I think there are several reasons of why this concept has faded:
- There was no formal process to do it. Managers just knew the basic concept of quality circles, but the details were left for them.
- Since most managers were uneducated on the concept, the team members of the quality circles felt "lost", and thus spent more time trying to know what to do rather than just doing things and then analyzing the results.
- Quality circles diverged team members from their "real" work and reduced short term productivity. Of course, the benefits are maybe far greater than the overhead created by quality circles, but when the economy is in trouble, companies focus on productivity (quantity) more than quality.