2019

STANDARD ISSUES

QUALITY MANAGEMENT

Paddle Like The Dickens

Embrace quality management to keep your organization running smoothly

by Govind Ramu

Throughout my quality career, I have been continually challenged by business process owners, R&D engineers and scientists, and senior management staff to prove the benefits of quality management systems (QMS).

These are the people who say: "We have a quality product and service," or, "Our brand is synonymous with quality," and use the word "quality" a lot when marketing to customers. They unanimously agree that quality is important to an organization’s revenue and bottom line, but, somehow, they don’t deem QMSs important.

QMSs are misperceived as a paperwork exercise done to ensure the organization has an ISO 9001 certification hanging on the wall. This narrow understanding often results in quality management professionals becoming an easy target for headcount reduction. This shortsighted cost cutting blurs the long-term vision of achieving a sustainable and more resilient organization.

ISO 9000:2015 defines "quality management" as establishing quality policies and objectives, and processes to achieve those objectives through quality planning, assurance, control and improvement.1 The same standard defines "quality" as the degree to which an object’s set of inherent characteristics fulfills requirements.2

If an organization demonstrates quality through quality control inspections only and not by addressing the other dimensions of quality management (such as quality planning, assurance and improvement), the product or service quality that is delivered won’t bring value to the organization’s customers. Eventually, quality control will become unaffordable.

On the other hand, if quality is built into the products and services the organization offers by embracing every dimension of quality management, quality becomes affordable and sustainable.

This is where there is disconnect. Quality professionals often don’t do a great job of making top management and other interested parties aware of everything quality management encompasses and why it’s important to understand a holistic approach to achieving quality. As a result, top management often sees quality as a transactional activity, not a strategic advantage.

Most people in an organization understand that improvement projects help the bottom line. In a typical lean or Six Sigma improvement project, the project leader performs cost benefit calculations to justify pursuing the project. After the project is completed, the project leader presents the benefits realized to management and the project champion.

But when it comes to implementing a QMS, a cost benefit analysis isn’t calculated. This is because quality professionals see quality management as the foundation of the sustainability of overall business. It even serves as the foundation of lean and Six Sigma projects.

Quality professionals see a QMS as a common-sense aspect of conducting business. When building a house, for example, the foundation isn’t optional. The same holds true for a QMS when running a business.

Benefits of a QMS

An effective QMS prevents or reduces the occurrence of organizational issues, such as those outlined in Table 1. The benefits of employing a QMS are cost avoidance through preventing failures or a reduction in failure costs.

Table 1

As an example, before implementing an effective QMS, the organization encountering the issues in Table 1 experienced a baseline cost of poor quality (COPQ) of 30% of the cost of goods sold (COGS).3 Going beyond compliance and improving the maturity of the business process reduced the organization’s COPQ to less than 5% of the COGS, improved its profit margin, and helped it realize financial and economic benefits.

The challenge for most organizations is attributing the measured benefits to the QMS. QMS benefits can become intertwined with other factors. Table 2 outlines some QMS benefits. Some benefits align directly with cost benefits and others with cost avoidance, which is why it’s important to measure a baseline COPQ and monitor it periodically to show top management the benefits realized through improved quality management effectiveness and maturity.

Table 2

QMS as a foundation

The benefits of an effective QMS often are taken for granted. If you take the probability of occurrence of the issues identified in Table 1 and multiply it by the number of transactions affected, the processes performed in the organization and the corresponding cost impact, you can estimate an overall potential financial and economic impact on the organization.

This is the dollar amount the QMS is "quietly saving" in every area of the organization. These implicit savings aren’t publicized to the organization because they aren’t obvious.

The "loud savings" are what get people’s attention because they are typically what prevent major losses or embarrassments. Consider this example:

An organization detected product quality issues after its products were shipped to one of its major customers. The products were in the organization’s finished goods inventory, in transit to the customer, in the customer’s warehouse and in the customer’s assembled goods. The organization was unable to supply conforming finished goods that met the customer’s requirements and delivery schedule.

The customer was dissatisfied and notified the organization that it was going to switch to another supplier in three to six months. In response, the organization quickly assembled a tiger team (a team of specialists) to investigate and resolve the crisis.

Although the organization lost money from recalling products at all stages of the supply chain and distribution, the tiger team demonstrated its ability to recover from such a crisis and prevented the organization from losing a major customer.

The resolution made the tiger team heroes, but the organization went back to how it had been operating, with the possibility of another crisis looming ahead. Even in this situation, the organization would not have recovered from this crisis without the foundation of QMS processes in Table 2.

