What is Quality Management and Why Should You Care?

Jan 18

When the term "quality" is used, it is generally as a synonym for "good." Many firms advertise their products as "high quality" or "superior quality" in this way, without truly defining what "Quality" entails, and we're more likely to find it in marketing materials than in critical business processes or policy papers.

The goal of this exercise is to:

Examine the ideas and notion of quality, as well as who is accountable for it, and the Cost of Quality, as well as how it may affect any company.
This introductory analysis will assist readers who are just starting to think about Quality and how it might enhance company operations.

What is the definition of quality? It takes much more than identifying a product or service as "excellent" to define quality. Professionals in the field of quality management define quality as follows:

Satisfying a set of intrinsic traits, either expressly or implicitly specified.

Providing clients with items or services that they require. These attributes contribute to higher income for the manufacturer by increasing consumer satisfaction and exceeding customer expectations. It costs money to ensure Quality by adding features that consumers desire while maintaining consistency and dependability with each iteration, but the cost of not doing so is far higher, with lost market share, missed opportunities, brand harm, and recalls due to design and manufacturing defects.
Creating features that are devoid of flaws and faults. Defective products or services necessitate revision or, if they get it to market, result in costly recalls and consumer unhappiness, all of which costs a firm money, effort, and brand integrity. Defects discovered later in the product development process are significantly more expensive than those discovered early.
Maintaining continuous improvement (CI) to address the fundamental causes of flaws in processes, tools, and designs that have a substantial effect. Organizations may lower the Cost of Quality, boost efficiency, maintain a Culture of Quality, limit rework operations on the shop floor and in the back office, reduce scrap, and have fewer recall events by addressing the underlying causes through CI rather than the symptoms. As a result of greater product quality, higher levels of customer satisfaction, and increasing market share, revenue and overall market share rise. According to the Center for Economic and Business Research, every $1 spent on quality results in a cost savings of $16 and a profit rise of $3. ii Quality professionals frequently refer to the Quality Management System (QMS) (QMS). The QMS is the underlying Quality process architecture on which the company is built, not a machine or an application. All of the people, processes, stakeholders, and technology involved in an organization's Quality Culture, as well as the major business objectives that make up its goals, are referred to as "QMS."

Quality is a mindset and a method for improving customer satisfaction, decreasing cycle time and costs, and minimizing mistakes and rework by employing a set of methods such as Root Cause Analysis and Pareto Analysis. "Quality" is defined by the International Organization for Standardization (ISO) as "the degree to which a collection of inherent qualities meets a criterion," while "requirement" is defined as "a declared, widely assumed, or compulsory need or expectation." The following are some examples of requirements:

Customer requirements such as dependability, availability, correctness, and delivery dates are all taken into consideration.
Return on investment (ROI) and productivity increases are examples of value for products and services acquired.
ISO 9001, IATF 16949, and ISO 13485 are some of the quality-related ISO standards.
Food Safety Modernization Act, FDA Code of Federal Regulations, Canadian Standards Association, Underwriters Laboratories, EU directives, and the Occupational Health and Safety Act are examples of statutory requirements.
Various industrial specifications.

Quality isn't a curriculum or a discipline; it's a mindset. It doesn't cease once you've accomplished a certain goal. Quality must be embodied in the organization as a Quality Culture, in which everyone feels and understands the need of adhering to its ideals. Quality is a never-ending quest for improvement with no end in sight.

Quality, in a broader sense, refers to doing the right thing for your customers, workers, stakeholders, company, and the environment in which we all function. Quality is about optimizing productivity and satisfying customers while safeguarding our people and resources from the harm caused by poor procedures and thoughtless oversight, from the individual employee to the level of our planet. Every institution, from business and industry to healthcare, government, and not-for-profits, should strive for quality.

A Quality Culture

Total Quality Management (TQM) is a phrase used by quality experts to describe the use of quality concepts at all levels of a business. While TQM has typically implied widespread use of process tools and analytical procedures, the term has broadened to include the entire organization's larger cultural norms. The expansion of TQM to cover both explicit efforts by individuals to enhance Quality and the underlying ideas, attitudes, and behaviors on which those efforts are based is referred to as Culture of Quality. A successful Quality Culture is one in which the organization's core Quality values, such as a focus on responding to customer needs and the importance of data-based decision-making, and workers' basic assumptions about the nature of human relationships and their place in the world, such as the value of collaborative relationships among people with common goals and the importance of developing long-term personal connections, are closely integrated. iii Because fundamental values are publicly communicated and recognized at all levels of the business, they are very straightforward to measure. Even the people who accept basic ideas typically resist explicit analysis, making participation at this level challenging.

