Monday, February 15, 2010

Tug of War: Customer Satisfaction vs Cost Reduction

This is the classic struggle of Quality. High quality and high customer satisfaction demands that suspect product be thoroughly scrutinized and a high standard set for its release to a customer. Customers expect this and quality staff strive to achieve it. The other side of the tug of war is cost. Business leaders are looking for every advantage they can get in reducing their costs and scrap product is one fo the biggest targets out there. Does it have to be this way? Can Quality and Business be on the same side? In short, the answer is, yes they can. What's required is a change in attitude and approach about quality. The two models below help to illustrate the different attitudes about quality. In the Economic Conformance Model illustrated below the classic Quality vs Cost struggle is portrayed. The underlying philosophy is that high quality costs money and that there exists a point of diminishing returns. That point is called the Economic Conformance Level (ECL). The ECL is the point above which higher quality is more costly to achieve that its "worth". This viewpoint pits those with "Quality" in their job title against those without in a dance to determine where the ECL exists for the business and promotes a "good enough" rationalization mindset that permeates every product quality decision eventually.

For a different perspective, we turn to the work of Phillip Crosby. Mr. Crosby developed a four part quality philosophy through years of proven experience. The four components of Mr. Crosby's philosophy are:
1. The definition of quality is conformance to requirements

2. The system of quality is prevention

3. The performance standard is zero defects

4. The measurement of quality is the price of nonconformance

Mr. Crosby's approach is illustrated below in the "Quality if Free" perspective on quality costs.

A key component of Mr. Crosby's philosophy is the definition of quality. "Quality is defined as a conformity to certain specifications set forth by management and not some vague concept of "goodness." These specifications are not arbitrary either; they must be set according to customer needs and wants." This statement is very important for what it really means in practice. It means that everyone from top management on down is engaged in the work of quality, not just those folks with "Quality" in their job title. It means that management must grapple with interpreting what the customer wants and needs and set policy to achieve those wants and needs, accepting the consequences of not achieving those results and relieving the pressure on the organization to rationalize quality and cost. I participated in a discussion recently which is frightening but illustrates the point. In this discussion, trend data were being reviewed and a poor trend was displayed for a product that is limping along. A meeting particpant then announced that the product would continue to be made for the next couple of years in response to customer demand. Since this was beyond what we had all come to understand was the End Of Life of this product, the questions started to fly. Will we now engage suppliers in process improvement? Will we perform process improvement in-house? Will we upgrade the raw materials? In short, will we invest in helping make and keep the product "good". The answer to all of these questions was No. Now here's the frightening part; tacked onto that No was a statement that the problems with the product were because we had accepted the notion that variation should decrease over time and the continuous improvement was driven by customer demands. "We should just say no" to tighter control limits requested by the customer is the viewpoint expressed. Clearly, this is not a customer-centric approach to quality and shows that there is still work to be done to change hearts and minds.

So how do people with Quality in their job title fit into this system? The unpleasant answer is that, in my opinion, Quality folks should do everything in their power to work themselves out of a job by working with top mangement to change the view of quality from a job responsibility to an organizational value. When everyone values quality from the customer perspective, and acts accordinly, "Quality" folks in the traditional sense will no longer be needed because there will be no need to police for quality. Quality becomes a  consultive role to management in interpreting customer needs and wants and giving guidance on what that means in practice.

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