Participative management technique within the framework of a companywide quality system in which small teams of (usually 6 to 12) employees voluntarily form to define and solve a quality or performance related problem. In Japan (where this practice originated) quality circles are an integral part of enterprise management and are called quality control circles.
A quality circle is a participatory management technique that enlists the help of employees in solving problems related to their own jobs. Circles are formed of employees working together in an operation who meet at intervals to discuss problems of quality and to devise solutions for improvements. Quality circles have an autonomous character, are usually small, and are led by a supervisor or a senior worker. Employees who participate in quality circles usually receive training in formal problem-solving methods—such as brain-storming, pareto analysis, and cause-and-effect diagrams—and are then encouraged to apply these methods either to specific or general company problems. After completing an analysis, they often present their findings to management and then handle implementation of approved solutions. Pareto analysis, by the way, is named after the Italian economist, Vilfredo Pareto, who observed that 20 percent of Italians received 80 percent of the income—thus the principle that most results are determined by a few causes.
The interest of U.S. manufacturers in quality circles was sparked by dramatic improvements in the quality and economic competitiveness of Japanese goods in the post-World War II years. The emphasis of Japanese quality circles was on preventing defects from arising in the first place rather than through culling during post-production inspection. Japanese quality circles also attempted to minimize the scrap and downtime that resulted from part and product defects. In the United States, the quality circle movement evolved to encompass the broader goals of cost reduction, productivity improvement, employee involvement, and problem-solving activities.
The quality circle movement, along with total quality control, while embraced in a major way in the 1980s, has largely disappeared or undergone significant transformations for reasons discussed below.

BACKGROUND

Quality circles were originally associated with Japanese management and manufacturing techniques. The introduction of quality circles in Japan in the postwar years was inspired by the lectures of W. Edwards Deming (1900—1993), a statistician for the U.S. government. Deming based his proposals on the experience of U.S. firms operating under wartime industrial standards. Noting that American management had typically given line managers and engineers about 85 percent of the responsibility for quality control and line workers only about 15 percent, Deming argued that these shares should be reversed. He suggested redesigning production processes to account more fully for quality control, and continuously educating all employees in a firm—from the top down—in quality control techniques and statistical control technologies. Quality circles were the means by which this continuous education was to take place for production workers.
Deming predicted that if Japanese firms adopted the system of quality controls he advocated, nations around the world would be imposing import quotas on Japanese products within five years. His prediction was vindicated. Deming's ideas became very influential in Japan, and he received several prestigious awards for his contributions to the Japanese economy.
The principles of Deming's quality circles simply moved quality control to an earlier position in the production process. Rather than relying upon post-production inspections to catch errors and defects, quality circles attempted to prevent defects from occurring in the first place. As an added bonus, machine downtime and scrap materials that formerly occurred due to product defects were minimized. Deming's idea that improving quality could increase productivity led to the development in Japan of the Total Quality Control (TQC) concept, in which quality and productivity are viewed as two sides of a coin. TQC also required that a manufacturer's suppliers make use of quality circles.
Quality circles in Japan were part of a system of relatively cooperative labor-management relations, involving company unions and lifetime employment guarantees for many full-time permanent employees. Consistent with this decentralized, enterprise-oriented system, quality circles provided a means by which production workers were encouraged to participate in company matters and by which management could benefit from production workers' intimate knowledge of the production process. In 1980 alone, changes resulting from employee suggestions resulted in savings of $10 billion for Japanese firms and bonuses of $4 billion for Japanese employees.
Active American interest in Japanese quality control began in the early 1970s, when the U.S. aerospace manufacturer Lockheed organized a tour of Japanese industrial plants. This trip marked a turning point in the previously established pattern, in which Japanese managers had made educational tours of industrial plants in the United States. Thereafter quality circles spread rapidly here; by 1980, more than one-half of firms in the Fortune 500 had implemented or were planning to implement quality circles. To be sure, these were not installed uniformly everywhere but introduced for experimental purposes and later selectively expanded—and also terminated.
In the early 1990s, the U.S. National Labor Relations Board (NLRB) made several important rulings regarding the legality of certain forms of quality circles. These rulings were based on the 1935 Wagner Act, which prohibited company unions and management-dominated labor organizations. One NLRB ruling found quality programs unlawful that were established by the firm, that featured agendas dominated by the firm, and addressed the conditions of employment within the firm. Another ruling held that a company's labor-management committees were in effect labor organizations used to bypass negotiations with a labor union. As a result of these rulings, a number of employer representatives expressed their concern that quality circles, as well as other kinds of labor-management cooperation programs, would be hindered. However, the NLRB stated that these rulings were not general indictments against quality circles and labor-management cooperation programs, but were aimed specifically at the practices of the companies in question.

REQUIREMENTS FOR SUCCESS

The problems of adaptation, which have caused quality circles to be abandoned, are made plain by a look at the conditions two experts think are necessary for the success of quality circles. Ron Basu and J. Nevan Wright, in their book Quality Beyond Six Sigma (another quality management technique) specified seven conditions for successful implementation of quality circles. These are summarized below:
  1. Quality circles must be staffed entirely by volunteers.
  2. Each participant should be representative of a different functional activity.
  3. The problem to be addressed by the QC should be chosen by the circle, not by management, and the choice honored even if it does not visibly lead to a management goal.
  4. Management must be supportive of the circle and fund it appropriately even when requests are trivial and the expenditure is difficult to envision as helping toward real solutions.
  5. Circle members must receive appropriate training in problem solving.
  6. The circle must choose its own leader from within its own members.
  7. Management should appoint a manager as the mentor of the team, charged with helping members of the circle achieve their objectives; but this person must not manage the QC.

"Quality circles have been tried in the USA and Europe, often with poor results," Basu and Wright say. "From our combined first-hand experience of quality circles in Australasia, the UK and Europe, South America, Africa, Asia and India, we believe that quality circles will work if [these] rules are applied."

Any experienced manager, contemplating the rules shown above and the typical management environments in which he or she works or has worked in the past will be able to discern quite readily why QC has not taken a firm hold in the U.S. environment. As for the small business owner, he or she may actually be in a very good position to try this approach if it feels natural. An obviously important element of success, confirmed by Basu and Wright, is that QC must be practiced in an environment of trust and empowerment

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