Justifying the Cost of Quality? Money that we spend on the quality system

M

Meggsy

#1
Seeking ideas here!

My boss is making me justify the cost of all money that we spend on the quality system, and my own time, in terms of how it will be cost beneficial to the company.

So, part of my performance review talks about how every 6 months I need to tell the company how much money I will save by cost reduction or cost avoidance in the following six months - which I think is really difficult when it comes to the Quality Management System. I also need to submit a proposal to get some of our internal auditors trained - including a SWOT (strength/weakness/opportunity/threat) analysis, to justify why we should spend the money and how much we will save by doing it.

I feel like saying "If we lose our 9001 certificate, we will lose X% customers and X% sales", but I don't think that answer will be accepted! I know it's not personal (the GFC has hurt us a lot and his role is mainly commercial), but still...

Any ideas how I should tackle this?

:thanx:
 
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Chennaiite

Never-say-die
Trusted Information Resource
#2
Re: Justifying the Cost of Quality?

Seeking ideas here!

My boss is making me justify the cost of all money that we spend on the quality system, and my own time, in terms of how it will be cost beneficial to the company.
:thanx:
I would say, what your Boss expects you to perform makes little sense. I would rather prefer setting a Quantifiable target for COQ in terms of Percentage of turn-over and take actions based on Data Collection, analysis & Interpretation.
The benefit of the cost spent on Quality is Quality itself (and that is why it is Cost-of-Quality). And if you try to justify the money spent for good Quality, Sky is the limit.
But in the end, it goes without saying, Boss, Wife & Customer are always right. One can do little to change their views.
 
D

DrM2u

#4
Seeking ideas here!

My boss is making me justify the cost of all money that we spend on the quality system, and my own time, in terms of how it will be cost beneficial to the company. (...)

Any ideas how I should tackle this?

:thanx:
:read:If I may, I would like to suggest reading Juran's Quality Handbook. It is often regarded as The Quality Bible. The book covers CoQ in chapter 8 in detail, including some examples. Basically, there are the cost of good quality and the cost of failure (poor quality). The cost of good quality consists of the cost of prevention actions (, training, Poka Yoke, mistake/error proofing, process controls, QMS audits, etc) and the cost of detection/appraisal (inspection, product audits, control & calibration of equipment, etc). The cost of failure consists of the cost of external failure (failure to meet customers' requirements and lost opportunities for sales revenue) and cost of internal failure (failure to meet customers' requirements and cost of inefficient processes). The idea is to strike the fine balance between the cost of failure and the cost of good quality: in one hand you have small investment in 'good' with big gains (reduction) in failure and in the other hand you have large investment in 'good' with little reduction in failure.

Hope that my :2cents: help some.
 

Randy

Super Moderator
#5
Your boss is failing to understand that a QMS is an investment and not a cost. In business cost's infer overhead that has to be expended to just operate whereas an investment indicates an expectation of a return. The implementation of a QMS has an expectation of return, tangible (that which you can see or touch...you can put it into the bank) or intangible (that which you can't readily see or touch...it directly helps to put the tangible into the bank).

Your boss has to get his word usage correct before he can be led to understand.

You're gonna get all the quality expert gobblty-goop (like some of the double-speak above)but you need to address this in business and financial terms because in the end that is all that is really important.
 
D

DrM2u

#6
To Randy's comments, 'the cost of good quality' is indeed an investment and not a cost. :agree:
A company 'invests' in good quality in order to prevent the 'cost' of poor quality or failure. Like Randy said, the management has to recognize the difference in order to have the correct perception about the 'cost of qualtiy'. At least IMHO. :agree1:
 
N

ngaran

#7
Seeking ideas here!

My boss is making me justify the cost of all money that we spend on the quality system, and my own time, in terms of how it will be cost beneficial to the company.
why did your boss adopt the standard? what's there to fear?
 

Jen Kirley

Quality and Auditing Expert
Staff member
Admin
#9
If that is so, why wouldn't that answer be accepted?
I also want to know. I think this idea of telling you to justify the system's investment on your own time is very troubling. If this represents him overall as a manager I am not sure you would ever win him over - I worry he will always be an opposing force that in itself adds to quality costs as you spend resources (like your own time and focus) in dealing with opposition before progress can be made.

I do hope my calculator will help. :cfingers:

But even if it does not win him over and you can't see the day when negative influence doesn't stifle progress, the exercise of measuring COPQ and project ROI is very good experience and should help you as you go forward.
 
J

John Martinez

#10
Your boss is failing to understand that a QMS is an investment and not a cost. In business cost's infer overhead that has to be expended to just operate whereas an investment indicates an expectation of a return. The implementation of a QMS has an expectation of return, tangible (that which you can see or touch...you can put it into the bank) or intangible (that which you can't readily see or touch...it directly helps to put the tangible into the bank).

Your boss has to get his word usage correct before he can be led to understand.

You're gonna get all the quality expert gobblty-goop (like some of the double-speak above)but you need to address this in business and financial terms because in the end that is all that is really important.
I agree. You need to learn to speak the language of management and the bean counter (My degree is in accounting, so I can take the shot).
 
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