Ideas to promote ASQ's Economic Case for Quality (ECQ)?

[Diane G. Kulisek]

I am in the process of putting together the agenda for a local industry leader breakfast in order to help promote ASQ's "Economic Case for Quality". ASQ has provided some presentation outlines, case studies and other tools for me to work with. What I'm wondering is.... have any of you out there done or heard about anything specific to substantiate the cost effectiveness of quality? Top executives I've worked with loved numbers, especially those with dollar signs in front of them. Any good quotes, statistics or demographic info out there to support the "Economic Ca$e for Quality"?

[Baldrick]

Deming's always worked for me - "You don't have to do any of this - survival isn't compulsory".

Best of luck!

[Statistical Steven]

Originally Posted by Diane G. Kulisek

I am in the process of putting together the agenda for a local industry leader breakfast in order to help promote ASQ's "Economic Case for Quality". ASQ has provided some presentation outlines, case studies and other tools for me to work with. What I'm wondering is.... have any of you out there done or heard about anything specific to substantiate the cost effectiveness of quality? Top executives I've worked with loved numbers, especially those with dollar signs in front of them. Any good quotes, statistics or demographic info out there to support the "Economic Ca$e for Quality"?

Diane,

As a Division leader within ASQ, and an active participant in many of these discussions, I have come to the conclusion that most executives value quality, but do not see it as their job. In a recent engagement, the client wanted a tools for quality presentation to be given to their line workers. I mentioned that giving them the tools was a start, but top management needs to buy into this philosophy. I was told, "It is my goal for the year, so I will do it." My perception is that top management made quality an operational goal, without any real metric to measurement it. I have asked ASQ and others to help me understand what is the metric to measure success. The idea that money is the only metric does not work for me. Just my ramblings about the ECQ.

[Brian Myers]

A fine example of when the execs just don't get it...

My job for the last 12+ months has been to administrate and track an off-shore group of inspectors (in China). These folks are on contract to us as our QA Auditors, they pull a sample from every lot of product coming out of China (we have multiple contrat factories in China). They inspect the sample and issue a report and recommended action (release or hold) based on the old MIL SPEC 105E. The cost for this service was approx. $300K for last year.
(Considering the amount of work involved in conducting those audits, we ship in pretty small quantities on a VERY REGULAR BASIS, this bill is very reasonable.)

I was also able to dig up enough stable, trustworthy data to show that during this same timeframe, even though our Sales grew substantially (something noone else in our business has been able to say in quite a while!) the Warranty Returns have gone down dramatically, without changing Suppliers, Product Design/Mix, or any other factor of note. In terms of Warranty Dollars Avoided, we managed to save somewhere north of $3.7M over those same 12 months.

Not bad, a 10-to-1 ROI : IN THE FIRST YEAR!!!

You want to guess what one of the Goals for this Fiscal Year is ....

Streamline and REDUCE the cost of this Audit Process!!!

Even as I prove it's worth to the BOTTOMLINE and look for ways to make it even more effective in Warranty Cost Avoidance, I am told that I have to REDUCE the expenditure!!!!

Just when you thought you were getting somewhere and the execs understood that you are "doing a good thing"... WHAM -The Stupid Fairy strikes.

Brian

[Jim Wynne]

Originally Posted by Diane G. Kulisek

What I'm wondering is.... have any of you out there done or heard about anything specific to substantiate the cost effectiveness of quality?

Many of us have spent substantial portions of our careers trying to bring sight to the blind. Back in the eighties there was a story on Deming in the Chicago Tribune Magazine and he was asked by the author how he would like to be remembered. He thought for a second and replied, "Well, if I could be remembered as someone who spent his life trying to keep American manufacturing from committing suicide..."

I know this much: there is no magic bullet, no panacea, no profound pronouncement and no slick package of platitudes that will make incompetent executives suddenly see the light. You can buy them books, send them to seminars and give them brilliant talks and presentations. You can show them incontrovertible, undeniable evidence, packed with dollar signs and ROI and boosted bottom lines and before-and-after P&L statements, and they'll come back tomorrow doing the same old stuff, totally oblivious to the bloody obvious.

American manufacturing executives are like crack addicts high on psychotic belief in their own greatness despite stacks of empirical evidence to the contrary. And like any sort of addict, there's nothing you can do to help them until they recognize the hopelessness of their situation and decide for themselves to do something about it.

