Cost of Quality

I recently sat down with a private business owner that thought quality sat in the engineering and production departments, I asked him why it didn’t belong to finance.

In his boardroom there was a whiteboard, thankfully it was one of the bigger ones, I handed him a blue marker and asked him to ‘big picture’ sketch his product development steps; from concept to delivery.

I then picked up a red marker and put next to each step a variety of quality costs:

Cost to define markets, customers and users
Cost conduct all the market research and define product specifications
Cost of surveys (customer satisfaction, user perception, product research)
Cost to bid on contracts
Design costs
Cost of support activities
Testing / Qualification / Certification costs
Field Trials
Technical / Customer Support Centers
Supplier reviews, dealing with supplier issues
Cost spend for inspection, reviews
Process validation costs
Quality planning
Measurement & Control equipment
Education & Training
Audits
ISO certification
Updates / Upgrades / Improvements
Labour validation, time to complete, time / task
Return Material Authorizations – product returns
Corrective Actions
Engineering Change Orders
Scrap Costs

Aside from the scrap costs the organization didn’t track the cost or time associated with these actions. The subsequent 2 hours resulted in a basket full of low-hanging fruit, a variety of projects identified and a substantial opportunity for cost control and cost avoidance.

There is more than one meaning to the 'cost of quality', the one that seems to hit home is that with the $$$ in front of it.

Organizational Hierarchy of Needs

Organizational Hierarchy of Needs

Maslow's hierarchy of needs - an organizational / business version:

Need for Survival

Need for Maintaining Current Operations

Need for Improving Current Operations

Need for Adopting New Solutions

Need for Develop New Solutions

.....where do you think your organization is or should be?

.....where is your organization?

.....why is it where you think it is?

.....where are you telling your organization you are or want to be?

.....do you really stand behind / support where you are or want to be?

You've hire top talent - let them work!!!

Over the course of the last two years (basically at the onset of the recession where some great talent became available to the market) I’ve been asking two questions. The first question was to some top talent individuals; in essence, how is the new position going? The second to business owners, GMs, hiring managers; how’s the new employee going?

From the employee side, and these are keen folks I’ve known and worked with, understand their abilities, their dedication, their ability to make it work, I hear over and over again:
- It’s a one man battle and I’m expected to be the front line, reinforcements and supply.
- There’s a bunch of lip-service, I’m the only one biting into any of the tasks.
- Management can not make the tough decision(s), they look me to make them but don’t like the fallout.
- Lack of structure, support.
- Keeping getting told to not get absorbed into the ‘rut’, stay fresh.

From employers I’m hearing, and it’s not just one employer or about one employee, it’s a disturbing pattern:
- On paper and in the interview process was perfect, but he/she can’t win the staff over, they get lip-service from the staff (peers) but no real buy-in.
- They can’t implement the change required.
- They don’t understand the culture, they’re upsetting the current balance.
- They’re not ‘joining’ the team, they stand out, not entirely accepted.

When I first started hearing this I thought it was a bit of whining, some coincidence, personality mismatch, but there is a pattern, there is a trend and there is a problem.

Business owners have to realise a few key things:

One person is not going to solve the problem or address all the issues – not when you are hiring them at a manager or directors level – especially when you have not given his/her peers the same mandates for their departments. If you are telling the organization it’s status quo and then telling the new hire to make this change, make that change, increase this, decrease that, you are setting them up for failure. The organization is a living, breathing, interconnected mechanism. All the pieces have to work together.

There is a reason they accomplished so much prior to coming to you. I would venture to say it’s mostly due to their intelligence, drive and ability, but they did have the tools, structure and support needed to get things done. In hockey terms you’ve hired a great goal scorer but if he has no one to feed him the puck, no one to block a check and a goalie that lets every other shot on net in, your start scorer will never win you a game.

You’ve hired them for their ability, their know how, the fact they’ve done it before – use them to help transform your organization, help them get other managers on board to the changes, address the issues with managers that resist the change. Support these guys/gals and you’ll see they’ll go above and beyond to make things happen. Yes, they are the types you can put in a sink or swim situation (and they’ll swim) but you can’t expect them to survive if you throw them to the sharks. Think about how you won them over to join the organization, what you said that got them to join – they knew you had issues – but they saw the potential, help them unlock it.