Making the Business Case for Quality

Increase quality maturity by gaining executive sponsorship

Published: Tuesday, July 12, 2016 - 14:58

A few years ago, I was working with a high-tech company that had built market leadership around world-class product quality, then lost it. Several years prior, the company had gone through a cost-cutting exercise. One outcome of the exercise was a decision to outsource engineering on core products, and while this accomplished the objective of increasing margins for a short time, the brand’s differentiated reputation eroded fairly quickly, market share dwindled, and sales discounting pressure grew.

Gain executive sponsorship, but how?

I was reminded of this while working on the LNS research, “Quality Management in the Board Room: Building the Executive Business Case for EQMS.” As a part of that research, we’ve quantified the effect of top-executive sponsorship on quality maturity. Companies with top-executive sponsorship have, on average, adopted three times as many quality best practices as those without this sponsorship.

This creates a substantial impact on quality maturity. LNS also analyzed the adoption of quality best practices across industry. The analysis revealed that the difference between 8.6 best practices adopted and 2.9 is the difference between being in the second-best quintile and the second-worse quintile in quality maturity. Therefore, on average, companies that have executive priority move from a position lagging the market to a position much closer to market leadership.

Put another way, executive sponsorship for quality might not be the only thing that’s needed to become a market leader, but it moves the needle substantially.

However, as an industry we know all too well that executive sponsorship most often comes on the heels of a negative event, such as the one that happened in the high-tech company. In that case, once executive management recognized the problem, they sounded the emergency alarm and launched a wave of new executive-sponsored quality initiatives to regain the prestige of the brand. This did indeed gain executive sponsorship for quality, but at the price of revenue, earnings, brand, and market share—not to mention a changing of the guard at quality VP.

The pattern of negative events driving executive sponsorship for quality is destructive—destructive to the company, to shareholder value, to employment and careers, and to the customer. Quality leaders must recognize this pattern and interrupt it by finding positive “compelling events” that gain executive sponsorship.

Compelling events: Attaching a time frame

So what’s a compelling event? The term comes from the sales world, where salespeople look for events that fit the bill to drive purchases within a certain time frame. “You’re opening a new branch? You’ll want to make sure that you buy another point-of-sale system at least a month before so that you can....” In this case, the new branch opening is the compelling event.

As quality leaders, we’re selling, too. We’re just selling change, and we need to wear our sales hats. Think of a compelling event as a defined event that forces a business response—something with a timeline and some teeth. Examples can include a new regulation, a new contractual requirement that must be acted on to recognize revenue, a stop-ship from a customer, a recall, a new transformative technology like the Internet of Things (IoT), or a new competitive force. These are things that dictate that you must accomplish something by a certain period in time.

Compelling events are catalysts for change. Significant compelling events can be leveraged to gain executive sponsorship. Quality leaders need to know how to identify or create compelling events, then sell them to executives in order to achieve desired quality management operational excellence.

Sure, investment can still occur without a compelling event, but without it there is no time pressure for the investment. And without time pressure, this investment is immediately lower priority to an executive weighing other options that are (or at least positioned as) time-sensitive. Again, executive priority is the single most critical element to quality maturity, and so we need to think from the perspective of the C-suite.

Proactive use of compelling events to drive maturity

In order to use compelling events to gain executive sponsorship, and therefore operational excellence maturity, it’s useful to classify them. We want to use positive compelling events to interrupt the pattern of using destructive compelling events. So, one classification will be negative or positive.

We also want to be proactive—we must be able to dictate timing, otherwise we’ll resort to waiting for external events to tell us when to act. Therefore, the other classification is controllable or uncontrollable. A controllable compelling event can be influenced by the quality team.

In the example above, the compelling event was loss of market leadership, revenue, and earnings. This was clearly a negative compelling event. Whether it was controllable is debatable. If quality leadership had enough influence, it could have influenced the outsourcing decisions that eventually caused the negative compelling event.

Let’s say that compelling event was controllable and negative. Quality leaders need to find controllable, positive, compelling events.

In the chart above, you can see that we’ve broken out the four quadrants and provided examples of compelling events in each quadrant. Look at the example for positive, uncontrollable compelling events, also known as the “just plain lucky” quadrant. The example is the arrival of a new executive who wants to champion quality. This is real; it’s not as rare as winning the lottery, but it’s obviously difficult to plan for.

The executive business case: A journey of proactive improvement

The best bet for quality executives is to demonstrate strategic value through the executive business case. What’s the executive business case? It’s not a standalone investment request, but rather a stake in the ground establishing that quality is highly valuable to the company and to executives. The goal of the executive business case is to gain sponsorship from an executive who will champion the operational excellence changes needed to achieve market-leading quality maturity.

The executive business case is built from two parts: the master business case and the incremental business cases. The master business case captures the initial as-is state, identifies the ultimate end goal for quality within the company, and repositions the value of quality within the organization based on the value that will be delivered at that end state. The master business case for quality is targeted at executive sponsors.

It is supported by many incremental business cases, each of which should both demonstrate supporting value as well as make progress toward the ultimate end goal. The initial as-is state, the ultimate to-be state, and the incremental business cases comprise the business case journey, a roadmap to high quality maturity.

Learn best practices for crafting your business case

The research that has been performed provides frameworks to contextualize and construct the executive business case, and clearly captures the connection between specific quality practices and outcomes. For a much deeper dive into this topic, be sure to download the LNS Research ebook, Quality Management in the Board Room: Building the Executive Business Case for EQMS for more details and supporting justification evidence. The ebook shares 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.