Posts Tagged ‘creating more successful employees’

Is quality the cheapest option?

November 1, 2013

Some of us instinctively think quality products should cost more. But by removing the costs of nonconformity, quality products actually cost less to produce. Nonconformity, by the way, is a failure to meet the requirements including the requirements of customers. Some managers pay the price of nonconformity instead of making quality a reality for employees and customers.

At the normal 2 or 3 sigma, the price of nonconformity is 40% of turnover. Many times the level of profit for most organizations. Leaders may not need to measure these avoidable costs to eliminate the causes of failures to meet requirements from their systems. They may even help their suppliers to remove these avoidable costs too.

But more product verification will not help because it is too late. Inspection or testing merely sorts bad product from good product. Therefore, verification of the product is part of the price paid for failing to design capable processes. Capable processes are validated to result in products that need no inspection or testing.

Accordingly, we work to make sure our organizational management systems help employees and suppliers to add value for each customer. Adding value faster while preventing loss sooner. Having prevented nonconformity in our goods, we should also design the service part of our products so we avoid paying the price of service nonconformity too.

Leaders, who choose to avoid paying the price of nonconformity, invest in their process-based organizational management systems so more work is right the first time. They discover that buying and delivering quality costs a lot less than the alternatives. What’s more, in markets, where quality rarely is delivered, customers may be willing to pay a little more to have their requirements fulfilled exactly.

Even so, “quality is free” because it is cheaper to buy and deliver quality than not. Here we see the cost of quality at its lowest when the product exactly meets the requirements of the customer:

Earlier versions of these cost of quality curves mistakenly showed costs tending to infinity with perfection. The old curves showed perfection is not quality. Thankfully, in 1999, these curves were corrected to accord with reality and Crosby’s 1979 definition of quality. Of course, by then Taguchi had also showed that any deviation from the requirement increases costs to society.

In summary, managers of quality prevent nonconforming products to assure quality and satisfy customers. They govern their organizational management systems for creating more successful customers by making and keeping more competitive promises. Tomorrow’s managers of quality will also be focused on sustainability for all by creating more successful stakeholders.

As we can see, designing and producing quality remains the cheapest sustainable option.

Why do companies exist?

February 16, 2012

Some people claim that companies should provide jobs. Not necessarily work that adds value but jobs followed by generous company-paid pensions.

Companies exist to create more successful customers. They recruit well-educated employees who can anticipate the needs of future customers to collaborate in designing goods and services that will fulfill those needs. They hire well-educated employees to work together in designing processes that result in goods and services that create more successful customers. They also employ people to work in teams to fulfill the design specifications.

Customers reward companies by paying them what they agreed the goods and services would be worth to them. Companies invest part of these rewards to optimize the system while improving supply chains and neighborhoods. Companies share other parts of these rewards with owners and employees (may be the same) so they can look after their families, their communities and themselves now and in their futures.

The more a company has to invest in its ability to create even more successful customers the better it is for the economy especially when those customers live in other countries.

The greater the value they add through their work the more the employees can receive. Creative designers earn more and may be paid more than the implementers who fulfill the designs.

Employees are not alone in this. The leaders create and continually improve systems that help create more successful employees as well. These systems are organizations known as companies.

Companies that fail to do this consistently exist only on borrowed time.

Companies, why not design one as a system now?