The effectiveness of an organization's deployment of a Quality Culture might hinge on whether basic values and underlying assumptions currently represent Quality or can be effectively adjusted to embrace Quality via committed change management. The more a company's culture deviates from the principles of a Culture of Quality, the more difficult and risky the implementation will be, especially if a dedication to core values contradicts with underlying assumptions. iv

What are the characteristics of a company with a well-integrated Quality Culture?

v Leadership in exceptional cultures displays its commitment to Quality by supporting Quality initiatives and speaking about Quality ideals in clear and unambiguous terms. Employees value cross-functional collaboration and believe that leadership trusts them to be proactive in using their Quality and problem-solving abilities based on their best judgment. vi A Culture of Quality can only be achieved when leadership and employees have a common understanding of not just the core values and procedures they utilize and promote, but also their underlying assumptions about the nature of work and human interactions on which those core values are based.

The People In Charge Of Quality

"Quality is everyone's job," declared W. Edwards Deming, one of the architects of the Quality movement in the United States. The majority of people have understood this to suggest that quality should be ingrained in every company. Quality, in other words, should be woven into the very fabric of an organization's identity, rather than being the sole duty of a separate and segregated "Quality Department." Yet we should examine what author and Quality expert Rafael Aguayo tells us was Deming’s in-person conclusion to his famous injunction:

"Everyone is responsible for quality, but senior management has more clout in making judgments than everyone else."

The quality initiative must originate from the top.

vii While a Quality leader in a dedicated Quality department with assistance from equivalents in operations, engineering, sales, marketing, and IT will be responsible for adoption and execution, the will to integrate Quality standards throughout an organization must come from the leadership team. For a Quality program to succeed, they must walk the walk. While there is importance in teaching the notion of Quality in every member of an organization, "Quality is no one's duty in particular" without clear and explicit initiative and means for executing those concepts is another way of stating "Quality is everyone's job." Quality is something that everyone should aspire for, but describing how to achieve it in very particular terms is something that can only originate from organizational leadership and be entrusted to certain cross-functional stakeholders for execution. This is supported by the current ISO 9001:2015 standard, which returns ownership and accountability to the leadership team, where it belongs, from a Quality "designate."

A Quick Overview Of Quality

The notion of quality management may be traced back to statistician Walter Shewhart's work at Bell Laboratories in the early twentieth century, when he was undertaking research on the study of industrial processes.
Shewhart discovered that industrial processes generated data that he could measure and analyze to determine if they conformed to ideal norms of stability and control, and that he could apply remedies to bring any deviations back into line. This ground-breaking methodology demonstrated the superiority of process-centered Quality solutions over earlier product-centered approaches. This notion is now known as statistical quality control (SQC), and it was the foundation of the early research into industrial quality.

The American government implemented Quality standards based on SQC for military suppliers in the 1940s as a result of the Second World War.

ix In the near term, this increased quality, but most civilian firms failed to implement process improvement across their businesses. Engineers W. Edwards Deming and Joseph M. Juran served as consultants in Japan after the war, assisting Japanese industry in its efforts to recover from the war and reform its economy to focus on civilian products and services. Deming and Juran collaborated with Japanese manufacturers to develop the idea of Total Quality, which extends quality beyond manufacturing to all organizational operations and instills quality values in every employee.x Japan became a manufacturing powerhouse as a result of this Total Quality revolution, dramatically boosting its market share at the expense of American businesses who had yet to realize the advantages of Total Quality.

Manufacturers and policymakers in the United States began to identify the issue of low quality in American manufacturing in the 1980s. Total Quality Management was the American reaction, based on Deming and Juran's work in Japan (TQM). The original ISO 9000 quality standard was published in 1987, and it is now the most widely accepted standard for quality certification in a variety of sectors.

ISO 9000 has changed since 2000 to suit the demands of a changing economy. Globalization and developing technology have broadened the scope of quality as well as the techniques employed to achieve it. New methodologies, such as Motorola's Six Sigma, have produced amazing levels of productivity and variation reduction in the production of defect-free goods and services. Quality is currently viewed as a strategy that can be applied to any institution, including services, government, healthcare, education, and even emerging technologies such as Bitcoin and Blockchain.

