Cost of Quality, part I

One important concept to work from when talking about quality is money. The renowned Quality legend, Dr. Juran, said that when you talk about quality to top management, you need to talk the “language of money”, as opposed to the “language of things” that you can use towards workers, engineers, operators and technicians. A skilled quality professional who wish to provide structure and culture for quality needs to be able to speak both languages fluently. But to get anything done – you need the top management support and that you can get through the language of money. In quality, this relates to Quality Costs.

Cost of quality is really a simple concept. We all know the «golden triangle» between time, cost and quality. There’s a saying:  «you can have your project cheap, fast and good, but you have to choose only two». 

The elements in the golden triangle are interlinked and if one fails, the others soon follow. But keeping track of quality or the cost of quality, both the things that go right (called Price of compliance), but also the things that go wrong (called Price of non-compliance) is crucial for both cost and time. The terms” Price of compliance/non-compliance” was first introduced by another quality legend, Philip B. Crosby.

I always like to start with definitions, to make sure we have the same understanding of what we are talking about. The Question “What does Quality mean?” is not easy to answer, but perhaps we can get closer by looking at some definitions. I like ISO, but their definition is a bit tricky.

Quality – ISO 9001 - Degree to which a set of inherent characteristics fulfils requirements

For my company – this has been translated into:

Quality - The ability to deliver in accordance with the requirements, needs and expectations that has been specified for the company – by our customers and stakeholders. Deliver with a high degree of compliance, precision and excellence.

Personally I prefer the excellent quote from Henry Ford “Quality means doing it right when no-one is looking”. It is simple, easy to understand and really says something about the culture in the organisation.

Now, there are two different types of quality costs, one is the necessary costs to run an efficient management system (which can be reduced significantly if we work more efficiently) and the other is when we make mistakes, we simply separate between the “Price of compliance” and the “Price of Non-compliance”. Having a good structure for quality in place is not something that comes by itself. It has to be driven. So the Price of compliance is basically the expense of doing things right or the cost of having an efficient structure for quality. You need people and systems to get it rolling. But you don’t have to overspend either. There is a limit to the Price of Compliance and a too bureaucratic system or way of doing things can work against your purpose. To limit your Price of Compliance, you need to improve and almost all improvement comes from simplification. To quote Tom Peters, who wrote the book “In Search of Excellence”,  “Almost all quality improvement comes via simplification of design, manufacturing... layout, processes, and procedures.”

In the next part, I will give a model for a good way of doing quality with an efficient structure, with low Price of Compliance, but we will also looking at how to limit the Price of Non-Compliance in a later post.