Juhani Anttila
Venture Knowledgist Quality Integration
Helsinki, Finland


Integrating performance measurements into quality management

Development of the company's quality approach as well as of the performance measurement methodology and practices should be understood alongside with the general development of Sonera's business conditions and culture.

During the almost one hundred year stretch of monopoly status concerning telecommunications in Finland, the grade of the services reached a top level globally. At the same time the prices of services were amongst lowest. This was brought about especially by the professional skills of technical experts and the utilisation of the most modern technology. Despite this, Finnish political decision-makers wanted to provide alternatives and options in the telecommunications market. At the end of the 1980s dissolving regulative measures and a step-by-step opening up of the telecommunications business to competition. Finland has been amongst the first countries in dismantling regulation within the industry.

Also Sonera thus found itself in a situation in which it would have to make entirely new competition-strategic decisions. The most important options concerned were:
- cutting costs and right-sizing the needed number of personnel,
- a redetermination and reorganisation of business,
- creating customer focus and
- expanding its business outside of domestic markets.

Business course adjustments were made: emphasis on customer focus (quality), reutilisation of technological know-how, implementation of a culture emhasizing accountability, intentional recruitment from outside of the company, uniting a scattered regional organisation into a country-wide organisation, and the creation of a new corporate image.

During the monopoly era all the quality activities related mainly with the technological performance of telecommunication network and the control the suppliers of technical systems. At the end of the 1980s the topic of quality started to acquire explicitly more features. This occurred first at the customer interface level and in business units responsible for service deliveries, who were the first to encounter real customer requirements and their significance to business. At the turn of the decade the topic of quality surfaced also at the corporate level.

Coming into the 1990s quality was already understood in Sonera in a modern way as customer satisfaction. Over the ongoing decade this basic definition of quality remained, but it has gained new, more thorough and broader meaning. As time goes by, the satisfaction of other stakeholders (owners, personnel, partners and society) has also been better appreciated. For example, work satisfaction and work climate measurements were commenced in a way similar to customer satisfaction. This way of thinking has also been influenced by the latest international interpretation of the concept of quality as "business performance excellence". In a competitive situation the business objective can only be the satisfaction of all parties and the excellence, i.e. competitiveness, of the company based on this. One must also be able to evaluate performance critically and to express it clearly with measures and indicators. Superiority refers to surpassing one's own objectives, performing better than competitors and comparable performance even outside of one's own field of business.

The adoption of modern quality approaches was positively influenced by Sonera's broad international expert contacts in the field of quality. For instance, Sonera is the only Finnish company that has been actively involved right from the beginning in formulating ISO 9000 standards as a member in the international ISO TC 176 standardising committee. Sonera has also participated actively in the development and evaluation of both the European and Finnish quality awards. Moreover, the organisation had already studied the American Malcolm Baldrige criteria in the USA even before these later involvements. Internationally recognised approaches were naturally implemented within the organisation's own total quality management (TQM) model to integrate corporate's quality intention with the business management. Thus, it was possible to avoid the problems which many organisations have frustratingly had to face when concentrating on quality expert-based construction of distinct so-called quality systems.

When implementing Sonera's quality intention into use, an company-specific four-tier TQM model has been used as a basis. This model consists of the following four levels: corporate (normative issues), businesses (strategic issues), processes (operational issues) and individuals/teams (personal issues). The corporate-level quality council has played a significant role in adopting quality management means and developing operation models (e.g. related to performance measurement and assessment). The CEO acts as the chairman of the council, which consists of business leaders from different businesses and a corporate-level quality expert (director of corporate quality improvement) acts as the secretary. The most important part of the TQM activities from the corporate's business point of view has been contributions relating to process performance enhance.

Through the significance of business performance due to the big changes in the business of Sonera it has also been natural to realise the need for systematic self-assessment approaches in order to improve one's business. In fact, self-assessments deepened the understanding of business performance when in 1992 Sonera started implementing internal Malcolm Baldrige assessments and 1993 company's own model for evaluating business process performance developed on the basis of ISO 9000 auditing principles. A benchmarking procedure has also been developed in connection to both of these. It was especially through the Malcolm Baldrige assessments that in 1996 a need to manage business results in a systematic and balanced manner was recognised. For this purpose a practical operation model was created on the basis of general balanced scorecard (BSC) principles. Implementing the BSC was first commenced in a business unit but has then been taken into use also at the corporate level and in other business units. The BSC has proved to be an excellent tool in understanding and implementing vision and strategies in practice, all the way from the corporate level to businesses and processes. Hoshin Kanri or Policy Deployment ideas from Japanese and American quality heritage have been useful in implementing BSC principles effectively. The measures of the BSC were also linked to business managers' personal remuneration based results according to the so-called MIDO matrix which had been in use already previously. The next interesting issue being considered in connection with performance management is knowledge management.

The basis for internationalising was the relatively small size of domestic markets and limitations concerning growth potential. Due to free regulation Sonera has acquired new competitors constantly. In order to utilise product development efforts and the know-how gained from domestic competition, the direction of growth was aimed abroad. A strong internationalisation trend also entailed Sonera's next great metamorphosis. The objective is that a significant proportion of turnover in the next few years originate from abroad. Sonera started utilising these capabilities by entering into minority share ownerships in several foreign operator companies in 1993.

The owner's point of view has been at the background of developing Finnish telecommunication markets up until the present time. The reasons for this can be found in the existing telecommunications companies in the country when competition started; on the one hand there was a governmental civil service organization and on the other hand non-profit regional independent companies. The emphasis has been less on increasing the value of business, which can be seen e.g. in fierce competition in prices, an overemphasis on the significance of market share and investing practices akin to an arms race. The privatisation and listing on the stock exchange in 1998 have forced Sonera to change ways of thinking and operating models. The owner point of view has clearly gained in strength. Another significant change will be an expansion in the field from traditional telecommunications services to new service entities based on the integration of telecommunications, information processing and digital media. Telecommunication networks will change into interactive information networks and application bases for virtual businesses. In this respect, the challenge comes from a change in the industry.

All these different changes in the business environments and the increasing importance of all the stakeholders' interests relating Sonera's business have emphasized the importance of systematic and comprehensive approaches (e.g. covering all BSC perspectives) for performance measurement and performance management. In fact just here are the natural contacts to the professional quality discipline. The principal aim of quality management is to develop and maintain systematic methodology striving for the quality management principles of e.g. ISO 9000 standards: customer focused organizations, leadership, involvement of people, process approach, system approach to management, factual approach to decision making, continual improvement, and mutually beneficial supplier relationships


1. Anttila. J., Creating a corporate culture that embraces performance measurement - A case study from Sonera Ltd, Finland, Focus on Change Management, Issue 46, July/August 1998
2. Anttila J. and Vakkuri J., Does it pay to be good? (Helsinki: Sonera Ltd., 1997)
3. ISO 9000:2000, Drafts (CD 1) for the revision of the ISO 9000 series standards, (Geneve: International Standardization Organization ISO, 1998)
Malcolm Baldrige National Quality Award, 1998 Award Criteria, (Washington: National Institute for Standards and Technology, 1997)

[This text was presented as a conference paper in London, UK in 1998]