[Graeme]

In my experience, Quality works best when the top executive is personally committed to quality improvement and that commitment is very visible. For example -

In the early 1990's I was working at a Navy shipyard (now closed) on the East Coast. For most of the 1980's there had been attempts to start an effective quality program with the "program of the quarter" approach, with little success. The programs were generally driven by the Quality Assurance office, there was some support from the involved line workers (I was on a couple of quality circles - anyone remember them?) and front-line supervision, but upper management ranged from apathy to obstructionism. Then a new commanding officer arrived. He instituted new quality leadership training - combining quality principles and leadership principles. The training was mandatory for all executives, managers and supervisors, and available to other workers as well. More importantly, the CO was personally teaching several of the classes - especially the opening one and the closing one of each course cycle! When the top boss is teaching the course, you better believe the subordinates get the message! From that time on there was a marked improvement in all quality measures - and then in 1994 the government decided to close the base. Nobody was discouraged because the CO said that now that we had our orders, we were going to do the best quality job of closing a major industrial complex that had ever been done -- and it was. One of the goals was that every worker who did not retire would have another job to go to, and that goal was also met.

The problem is gaining that commitment. We have to overcome many obstacles such as the ones mentioned by Steven W., plus impatience, a focus on very short-term results, and a desire to just "install" quality and get it over with to move on to the next thing. The necessary executive commitment takes a combination of patience, personal values and a long view of the business. The time focus has to be 3, 5, and 10 years or more -- not the next quarter's results. They have to be personally committed to fostering culture change ... going from quality being "we have to do it to get this contract" all the way to "that's the way we do things here". If the organization is a union shop, then the union leadership also has to be committed and involved.

There are documented financial benefits, but they are long term. There was a study published in 1999 (I think) that looked at the economic effects of implementing an effective Total Quality Management (TQM, the buzzword of the 1990's). In the absence of other information, the researchers used the act of applying for a national quality award program as an indicator of the existence of an effective TQM program. They found that over the study period (five years) the stock price of the sample companies outperformed a control group by about 45%. (Research by Vinod Singhal (Georgia Tech) and Kevin Hendricks (William & Mary). Article: Boosting the Bottom Line, in Georgia Tech Research Today.)
That research is fairly old now, and I think it is referred to in the ASQ ECQ white paper. For ten years NIST had a hypothetical index of Baldrige Award winners that compared their performance to the S&P 500. (It was discontinued after 2004.) But in a quick search I have not been able to find other documented and validated examples.

Juran says the benefits have to be expressed in financial terms to get emphasis, and Crosby implies the same thing. The Deming quote cited by Baldrick is good and may be effective in some cases -- but often by the time the company realizes that the issue is survival it's too far gone to do any good. (I once applied for a quality leader position for a company; on Thursday an appointment was made for an interview on Monday, but the headlines in Saturday's paper announced that the company had folded on Friday afternoon.) Sometimes the long-term benefit is in fact survival -- or at least survival of the jobs or company in this country.

One thing that may be valid is that the approach has to be tailored to the size, makeup, organization and philosophy of the company. The thing that helped Motorola win the Baldrige Award in 1988 (something called "six sigma") may be too much for the small service company down the street. There are many tools available, and even several tools for the same task. What is suitable for one organization may be too much -- or not enough -- for another. My bias is that every organization that measures physical "stuff" needs to have a good measurement quality program backed up by a good calibration program -- but even the level of those varies from one place to the next.

I don't have any magic bullets. I don't think there are any. After all, the things being taught now are largely the same as those that were developed in the 1920's through 1940's, plus a few more recent ones. Sure some of the methods have been dressed up in flashy new clothes and hyped with flashing neon signs (Six Sigma) but there's hardly anything in there that an ASQ CQE from the 1960's would not recognize.


Graeme C. Payne
ASQ Sr. Member, CQE, CCT, CQT
Chair, Measurement Quality Division

[Diane G. Kulisek]

Originally Posted by Baldrick

Deming's always worked for me - "You don't have to do any of this - survival isn't compulsory".

I've held Deming up as the ultimate "quality consultant" for most of my career... but I don't seem to be having the same success with openly insulting executives that he did...

Thank you for the speedy response, Baldrick!

[Diane G. Kulisek]

Originally Posted by Statistical Steven

I have come to the conclusion that most executives value quality, but do not see it as their job. ... My perception is that top management made quality an operational goal, without any real metric to measurement it. ...The idea that money is the only metric does not work for me.

Thank you for validating my concern, Statistical Steven. I guess that we need to find some examples for how to help executives both see quality as their job and to measure quality as an operational goal. I think that one of the later posts I've read this morning does a nice job on the "their job" part. I'm still interested in the statistical part, though..

Thanks again!