culture of never ending improvement through self assessment.  Some of the benefits that Federal Express achieved were; credibility, accomplishment, validation, leadership, and national recognition of their company and its performance.
     Federal Express's principle activity is that of a "package delivery company".  The air express market business is the foundation on which it was built.  Federal Express began in 1973.  At this time, only a small fleet of aircraft was needed to meet their customers' needs.  By 1978, Federal express found itself handling 35,000 shipments and employing over 10,000 people.  By 1990, Federal Express went global, employing almost 100,000 people with sites across the globe.  Their volume grew to nearly 1.5 million shipments.  In such a short period of time, Federal Express became the world's largest air cargo transporter, with revenues totaling $7 billion in the fiscal year of 1990.  Domestic overnight and second day deliveries account for nearly three fourths of this total.  The rest is accounted to international deliveries.  Federal Express held a domestic market share of 34% in 1989, the nearest competitor has at 26%.
     Federal Express's commitment to its people is evident in its corporate philosophy:
     "Our company always balances the needs of employees, our customers, and our shareholders, considering each in making plans an policies.  We always consider the effects on our people first when making decisions, recognizing that if we take care of our employees, they will deliver a superior service which our customers will in turn, utilize.  Only by making a surplus, or profit, can we ensure our company's continued existence, future opportunities, and our employment"  (Frederick W. Smith, CEO, Federal Express).  
     Some of the activities Federal Express offers its employees are continuous training for all employees, team training in problem solving, use of interactive video for employee training, internal television network for people interactions and employee development, a no lay-off philosophy, guaranteed fair treatment procedure, internal promotions opportunities, and recognition program for both individuals and teams.
     Two particular programs that Federal Express offers which truly identifies the pursuit of Total Quality are the Survey-feedback-action program and the guaranteed fair treatment program.  The first program is an employee survey conducted on a regular basis to assess the effectiveness of the management team and to ensure that there is continuous improvement in the management.  The survey highlights issues of management  and operational levels relating to corporate strategy, communications, incentives, reward systems, future planning and decision making processes.  The second program, the guaranteed fair treatment program is a way of listening to employee grievances and ensuring that morale is always high.  There is a procedure of reviewing complaints at various levels of management, and the ability to appeal a decision if so desired.
     Federal Express previously relied on a quality measure of customer satisfaction based on on-time deliveries.  This measure, however, had to be modified because of Federal Express's goal of achieving Total Quality and total customer satisfaction.  The new performance measurement system was named service quality indicators, and is based on 12 principle indicators.  These indicators are weighted to reflect the factors that the customers felt were the most important.  The SQI is based on the average daily failure points for all 12 of the indicators, and are tracked and reported weekly.  The service quality indicator systems has 12 critical factors.  The implementation of these factors are based on a multi-functional approach where accountants take part in some of the teams addressing the quality issues.  There then is a clear joint ownership of the goals and points involved.  The ultimate target is a 100 percent customer satisfaction level.  in order to achieve this, all departments and employees will have to help.  Significant improvements have already been achieved in various areas in the 12 factors.  The twelve indicators of the SQI and their weightings are:
	1.   Right day late service failures   -   1  
	2.   Wrong day late service failures  -  5
	3.   Traces ( Some information missing )  -  5
	4.   Complaints reopened by customers  -  5
	5.   Missing Proof of Delivery  -  1
	6.   Invoices adjustments requested  -  1
	7.   Missed Pickups  -  10
	8.   Damaged Packages  -  10
	9.   Lost Packages  -  10
	10.  Overgoods (no packages received in overgoods)  -  5
	11.  Abandoned Calls  -  1
	12.  International (All the above 11 indicators for international operations)  -  1     
     By implementing a TQ based system, Federal Express has seen some extraordinary results.  Since 1987, overall custom satisfaction with domestic service reached no less that 95%, with interaction business, customer satisfaction averaged at 94%.  According to an independent survey on the shipping industry customers, 53 per cent gave Federal Express a perfect score.  The next competitor scored only a 39 per cent.  Federal Express has received 195 awards over the past 13 years.  Representatives from over 600 different business organizations have visited Federal Express to gain knowledge in hopes of implementing a similar program within their companies. 
Framework for implementation
     Today's organizations must look for areas of improvement everywhere.  In order to achieve this goal, they must reduce costs and also reduce waste.  This can be done by using Total Quality techniques.  In the area of accounting, the current performance measures are outdated.  Many companies just look to the Production or at using Cost Accounting as places where there is room for improvement.  Many Cost Accounting techniques are redundant in today's organizations.  Existing control measures are very much control measures and provide information that can only be used by senior level managers.  What has been missing are improvement measures that enable the employees involved to see results and receive feedback.  Total quality is an extremely useful tool, however many managers have an extremely difficult time implementing this type of change since many of its benefits can not be directly transferred into a financial amount or gain.  An extremely long amount of planning is required on order to make a Total Quality system work.  The focus in a customer service related industry needs to be on the customer.  A business needs to understand the customers requirements, work these requirements into the current system, and then create a plan to effectively control and monitor these processes.  This is directly applicable to both all external and internal customers, which accounting functions directly have an effect on.  
