Quality circles represent one of the most interesting employee participation initiatives of the I980s. According to their advocates they improve industrial relations, increase productivity and improve product quality. Quality circles were developed in Japan and embody some fundamental principles of Japanese management. Outside Japan, however, quality circles have had a consistently high failure rate, leading some commentators to suggest that they have a distinct life cycle. This article examines this contention by comparing the operation of quality circles in two divisions of a large manufacturing company in Australia and noting the factors that contributed to success and failure. It concludes that quality circles were used strategically in both cases to help introduce a more participative management style. The impact of quality circles on the existing pattern of industrial relations is assessed, particularly the changes in relations between the major groups in the organization, the response of the unions to the programmes and their effect on the supervisors.