Thursday, November 26, 2015

Talking Quality with the C Suite

In a guest post to ASQ's "A View from the Q" blog, Dr. Suresh Gettala, a director at ASQ India, discusses how quality professionals might effectively talk about quality to convince the C-suite about its role to drive and sustain a culture of quality. My 34 year experience in a global manufacturing company echoes and reinforces much of what Dr. Suresh suggests as the best ways for quality leaders to discuss the importance of quality with senior management.

First and foremost, the quality professional must be fluent in the language of management; that is, the language of money. The quality professional must be familiar with financial terms and measures of inventory, investment, and loss. Terms and concepts such as Balance Sheets, P&L, Assets, Liabilities, Gross Margin, Operating Income, Nonworking Capital, Internal Rate of Return (IRR), Payback Period, Return on Investment, Economic Profit, etc. The more comfortable and fluent the quality professional can become when discussing the financial impacts of quality to the business bottom line the stronger credibility he/she will have among the C-suite. Cost of Poor Quality is an important metric that quality professionals can use to educate the C-suite on quality costs.

  • Appraisal costs include costs of inspection and testing. How many dollars could be saved by using the process approach to understand the root causes of product defects, and focus improvement efforts on improving the process and inputs rather than rely on after the fact product testing and inspection?
  • Internal failures include rework, waste and scrap. What percentage of waste is "inherent" versus process? Process waste is usually much easier to reduce by addressing sporadic special causes whereas Inherent waste reduction may require fundamental changes in process or product design.
  • External failures include customer complaints, warranty costs, and loss of customers. In today's world of highly connected, savvy consumers it is more critical than ever to not just satisfy your customer but to consistently delight your most valued customers. Touchpoints - customer interactions - are becoming a greater differentiator of quality perceptions. The power of social media and word of mouth marketing to influence customer purchasing decisions cannot be overlooked. The effective quality leader is able to quantify customer experience (CX) as a new measure of quality on the C-suite scorecard.
Every quality professional should also be conversant in Constraint Theory, Lean, and Six Sigma/TQM. Senior management is less interested in cost avoidance and other types of "soft" savings than it is in learning how to save "hard dollars". Theory of Constraints teaches us that the application of quality principles to reduce, subordinate or eliminate constraints to throughput are the best ways to save "hard dollars" other than reducing headcount. Lean principles teach us to abhor waste in all of its forms and manifestations, most notable work in-progress (WIP) and inventory (nonworking capital). Value Stream Maps are an invaluable tool to illustrate to everyone involved in the supply chain and to senior management how to see and quantify the piles of nonworking capital located throughout a product's value stream, from raw materials to WIP to finished goods.

One of the best, most effective, endeavors I had the pleasure of participating in my career was to bring Heero Hacquebord in to teach our senior leaders and executives about understanding variation. Heero designed and delivered a series of short modules titled, "Statistical Thinking for Leaders". This training was targeted specially to management and addressed many of the topics I shared above. The goal was to mitigate the tendency of 2-point comparisons and the subsequent all-too-common knee-jerk reaction of management tampering (treating common cause variation as special cause). Common cause variation reduction strategies are quite different from special cause.

Authentic, informed leadership is a critical input to build and sustain a culture of customer-focused, process-approach, systems-oriented quality management leading to organizational performance excellence.

1 comment:

  1. " language of management; that is, the language of money" I agree, though I would say the language of executives, I find much lower level management doesn't know money very well at all.

    "Heero Hacquebord in to teach our senior leaders and executives about understanding variation" It really is wonderful when you can bring in really good experts like Heero, they can help get really great things done.