Breaking Into the Boardroom

Making the business case for executive sponsorship of quality

Published: Wednesday, June 8, 2016 - 13:44

The way an organization handles quality generally differs from how it manages other business areas. Although no one questions the importance of tangible industrial functions like production or scheduling, too often quality is treated as an add-on. Some companies take an antiquated approach and treat it as an isolated and reactive “policing” department to be placated by other areas of the value chain. More forward-thinking enterprises understand that quality is integral to every part of that value chain. But few make a business case for its value to executives.

The focus and scope of a business case sets the executive priority. If the focus and scope stay on the department level, then chances are it will be considered a departmental initiative not “worthy” of executive sponsorship. However, if set properly, a business case can be the catalyst for executive sponsorship in addition to funding.

Achieving executive sponsorship of quality requires just such a business case, one that positions quality as critical to the entire organization.

If your company considers quality to be the responsibility solely of the quality department, if quality translates as the “quality police,” if quality data and processes are siloed, then a change in perception is definitely in order. Start by recognizing that quality receives executive sponsorship at many organizations, and not only at standard exemplars like Toyota. Achieving executive sponsorship is attainable, so take heart.

What does executive sponsorship mean?

Executive sponsorship of quality is critical and can be summarized by three main elements: a voice for quality in the C-suite or on the board of directors; top-down, sustained support for quality efforts; and sufficient resources and investment. Let’s look at each more closely.

Executive voice: Quality needs a business partner at the highest executive level who can influence the creation and execution of corporate strategy. With the appropriate executive voice, quality can help determine timing on global expansion plans, set direction across functions, and suspend operations to ensure quality. Did you know that the vice presidents of quality at Coca-Cola and other leading organizations have direct access to the board and can shut down any plant at any time to ensure quality?

Top-down support: Active support from the C-suite creates a culture change and brings about results more quickly and effectively than decades of bottom-up (or midlevel up) consensus-building. As an example, Mary Barra, the CEO of General Motors, personally transformed risk management at GM. In the wake of the recall crisis, Barra added the role of chief risk officer to her role as CEO, and personally led development of top corporate risks. She requires the heads of the business units to own risk for their individual units, report about risk to the board of directors, and demonstrate progress on actively tracking and reducing risk.

The take-away is that executive champions have the power to create culture change and make sweeping changes that are otherwise nearly impossible. Research from LNS supports this. On average, nearly three times as many best practices are adopted when quality is an executive priority vs. all other respondents.

Resources and investment: Consider the total quality operational excellence model that prioritizes people, processes, and technology. Are there critical gaps that prevent the job from being “done right” in your organization? Is quality management performed on paper, are there multiple EQMS solutions, or is there a harmonized and integrated EQMS approach? This is a good litmus test of executive sponsorship—how, when, and why are resources prioritized? If quality isn’t getting critical resources, it doesn’t have executive sponsorship.

The role of the business case

Unfortunately, quality often gains executive sponsorship in the wake of a quality crisis. It’s far more effective for quality leaders to gain executive sponsorship in a positive, controllable fashion. The business case is just such a positive, controllable event, but how should it be used properly?

Put yourself in the shoes of those in the C-suite. Every function is looking for funding and focus. The only way executives can prioritize is by a business case, or based on the executives’ personal experience and convictions. The business case must meet three criteria:
• It must be relevant to the executive team. It can’t describe value in terms of the quality department alone, but rather capture value to multiple functions, or to the corporation as a whole.
• It must be meaningful enough that it deserves management’s attention. The business case must substantiate value that advances corporate strategy and financial performance.
• It must be believable, and therefore must be evidence-based.

Evidence?

Quality leaders need an evidence-based connection that stretches from quality management practices to outcomes aligned to corporate strategy and financial performance. We “know” that quality is important to customers, that it can make or break companies, and that departments such as engineering, service, sales, support, and manufacturing all care about quality. And we’ve all heard the “1-10-100 rule,” which says that $1 spent in prevention saves $10 in correction and $100 in field failure.

Unfortunately, these are either not meaningful to a CFO, or simply inaccurate, as in the case of the 1-10-100 rule. A business case can’t be built on any of this information, and even extensive value engineering work doesn’t often provide answers. Therefore, quality can’t clearly demonstrate the connection between its operational excellence best practices and measurable outcomes.

LNS research on the executive case for quality provides frameworks to contextualize and construct the executive business case, and clearly captures the connection between specific quality practices and outcomes.

For more information on this topic, join me and Quality Digest editor in chief Dirk Dusharme on Thurs., June 16, 2016, at at 10 a.m. Eastern/1 p.m. Pacific for our webinar, “Quality Management in the Board Room: Building the Executive Business Case for EQMS.” I’ll share the frameworks, evidence, and best practices necessary to transition the role of quality within the organization and gain crucial executive sponsorship.

About The Author

Dan Jacob

Dan Jacob is a research analyst at LNS Research primarily focused on the enterprise quality management systems (EQMS) practice. Jacob has more than 20 years of experience in quality, reliability, risk, and safety across several industries, primarily automotive, aerospace and defense, high tech and electronics, and medical devices. Jacob also operated his own firm providing engineering consulting to the medical devices and metals industries. Jacob graduated Magna Cum Laude from the University of Pittsburgh with a bachelor’s degree in mechanical engineering.