Quality professionals must effectively communicate to their key interested parties that the organization’s QMS foundation is what keeps the organizational business process stable and repeatable. This is analogous to the saying, "Be like a duck. Calm on the surface, but always paddling like the dickens underneath."4

Organizations that are crisis free and calm on the outside are being paddled by quality professionals who help prevent crises through effective QMS design, implementation and maintenance. Unlike those who pull the organization out of a crisis, the quality professionals who keep things stable aren’t always recognized or rewarded. But that’s just part of being a quality professional.

A crisis-free organization might be boring, but it racks up quiet savings that strengthen its bottom line. If quality professionals make top management aware of these quiet savings as often as possible, the quality professionals won’t have to defend their existence during economically difficult times. Furthermore, organizations will think twice before asking quality professionals to do as little as possible for the organization to barely keep its ISO 9001 certification.5


References and Note

  1. International Organization for Standardization (ISO), ISO 9001:2015—Quality management systems—requirements, clause 3.
  2. Ibid.
  3. Joseph A. DeFeo, "The Tip of the Iceberg," Quality Progress, May 2001, pp. 29-37.
  4. Michael Caine, www.brainyquote.com/quotes/michael_caine_140815.
  5. U.S. Technical Advisory Group experts are contributing to two important standards expected to bring value to quality management. The national standard, Cost of Quality: Guidelines for development, implementation and monitoring to improve quality and performance is in draft form. ISO 10014:2006—Quality management—guidelines for realizing financial and economic benefits is being balloted for revision. It is directed to top management to bring added awareness to the benefits of an effective quality management system. These standards are expected to bring value to quality management.

Bibliography

IndustryWeek staff, "Financial Impact of Quality Remains a Question," IndustryWeek, July 19, 2016, https://tinyurl.com/y9xbbsm6.

ISO, ISO 9004:2009—Managing for the sustained success of an organization—a quality management approach.

ISO, ISO 10014:2006—Quality management—guidelines for realizing financial and economic benefits.

Lyke-Ho-Gland, Holly, "Quantifying the Financial Benefits of Quality—The Role of Governance and Transparency," IndustryWeek, Dec. 13, 2016, https://tinyurl.com/y6ugt4nb.

Wood, Douglas C., Principles of Quality Costs, fourth edition, ASQ Quality Press, 2013.


Govind Ramu is a licensed professional engineer from Ontario, Canada. He also is the chair of the U.S. Technical Advisory Group to International Organization for Standardization Technical Committee (ISO/TC) 176, subcommittee (SC) 1 on ISO 9000:2015 standards and the convener for ISO TC 176/SC3 working group 23 for ISO 10014. Ramu is an ASQ fellow, ASQ Crosby Medal recipient and holds six ASQ certifications: manager of quality/organizational excellence, engineer, Six Sigma Black Belt, auditor, software quality engineer and reliability engineer. He is an author of The Certified Six Sigma Yellow Belt Handbook (ASQ Quality Press, 2016).



A very good article
--ANIL SKARIAH, 02-09-2019


It's a very thoughtful article on one of the fundamental quality issue.
Title says lot about underneath hard work needed for smooth sailing!
Thanks for sharing your thoughts with us.
--Kamala K Nanjundeshaiah, 05-23-2018


Just like everything else, those who keep things running smoothly are quickly forgotten and undervalued.
--John Elwer, 05-15-2018


So relevant! I am right now, from a new manager in the organization, facing the kind of challenge mentioned in the opening lines of this article. As Ramu points out, all too frequently, the heroics of organizational firefighters get all the glory and attention in a company. Meanwhile, the function of the QMS in keeping the business both stable and sustainably high performing is indeed often taken for granted. Ramu’s discussion of the QMS’ benefits helps clarify the much-questioned connection between the QMS and a strong business.
--F Nagy, 05-10-2018


Great article. "Organizations that are crisis free and calm on the outside are being paddled by quality professionals who help prevent crises through effective QMS design, implementation and maintenance." 100% agree to this.
--Raymond Medina, 05-06-2018


Thank you for the very well written article. I liked the lines "Unlike those who pull the organization out of a crisis, the quality professionals who keep things stable aren’t always recognized or rewarded. But that’s just part of being a quality professional."

The article was simple and easy to read.
--Muthuraman Annamalai, 05-02-2018


It is great to see an article on the importance of a well-organized and thorough QMS as the foundation of your business. Similar to designing quality into parts or services, the design of your QMS can contribute to issues or success.
--Katherine Moehrke, 05-02-2018

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