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Challenge # 3 - The Cost of Quality

by Kate Moor January 6, 2008

Business today moves at a very rapid pace. The temptation is there to compromise and ‘cut corners’ in our efforts to meet a deadline, be this to complete a task, launch a new product, implement a new process or finish a report to name but a few examples. We often can’t ‘find the time’ to fix a process that we know is flawed. We also a brainwashed into thinking that spend more time in ‘getting it right’ is a waste of time, effort and money. On the reverse side do we know what the hidden cost is to our businesses, to the morale of our people and more importantly our reputation when we put up with less than optimal processes, products and business practices? In essence the real cost to the business when we do not meet requirements. It is an interesting phenomenon that we blindly spend significant amounts of money in fixing things up and the numbers that are quoted are scary indeed. Software products are notoriously error-prone. This often arises because of oversights in the requirements definition and documentation phase. This however isn’t just restricted to the software industry; we see this daily in our own work environments.

Source: Requirements by Collaboration – Elleen Gottesdiener

Fixing requirements errors consumes 70% to 80% of a projects rework costs…... Overall, rework costs 40% to 50% of the total software development budget…Finding and fixing requirements defects after system delivery is often 100 times as expensive…

It is openly reported that rework levels in a service business can often be as high as 35% and 20% in a manufacturing organization. Are you doing a quick mental calculation? My experience across both manufacturing and service industries indicates the quoted percentages are very close to the mark. In one service business that I worked in some years ago, the initial rate was closer to 45%. Thankfully we saw the error of our ways and did something about it. Taking steps to reduce rework does, in very real terms, mean the difference between bottom-line profit and loss. This means we have to change both ours and our organizations’ behavior to one of prevention, rather than appraisal and rework. This means taking more time to ‘get it right’ rather than investing our efforts in fixing things up and reworking. I urge you to look within your organisation and to do your own research. I am confident you will be surprised.

Challenge # 3 – is to link the potential rework and appraisal cost back to bottom-line profit and loss. Management understands and takes note of bottom-line profit.

As we progress down the Quality at Work path and delve into building high performance and reliable cultures I will share with you some tools, measurement systems and concepts that you may find useful.

“Quality is free, but no one is ever going to know it if there isn’t some sort of agreed-upon system of measurement.” Philip Crosby