Cost of quality, part II

Structure for quality

To give you a better understanding of what we actually do when working with quality, I’ve developed a model. “The scope and deliveries within quality management”. 

Now there are some things I need to know before I start with providing a structure. I need to know something about the objectives and framing of the work to be done or the intent of the organisation - what do we want to achieve. 

The second thing is to have a grasp of the risk picture. What can go wrong and where do we have opportunities for better and simpler ways to our goals (as risk is considered a neutral aspect with both upsides and downsides)? The risk picture changes as the context changes, so this is not set in stone, and we always have to come back to the risks.

The third thing is the requirements put upon our venture.

From the definition of quality given in Cost of Quality, Part I, we can see that achieving quality really hangs together with compliance to requirements, and that can also be expectations and needs from our customers and stakeholders. To achieve quality, we MUST understand and comply with the requirements.

Now, the requirements can be divided into three

– WHY – talking about business requirements, such as policies, strategies, objectives, commercial issues and other critical success factors

- WHAT – talking about product requirements, such as technical requirements, International Standards, governmental requirements, production targets etc, everything that governs what we are making, or our product.

And lastly – HOW – taking about process requirements, such as Function requirements, work process descriptions, best practice and even ethics and values.

Now, when we have an idea of these things, we can create our structure. 

There are 6 elements – we start by creating or maintaining a management system. This is a huge task in any organization or project and we must rely on Quality Planning to be able to do this. Guidelines, rules and routines must be in place to create, manage, continually improve and update and implement governing elements in a management system effectively.

The second element is measuring or benchmarking, which can be linked to statistical analysis and data management, a huge part of the traditional quality management function, for instance looking at statistics for quality incidents as a way of cutting cost, as we will see later, but also external benchmarking like eg. ISO-certification or a Baldridge award.  I’ve read many places that we have to take the management system to the “next level”. But if we don’t know which level we are on today, how can we go to the “next level”? Measuring processes are not easy, but necessary to make sure that we keep focus and work effectively.

The third element is Monitoring, which is quite big. When I say monitoring, I mean all internal auditing and quality assurance done within the organization or project and all audits and examinations done towards our suppliers as well as any external audits from authorities and other third parties. All so called QA/QC activities goes into this box.

The forth element is Non-conformity and deviation handling. We need to understand what can go wrong and have a plan on to handle this. It is linked to risk management, change management and to requirements as non-conformities are deviations from requirements. Sometimes we know in advanced that we are unable to comply with a requirement and we need to seek a deviation permit, sometimes it is about cleaning up the mess after the fact and making sure we learn from it.

The fifth element is experience transfer, and I will elaborate more regarding experience transfer (it being the topic of my Master Thesis, after all). We need to learn from others in a systematic and documented way as well as share our own successes and failures so others can learn from them. Experience transfer is part of knowledge management, which is a huge endeavor that few companies have been able to manage properly.

I have identified an experience spiral (2008) that explains which arenas experiences are normally transferred.

The central arena is the people arena in our daily dealings and meetings with colleagues, mentors, friends, leaders and associates.

It moves outward to projects (groups, teams etc) where we before, during and after the work of a team/group/project gather, share and transfer experience.

The next step is portfolio. This could be asset portfolios, project portfolios or other natural entities that look at things across several similar areas. The portfolios can look into trends and do analysis for their areas to ensure learning and experience transfer.

Networking is sharing of experience between equally qualified persons within one knowledge or process area.

Formal training and courses is when experienced colleagues share their knowledge and experience with less experienced personnel, attending planned and structured courses.

Good examples and best practice are excellent arenas for sharing of experience. Examples of documents to be produced by projects for decision making and templates, work processes, and work descriptions on how to best fulfill the requirements in the governing system should be developed by line organization and process owners and shared.

Ultimately, our most important and critical experiences end up as governing elements in our management system as new requirements, either from continual improvement or as a corrective action to an unwanted incident.

And, of course, our experience shall also be a forming part of our strategies, turning our knowledge into action.

Going back to the main model for “The scope and deliveries within quality management”. 

The sixth and last element for the structure, we need to close the Plan-Do-Check-Act circle in using Performance management in deciding on our improvement agenda, and finding the activities and focus areas needed to become even better. We do this to continually improve which is of course a key element in quality leadership.

Now, having all this in place, we can achieve our quality goals or outcomes.

Firstly, Compliance – to requirements and expectations from stakeholders. If this is not in place, there is no quality. 

Secondly – Precision. I favor precision over perfection, making sure we hit our target related to specifications without gold plating. Ask yourself, what is good enough? 

And thirdly – Continual Improvement. We always have to strive to be better.

In the core of all this lies our Quality Culture. I’ll come back to the culture in a later blogpost.

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.