     Before any plans are put into place, it is important for the organization to conduct an audit of all current procedures.  The purpose of this is to see what current procedures are important and working, and how they will fit within a Total Quality setting.  It is also important to look at how they have an effect on customer quality.  This audit will also help to show areas that have not been addressed in the past and how much the employees know about the current system and how much input they have in the decision making process. I have accumulated six fundamental planning stages for implementing a total quality system, followed by 7 implementation stages to get the program going.  They first planning stages are:
	1)   Identify the purpose for implementing a total quality system.  Is it needed for 	reporting reasons, control reasons, or improvement reasons? 
	2)   A combination of employee groups, and levels are needed.  This will ensure 	that all involved are driven towards a common goal.  It will also eliminate 	barriers between the different levels of staffing.  Good communication is a key.
	3)  Areas to be measured to reflect a variety of measures, such as time savings,  	cost savings, profits gained, etc.
	4)  All areas should reflect the interest of both the internal and external 	customers interests.  This will incorporate both the control measures from the 	internal customer and the feedback and improvement measure from the 	customers.  What are the customers requirements and what do they expect?  Do 	not meet the customers requirements, but exceed them.
	5)   Areas to be measured must be selected carefully, since they will be setting a 	standard of performance. 
	6)  Time needs to be given by the business involved for the implementation of 	the new measuring systems.  An ability to track improvements over time is 	required, along with time for employees to learn and comprehend the goal.
     The implementation stages are as follows:
	1)  Total quality needs to be embraced as a responsibility of all employees.  It 	should be important to everyone.  In order to achieve success, everyone must 	therefore become involved.
	2)  All of the points to be measured should be weighed against the cost to the 	company to implement.  If a quality item is expensive to track and returns very 	little, then it should possibly be eliminated in favor of a new item.  (Weighing 	the Cost to Benefit).
	3)  If a quality item has a huge impact on the customer, a company has no 	choice but to chose it as a quality control item, regardless of the cost.
	4)  The decision making processes needs to be made with all the people within 	the organization.  A wide sampling of individuals are required in this process.
	5)  In difficult areas to measure, an  organization should take a sampling over a 	period of time to see improvement, for example, to measure morale and 	employer might look at the trend of absenteeism over a period of time.
	6)  Measurement is a cornerstone of quality control.  Measurement systems 	should be designed with flexibility in mind.  This is necessary in order to reflect 	changes within the market, or within strategic planning.  This measurement 	should be continuous and ongoing.
	7)  Total Quality needs to reflect a never ending strive for total quality, 	continuos improvement, and achievements should be looked at as stepping 	stones to achieving that goal. 
Section 3:  Option Selection

     For my thesis, I have chose to use Option Three - Alternative Policy Decision.  I have  
chosen this format for various reasons which I will highlight in the next page or so.  
     Within my current work situation, I would not be able to actually have control over and implement a plan such as the one I am designing.  United Parcel Service is such a large cooperation and changes would need to be approved on nearly every level of management before any action could be taken.  I feel that even if my case study was to get past the various management levels, my original suggestions would have to be altered to encompass all UPS functions and be changed into a uniform procedure.  This would have a negative effect on the entire plan and somewhat  "water down" the original intentions, and be of little use on a corporate wide basis.  In order to incorporate a plan such as mine of a corporate level, a large amount of time is necessary to visit many of the various accounting sites and get a feel for the people and structure you are dealing with.  No two offices would be exactly the same.  My goal is to get a possible pilot program started and then to build on this for the future.
     Option Two would be of no use to me in this application.  I can see no possible way to use this type of option within the working framework of  my employer.  The potential changes I am proposing do not require any government funding or grant moneys.  
     Option three is the best possible choice for me in my current situation.  This option best relates to the working structure at UPS.  Changes at UPS happen very slowly, so submission of an alternative policy is clearly the best way to allow me to have my potential changes reviewed and considered.  By allowing me to submit an alternative policy to the management structure at UPS, I feel I will be showing a great deal of initiative and concern with the problems we are facing on a day to day basis.  I believe that by alerting the management to my feelings on this issue I will be establishing a groundwork for future discussion and possible action, whether it be by the use of my proposal, or by the use of another.  The end result will still be a positive one.
     




Chapter 4 Description of the Alternatives
The purpose of this thesis is to identify and recommend methods to improve the measurement of performance and total quality in an accounting office.  By addressing these problems and implementing this type of program, new ideas will be encouraged and future changes will be easily accepted.  The benefits of this type of system can be directly related to the satisfaction of the customer.
Statement of Objectives
	Objective One  Six months after implementation of the agreed plan, there will be a 3 day reduction in the month end close out schedule committed by the clerical staff in the Accounting department of United Parcel Service.  This is a extremely relevant issue to company officers as most information received from the Accounting office is already outdated when it is received.
	Objective Two  Six months after implementation of the agreed plan, there will be a 50% reduction in the amount of statement errors reported to company of