Friday, January 27, 2012

Proposing: A marriage of Quality and Finance


ASQ’s CEO, Paul Borwaski, has posted a very interesting piece on his blog this month. I won’t steal his thunder. Read it here…

While Paul has anchored his post on his favorite (and mine too) Baldrige program, the point he makes is far-reaching.  If quality is valuable to a company, what is this value?
Unlike, usual responses which use twists of the English language to try and avoid answering what this value is, there are a couple of economists who have ascertained that the Baldrige program returns upto 820 times to one! If you don’t believe me or Paul, you are welcome to check the study here.

Honestly, I am not surprised at the magnitude of returns Baldrige provides, what is interesting is that finally there is interest and action on bringing Quality and Finance together. Dr. J M Juran was right (as he was on whatever he said!) when he said quality needs to speak the language of senior management (money) to succeed.

As a quality professional and assessor of business excellence programs I am noticing a very strong and welcome trend – quality professionals are being asked to prove their worth in $. Why not, when for years Marketing and Advertising have been measured like this. If we really make an impact, there must be a way to measure it.

Don’t get me wrong, I agree and understand that there are intangible benefits of quality. These include a change in culture, improved skills, better mindset, leadership etc. but if I was in the CEO chair I wouldn’t care for these if quality doesn’t deliver on its basic promise. And no CEO should.

It is time the quality profession is treated like a product or service that must firs provide its basic function and then deliver the ‘good to have’. What is this basic function? Lesser defects and reduced cycle time, what else?

Once you are on the road of lesser defects and time, you can use quality principles to improve revenue.  If you progress on improving revenue, you should consider improving the quality of management systems using frameworks such as Baldrige. I shudder to think of a company who is gaga over Baldrige but does not have a robust defect prevention program.

Are companies listening to this need to marry quality and finance? Yes. The three major recessions of the last decade have had many companies do this. I know of companies that measure quality and productivity improvement in $ and/or capacity released. Quite creative. If you have really improved quality and productivity, shouldn’t the process need lesser people? Be ready to prove it.

This proposed marriage reminds of a client early in my consulting career. After seeing early results of a quality improvement program, the Chief Financial Officer of an FMCG company asked to be the head of its quality improvement program. He had seen what many need to see now!

5 comments:

Allan Jones Cleveland TN said...

Hello! Just want to say thank you for this interesting article!

Hardik Someshvar said...

Anshuman,

You're spot on,it definitely is the need of the hour. However, I would have appreciated if you had shared data points from your previous and past experiences. I would appreciate if you could share the details of a study that you may have conducted to quantify the impact of Quality Management System in terms of $$$. I am asking this because it's the exact challenge I face at the moment. I can share more details over e-mail.

Thanks in advance.

Regards,
Hardik

Ashok M Vaishnav said...
This comment has been removed by the author.
Ashok M Vaishnav said...

This is re-posting of the comment I had placed earlier, with few modifications in the text:
Quite an opportune pointer to the 'value' of Quality.
As more and more of the non-commercial business activities become increasingly organised and professional - education, health-care, a host of services- and impact the human life, the 'quality' will have to be at center -stage of any strategic thinking.
That should bring in the quantitative and qualitative 'value' of quality as an essential parameter rather than a hygienic factor.

Anshuman Tiwari said...

Thanks Allan.

Hardik - QMS is like an alarm system. Does not assure improvement. Quality improvement can always be quantified if we are not obsessed with precision.

Thanks Ashok.