Speak the language of Money – For better Quality
The stuttering first steps
Qimpro was appointed as an International Affiliate (India) of the Juran Institute in 1987.
For 15 months I struggled to earn a client for ‘Juran on Quality Improvement’. Those being the pre-liberalization days, Indian businessmen performed in a Quota Economic Environment. Translated, that meant demand was always in excess of supply.
What happened to quality? It did not matter. Every product created had a customer. In some categories, a customer would wait for 10 years to be allotted the only available product / brand. That too of bad quality.
Quality Improvement made no business sense to any Indian business leader in those days.
Finding a detour
At an annual review at the Juran Institute, Dr J M Juran, on hearing my business predicament, advised me to learn to speak the language of upper management – MONEY. He also advised me to ration the use of the word ‘Quality’ when I interact with upper management.
Where was this conversation headed?
Dr Juran explained to me that the wasteful costs in any batch mode manufacturing organization is likely to be one third of the total costs!! He called it Cost Of Poor Quality (COPQ).
I did not contest the guru!
My mind questioned: How could COPQ be 33.33%? After all, failure rates in manufacturing units were only 3-5%!! Where are these costs locked and/or hidden? ….Rejects, reprocessing, warranty expenses, customer returns, lost sales, overtime to correct errors, damaged goods, obsolete inventory, extra inventory, paperwork errors, etc, etc, etc.
Saving wasteful costs since 1987
To grab upper management’s interest, Dr Juran further advised me to discuss the following ratios with these leaders:
• Quality costs as a percentage of sales
• Quality costs compared to profit
• Effect of quality costs on the break-even point.
Back in Mumbai that’s precisely what I did. I assessed the COPQ at various organizations to pull the alarm for Quality Improvement. I discussed quality ratios. As a result, Quality Improvement assignments flowed in.
Further, as a by-product I won over the confidence of the Finance Heads at Tata Steel, Mahindra Tractor, Punjab Tractors, Cummins (India), Caterpillar (India), and ITC. These heads proved to be the resident quality evangelists.
P.S– the COPQ in service industries is even higher!!!
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