Cost of Poor Quality (COPQ) and Reputation

Manix

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#21
I agree to a point with Jim and Wes, the thing is though sometimes it is not as easy, to simply say "we smell the smoke, now lets go put out the fire". They look around, grab the hose, but no one knows where the fire is or how big it is. A simple fault in service or product may not be enough to spark any damage, maybe even continual faults are not enough to damage that unmeasurable entity but when does it warrant resource to correct? Where do we target that resource? How much resource does it require to correct?

The points already been made in this thread that much of this will be classed in severtiy terms dependant upon your market, environmental conditions, management style and structure etc.... For example if you hold a monopoly and there is no direct correlation between damaged reputation and lost sales, then is there any need to know any of it? I would argue yes, you do, either that or ensure the competition never get a chance to exist!!!!!
 
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Jen Kirley

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#22
I like to think many upper managers are concerned about reputation, though I've been given opportunities to wonder.

Certainly they should be, and almost as certainly these same people are driven by data. They want a larger market share and understand that reputation matters, but I suspect few will be satisfied with perception when making plans for how to act to get that market growth.

So it makes sense to try to understand how much of what kind of reputation factor is at play, and what it means in outcomes. That is why I advocate developing a mathematical curve for show and tell. My quality costs calculator can be adapted to establish these averaged costs and generate a figure based on number of events--say, recalls or field failures...especially when they involve safety.

The sales team is perfectly positioned to ask existing customers why the customer prefers them, and how they can do even better. Marketing teams do (or should) look at the amount of sales going to competitors, and try to understand why. They can look at news articles and take a critical look at the message the public is getting. Doing active and beneficial community service can help the effort. But reputation is only partly about what we sell. It's also about our impact on the community where we work. This is why Baldrige has the Social Responsibility element.

When I was examiner for my state's version of Baldrige, I noticed that many organizations struggled with performance metrics, and tying them to planning and business activities. That is why I took such an interest in them, I guess. You could look at the Baldrige award winners' descriptions of what they did to understand and impact their reputation, among other things.
 

Jim Wynne

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#23
I agree to a point with Jim and Wes, the thing is though sometimes it is not as easy, to simply say "we smell the smoke, now lets go put out the fire". They look around, grab the hose, but no one knows where the fire is or how big it is. A simple fault in service or product may not be enough to spark any damage, maybe even continual faults are not enough to damage that unmeasurable entity but when does it warrant resource to correct? Where do we target that resource? How much resource does it require to correct?
You're talking about two different things--loss of money and loss of reputation. While the two may be interrelated and it's fairly easy to quantify the former, it's possible to lose business without diminished reputation. In addition to producing faulty products, a business can lose reputation by producing conforming products (in terms of engineering specifications) that the market isn't interested in. I always go back to the definition of "quality" given by Stanley Marcus, of Neiman Marcus fame: "Sell products that don't come back to customers who do."

The components that contribute to favorable reputation are manifold, and can't be pinned down to a narrow set of numbers. Understand the market, find ways to continually provide what it demands, and reputation will take care of itself.

For example if you hold a monopoly and there is no direct correlation between damaged reputation and lost sales, then is there any need to know any of it? I would argue yes, you do, either that or ensure the competition never get a chance to exist!!!!!
All companies in business to make money (all companies, in other words), regardless of market share, need to be aware of trends in the market, and where the spending is headed at any given time. Publically-owned companies, even if monopolistic, need to protect their reputations with existing and potential shareholders and as you suggest, guard against erosion of market share caused by competitive innovators. None of this means that reputation is an entity that can be quantified in a meaningful way. Good reputation is the result of doing things right, and you need to identify and measure the things that contribute to it, but that doesn't mean that reputation itself can be measured.
 
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J

Jimmy the Brit

#24
This started me thinking, how could I record the cost of poor quality in terms of reputation. Has anyone tried to do this? I know this may form part of 8.2.1 Customer Satisfaction for you TS companies out there, but how have people put this into measurable metrics?
Hi Manix,

A lot of great comments have come from this thread already, and I agree that reputation is a very ethereal thing, so fragile in some contexts and so robust in others.

In response to your original question; have your read "The Ultimate Question" by Fred Reichheld. In it he tries to connect the Net Promoter Score (his ~CSat measure) and company profitability. This is the nearest that I have seen to an empirical study linking customer satisfaction to financial outcomes, and at least defines a valid customer metric, instead of the blah, blah, blah of normal CSat mechanisms.

What you can end up with is a cost per NPS point score, although getting the data is vulnerable to all of the items already discussed in this thread.

If nothing else it is an interesting read!

Jimmy
 
V

victor30

#25
I just started working on developing a cost of COQ program. I am almost done with priciples of cost fo quality by Campanella.

But I would like to see a real procedure on the subject and the best way to implemented where to start? for instance...

I am going to appreciate you help.
 

Stijloor

Staff member
Super Moderator
#26
I just started working on developing a cost of COQ program. I am almost done with priciples of cost fo quality by Campanella.

But I would like to see a real procedure on the subject and the best way to implemented where to start? for instance...

I am going to appreciate you help.
Victor,

To start, you may want to scroll down this page and click on the links that are there. In addition, you can also use the search function. Lots of good information there.

Stijloor.
 
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