Thursday, 3 July 2008

The Cost of Quality

Read the Cost of Quality Discussion Paper

One of the key areas of Quality Management that I try to promote is the understanding of quality costs to the business. It's all too easy to know there are problems with the business operations, be those Software Test processes or Software Development, but never to really understand how much they affect the bottom line.

The paper provides a worked example based on public information available for EA Inc. As stated in the paper this applies to every business and the principles discussed can be applied to SMEs. In fact there are two good examples that I use time and again as to why SMEs must understand the Cost of Quality principles:

  • It's critical that SMEs see maximum benefit from often rarefied financial resources. They must remediate money wasting practices now and avoid wastage scenarios in the future. Addressing the Cost of Quality can provide both the remediation activities and provide an avoidance strategy.

  • An SME that is experiencing serious growth or is holding a strategic piece of the market may be a candidate for acquisition. They should understand the Cost of Quality to ensure investors are shown the management have these costs under control.

The actual experience however is that a business won't embark on a Cost of Quality programme, why? Many reasons such as fear of the unknown, can they face up to knowing and do they have the drive to complete the programme? If the business appears to manage costs enough to make profit they may feel a lack of motivation, not a world class attitude but very common.

What's discussed in the paper is a big step for any business to take. The rewards are great but the work is long and hard. However, the trick is in adopting the Cost of Quality mentality from day one. Then a programme never starts as something separate, it's just a natural part of the business practice as are reaping the benefits and avoiding the future issues.

Mark Crowther, Manager of Costs

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