Quality is free #1

Part 1: Quality Management: a solution to VUCA

VUCA = Volatility Uncertainty Complexity Ambiguity

There is a general feeling that the level of VUCA in the world is set to only increase: so much that it has been given its own acronym.

Given this, can a business make plans and reasonably expect to achieve objectives?

As quality professionals we believe that the answer is unambiguously; Yes.

Why yes? To a large extent the yes is based upon our understanding of the value add of good quality management. Whether your business is a highly regulated industry or a FMCG-type consumer goods company VUCA can be overcome with good Quality Management.

We, the authors, agree with Philip Crosby’s book “Quality is Free: The Art of Making Quality Certain.”(1971) that the role of quality management is to provide certainty to the business. Quality management is “a systematic way of ensuring that organized activities happen the way that they are planned”. Additionally, quality management ensures that money is not wasted in the costs of non-quality [reworking, scraping or servicing defective products].

One could make arguments about trade offs for speed to market over quality, however this more holistic view of quality will in fact make speed to market an objective that is subject to quality management. Ultimately the business’s leaders must decide what trade-offs are taken for achieving objectives, like speed to market. With proper quality management the foreseeable consequences and their risk profile will be made clear and management is enabled to make informed decisions.

Would you like to work at a place where firefighting of problems is minimized and most issues are identified and eliminated early, many even by making intelligent design choices?

Consider the resources that would be freed up in such an environment…

• Imagine how they could be used to meet the demand for your products & services is met
• Imagine the new potential for innovative products & services!

So how does one get started on building this beautiful future state?

First, one must understand that this is a journey that moves us towards business success. As such, everything must be contextualized in a manner that the business will understand. That is:

• How much does it cost?
• What is the ROI (return on our investment)?
• Why is it, the ROI, important to the business?

Next, during this a journey a relentless attack on solving problems and continuously showing value creation is a must. Does your company have a problem solving culture? Or is it too focused on avoiding blame?

Lastly, do not strive for management support strive for direct and continued management involvement.

Management Involvement is Crucial. Management is so crucial because they provide not only the leadership needed across the organization, but the funding required for the realization of successful quality management across the business.

Let us get started on the first point, contextualizing things in the language of a business. For quality professionals we must use a concept called CoQ Cost of Quality

CoQ is where quality and business professionals intersect and can be used to create common goals and a common understanding of the value add of quality.
The graphic below gives an overview of CoQ.

The total costs of quality can be broken down into two categories:

1. Costs of Quality: the costs of staffing a quality unit and their performance of the appraisals and prevention work e.g. analytical equipment for QC labs
2. Costs of Non-Quality: the cost of failures like rejects, reworks, plant closures, inspection findings etc..

Measuring the first cost is often achieved because it is easy, essentially it is the budget for the quality unit. However, measuring the costs of non-quality (poor quality), requires collecting information on work done across the entire value chain and multiple functional areas.

Crosby and others in the literature claim that companies just beginning to examine the total costs of quality usually have a CoQ as high as 25% of sales and that it need only be 3%.

If you do a quick calculation, based on your company’s annual sales, what are the potential savings for each 0.1% in CoQ reduction?

Has anyone at your business bothered to make such a calculation?

If not, why not?

Once you do so,

how can you begin to measure the Cost of Quality and what do you do with the information once gathered, so that you are taken seriously?

To get started on this journey your efforts will need

1. Believable, cost of non quality data and thus access to the data from across impacted departments
2. A pilot study that fixes some problem — a sexy one if possible
3. An audience with the most senior management possible in order to expand such investigations and identify a shortlist of the most expensive failures, across the company, if possible.

Costs of Non Quality — Collecting the Evidence

Begin your own forensic investigations into the costs of non-quality

Depending upon your role in the company and your access to and relationship with other functions where you look will vary, but the investigation should follow the same path.

Look into the common failures, find out who worked on resolving them and build an FTE model, as it is the easiest. Base costs for work on credible estimates of time spent by various job roles on fixing non-quality failures.

Based upon the time spent and the salary of the individuals involved you are likely to find some shocking costs of non-quality when you “guesstimate” the annual costs for such failures by multiplying the cost of the FTEs by the number of those failures/year.

Meet Your Comptroller: If simply getting the information about the roles involved in the work seems Herculean, take heart you are likely to find an immediate ally in the form of your comptroller. In some organizations the comptroller will greatly appreciate starting an FTE model conversation, especially if that is where the bulk of the expenses occur. More mature organizations will already have this information handy and it will be a straightforward request/approval.

To heighten the impact, if possible, add as many other costs to the FTE e.g.:

• lost sales,
• scrapped product,
• down time on the line,
• inventory and extra raw materials,
• impact on company image or worker morale/engagement,

These may not add too much to the monetary argument, but they do enhance the message that quality issues are not limited to the quality department.