Last Word


Performance Improvement
H. James Harrington

Minding Our Business

When quality professionals do their jobs right, COOs don't think about quality.

In January I retired from the position of chief operating officer for Systemcorp, a mid-sized project management software developer and seller. I had lots of management experience (I was an IBM manager for more than 30 years; COO of the consulting firm Harrington, Hurd, & Rieker for two years; and a principal with Ernst & Young for 10 years.), but all of my past assignments had been quality-related. This one, however, was business-related. For the past 40 years, I had been convinced that if the COO took care of quality, everything else would take care of itself. Boy, was I in for a rude awakening!

 During the time I was with Systemcorp, we never once did a Pareto diagram. If we had a problem, we solved it; every problem was important. Priorities were assigned based upon their impact on the customer. We did no process capability studies, even though we had 13 major processes, not to mention standard accounting, personnel, maintenance, procurement and administrative processes. But in all these cases, I could never justify spending money for a process capability study on any process or part of a process.

 The measure of any sales process is whether you make the sale. But a Six Sigma sales process can lead to trouble. U.S. companies with sales processes operating at six sigma--or sometimes even two sigma--discover that they are breaking the law. Why? Because when a company owns more than 70 percent of the market, it's considered a monopoly. If we closed more than 70 percent of our sales, we would have 70 percent of the market share, and thus would be considered a monopoly.

 When I first accepted the Systemcorp COO position, I focused on customer complaints. However, these soon tapered off, and instead we began to receive suggestions about customizing the product to work in a special environment or defining a new and desirable feature. So what were my priorities as COO? I identified three chief areas of focus:

  How do we generate enough sales to offset costs and make a reasonable profit?

  How do we generate money in case sales aren't enough to offset costs?

  How do we grow at a rate necessary to one day to go public?


 As you can see, the key to my top three priorities wasn't quality but sales and marketing. This meant that the company needed to identify more organizations that wanted a product like ours and close a higher percentage of the sales opportunities.

 In other words, what's important is growing the market and getting a bigger piece of the pie. I believe these are the main objectives of all COOs and CEOs. A third objective is to cut expenses, thereby turning a bigger percentage of the revenue into profit. For a quality professional to sell quality improvement to management, he or she must talk in terms that will impact these three factors.

 So what drove these factors at Systemcorp? A commission and bonus plan that motivated the sales force, salespeople who understood our product and our customers' applications, competitive pricing, a sales presentation that would "knock the socks off" our customers, understanding customers' applications before we met with them, and locating companies that needed our product and convincing them that they needed it.


 What concerned me as COO?

  How much did we sell this quarter?

  How many potential sales are in the pipeline?

  Is spending staying within the budget?

  Will we meet sales projections?

  What to do with underutilized people?

  What to do if customers' demands exceed our capabilities?

  How are market analysts viewing our product?

  Are any of our current customers dissatisfied with our product?

  Why isn't our sales closure rate 100 percent?


 So how does a COO spend his or her time? Developing business plans, talking to investors, developing strategic alliances, reviewing product development progress, meeting with customers, meeting with employees, settling conflict between functions, meeting with bankers, meeting with lawyers, approving expenditures, approving projects, reading e-mail, analyzing competition, handling personnel problems, developing alliance partnerships, reviewing finances, attending board of directors meetings, participating in quality reviews, reviewing sales and sales forecasts, managing by walking around, and communicating through direct reports.

 As quality professionals, we need to stop talking about quality as defects or distribution and focus instead upon the revenue results that improved quality will produce. If the quality professional does his or her job, the COO shouldn't have to think about quality unless the quality system fails.

 Quality is just a small part of the COO's job unless the quality system isn't working. In such a case, you, as a quality professional, have really fouled up.


About the author

 H. James Harrington recently retired from his position as COO of Systemcorp. He was formerly a principal at Ernst & Young. He has more than 45 years of experience as a quality professional and is the author of 20 books. E-mail him at jharrington@qualitydigest.com . Visit his Web site at www.hjharrington.com.

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