Quality Management As A Business Case

In any firm, implementing Quality Management and investing in a QMS requires executive backing. Without a clear business case that demonstrates either the costs of not investing (COPQ) or the market advantage that might be achieved by investing, leadership is unlikely to spend money. Because the advantages of Quality Management are harder to measure in direct terms and have longer payback periods than expenditures in sales and engineering, executives with no expertise in Quality Management frequently do not understand the worth of investing in it.

The fact is that a negative compelling event, such as a recall or a major loss of market share, is frequently the impetus for gaining executive support for Quality.

xi While negative compelling events can be powerful catalysts for change and help focus executive attention on Quality Management, they can also come at a high cost: lives can be lost, ecosystems can be destroyed, and the organization's brand and financial reputation can be harmed as a result of external failures that increase costs by an order of magnitude.

Gaining executive support begins with delivering a compelling business case backed up by qualitative and quantitative data that tells the tale of positive compelling events and financial returns like decreased waste, greater efficiency, and higher customer happiness. Organizations may avoid circumstances where they only find value in Quality as a reaction to unfavorable events that have a detrimental and lasting impact on the business, the marketplace, and the environment by building a compelling case for proactively investing in Quality.

The Price Of Quality

The cost of quality (COQ) is a method of calculating the costs of ensuring that a Quality Culture thrives in a company, as well as the costs of Quality failures.
xii Quality-related costs may be divided into four categories:

The expense of prevention is high. These budgeted expenditures are the outcome of developing and executing a quality management system and avoiding quality issues. Quality planning, training, and quality assurance are all included in these expenditures.
The price of an appraisal. These expenses are incurred as a result of determining the success of a Quality Management System, and they apply to both manufacturers and the supply chain. Verification, quality audits, and supplier evaluation are all included in these expenditures.
Internal failure has a price tag. These expenses are incurred when a manufacturer finds Quality Failures prior to the delivery of items or services to consumers. They include waste from inefficient operations, extra scrap, rework to remedy errors, and the time spent diagnosing the source of Quality failures.
External failure has a price tag. These are the most costly charges, and they are generally only obvious after the items or services have been delivered to the client.
Repairs, warranty claims, refunds, and dealing with consumer concerns are all included in these expenditures.

It can be difficult for businesses to quantify the Cost of Poor Quality (COPQ) and its repercussions, and it can be challenging to persuade senior stakeholders that quality improvement efforts to decrease COPQ have genuine value and are not just cost centers. The most visible COPQ effects are the principal ones. The following are some of the costs associated with internal process failures:

Inefficient production processes result in excess scrap and waste material.
Rework on defective or damaged items before they get to market, as well as retesting and evaluating systems and procedures to figure out where the failure occurred. External expenses might include those connected with Lawsuits, Recalls, Warranties, Complaints, Returns, Repairs, and Field Support if poor quality is not detected before products or services reach end customers.

Historically, the cost of poor quality has been estimated to be between 4% and 5% of an organization's yearly income.
xiii In other words, by failing to limit the effect of preventable process failures, a company with $100 million in yearly revenue is squandering between $4 million and $5 million.

Yet, like an iceberg, the problem's obvious surface conceals something considerably more serious.

xiv The following are some of the hidden costs related with COPQ:

Staff engagement has decreased, while employee turnover and attrition have increased.
Instead than concentrating on quality improvement via innovation, employees are addressing quality failures.
Overtime expenditures, machine downtime, long-term customer unhappiness, brand harm, low inventory turnover, and lower customer lifetime value are all factors to consider.

When these hidden and long-term expenses are included in, COPQ is closer to 10% to 25% of an organization's yearly income. To put that in context, it means a firm with $10 million in yearly revenue is squandering $1 million to $2.5 million per year on predicted and preventable mistakes. These expenses are frequently passed on to customers as a higher price, resulting in increased customer unhappiness and brand harm. Investing in quality is perhaps the most efficient method to cut these astronomical prices.

Conclusion

This overview of Quality has offered some information on its history, values, and importance to all businesses. Of course, it's not just a backstory; it's also the foundation for a strategy to get leadership support and address the stunning Cost of Quality data. What are your plans for the future? Start looking at your own operations through the lens of quality concepts, and consider all of the ways Total Quality Management may help your company succeed.