This article first appeared in the Union Leader on April 3, 2023
W. Edwards Deming is often considered the leading thinker in managing a business by a statistical approach to providing high-quality products and services.
Though his initial work is nearly 100 years old and he died 30 years ago at the age of 93, the principles for building quality into a business still apply.
• Constancy of purpose and continuous improvement.
• Leadership throughout an organization rather than managing by numbers and quotas.
• Driving out fear to avoid placing blame, rather to focus on improving the system.
• Training to raise the level of education and self-improvement.
• Improvement as everyone’s job.
Over the years, international organizations have developed systematic approaches to designing quality into organizations. Notably, the International Organization for Standardization has been established as is an independent, non-governmental group with a membership of 167 national standards bodies.
Standards for establishing quality methods are centered on the ISO 9001 standard as well as industry-specific standards such as ISO 13485 for medical devices and ISO 90003 for software engineering.
Quality standards can be applied to any type of organization of any size and, in some cases, are required by regulatory bodies and customers in order to do business. The ISO quality standards are based on seven quality management principles:
• Customer focus: Sustained success is achieved when an organization attracts and retains the confidence of customers.
• Leadership: Unity of purpose and engaging people enable an organization to achieve its objectives.
• Engagement of people: Involving all people at all levels and respecting them.
• Process approach: Knowing how results are produced enables optimizing the system and its performance.
• Improvement: Maintain current levels of performance, react to change, and create new opportunities.
• Evidence-based decision-making: Understand cause-and-effect relationships and potential unintended consequences.
• Relationship management: Interested parties (suppliers and customers) influence the performance of an organization.
Numerous tools are available for supporting an organization that pursues meeting these standards. Ideally, companies not only implement the standards for the industry in which they fall but pursue certification by a third-party organization to demonstrate that they meet those standards.
ISO has publications to support small businesses and software tools such as from Qualtrax, ETQ Reliance, and Master Control can automate much of the documentation needed to demonstrate compliance.
Why bother? Poor quality will cut into a business’s operating margin. The American Society for Quality describes assessing the Cost of Quality as a methodology that allows an organization to determine the extent to which its resources are used for activities that prevent poor quality.
Costs are usually broken down into prevention cost, appraisal cost, internal failure costs, and external failure cost. Hard costs such as scrap, rework, repair and warranty failure contribute to the cost of poor quality. Poor quality will often weaken customer relationships and damage the brand.
Once a customer is lost due to poor quality, finding a new customer has its own cost. Customer Acquisition Cost is the total cost of sales and marketing efforts, as well as property or equipment, needed to convince a customer to buy a product or service and these costs need to be applied for every new – or replacement – customer.
Employee recruitment and retention costs can be a result of poor quality, as well as Deming’s management principles noted above. Who wants to work for an organization that represents poor quality?
Quality systems are, therefore, a management tool for overall organizational improvement, improved customer relationships, effective supplier relationships, better employee engagement, and increased profitability. The most effective leaders will recognize and deploy the principles behind Deming’s early work and basic quality management.
Roy Wallen serves as General Manager for Quality and Programs for Pristine Surgical, a medical device company with a mission to simplify endoscopy, and as CEO of Directional Healthcare Advisors, an international advisory services firm specializing in commercialization of healthcare technology.