Increase quality, decrease costs

For the last few decades, management has been told that quality pays. That doesn’t mean that someone pays you for quality, but that any resources spent on improving quality will have a very positive return on investment.  

Basically, whatever you spend on improving quality will be returned to you in decreased costs.

One could also put up a good argument that revenue is increased by additional sales, higher prices and/or higher contribution through better quality products and services. But when it comes to pushing a growth strategy, quality really makes a difference.

When we push the boundaries of our capabilities and our capacity to lift our run rate, we are highly sensitive to things going wrong.

If something does go wrong, not only does it stall our growth but, because we are so finely tuned, we don’t have the resources spare to sort out the problem. We end up taking precious resources away from critical areas to sort out problems, thus creating waves of problems that ripple though the organisation.

You need to have a fundamental philosophy of stopping problems where they occur, rather than finding them later on and then working backwards to fix them.

Take a simple example: A defective component that is installed into a finished product requires product recall, examination of the quality testing to find out where the problem occurred, remedial work to fix the component, new testing and reshipment.

All very expensive to a company that is using its limited working capital to further growth.

What you need is a quality regime that tests items cumulatively, that reports errors immediately, that addresses problems when they occur, and uses performance measurements throughout the business to ensure high quality is established and continually monitored.

A growth business needs every part of its organisation to be working efficiently if it is to meet growth objectives. There needs to be a culture of quality where individuals are sensitive to doing quality work – but even more sensitive to the impact of defects and problems on others.

Quality does not occur by imposing it on employees; it is established by employees taking ownership for the quality of their own work. By demonstrating the impact of quality problems on downstream areas, it is possible to show the costs to the business of allowing problems to go undetected or uncorrected. 

We need to work with each part of the business to establish what errors are occurring and how they might be identified and then corrected. In this regard, we are really asking every individual to participate in improving quality, not just “the inspectors”.

If we are to pursue a growth objective, we need to look at quality control as a fundamental part of the plan. We need our resources to become more productive and for the connections between each part of our enterprise to be tighter.

We also need staff to have confidence in the products and information they are using to undertake their own tasks. When that confidence is broken, productivity declines, decisions are questioned, and growth becomes increasingly difficult.

It is not just that quality pays, but that quality is critical to a growth strategy.

Tom McKaskill is a successful global serial entrepreneur, educator and author who is a world acknowledged authority on exit strategies and the former Richard Pratt Professor of Entrepreneurship, Australian Graduate School of Entrepreneurship, Swinburne University of Technology, Melbourne, Australia.