Magazine article CMA - the Management Accounting Magazine

Quality Improvement Must Be Measured as a Strategic Initiative

Magazine article CMA - the Management Accounting Magazine

Quality Improvement Must Be Measured as a Strategic Initiative

Article excerpt

More and more companies and organizations agree that quality processes are essential to survival, let alone growth, in today's competitive market where "value added" is par for the course. But, what many don't realize is that while they are pondering over how to afford quality, they should be looking at the consequences of allowing poor quality to continue. Simply, they should contemplate why they can't afford not to put quality improvement processes in place.

There's only one way to demonstrate the bottom-line contribution of quality improvement -- through measurement of the quality improvement process as a strategic initiative.

If quality is strategic to the future of the organization, why not treat quality improvement with the same degree of attention and measurement as other strategic initiatives? Many companies embrace the quality theme for optical or superficial reasons, and fail to surround it with the measurement and scrutiny given to other strategic ventures. As a result, they fail to realize how poor quality drives costs, and how improved quality reduces costs.

When the value of a quality improvement process has been questioned, the shortcoming is not most often found in the quality process itself, but in the care taken with its implementation -- the means by which it was introduced. Chances are the process didn't involve a great deal of measurement, or identification of poor-quality cost, also known as the "cost of poor quality."

Through poor-quality cost and activity-based costing techniques, a company can measure the profit improvement that quality brings, while at the same time continuing to track the remaining costs of poor quality.

Ideally, all quality initiatives involving everyone from the mail clerk up to the chairman should be subject to measurement. Without calibrating a baseline, and movements from the baseline, it's impossible to gauge profit and other improvements resulting from improved quality.

Similarly, without tracking gains, it's difficult to know whether your company is on target, or whether the quality initiative is generating a positive rate of return on its cost.

A manufacturing company may first want to target its needs by choosing areas of measurement, such as replacement parts, defects, or warranties. …

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