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Columnists: Pat Townsend & Joan Gebhardt

Photo: Pat Townsend

  

Photo: Joan Gebhardt

    
         

Selling the Idea

Pat Townsend & Joan Gebhardt
ptownsend@qualitydigest.com

 

 

Still having trouble selling the idea of a quality effort to senior management--or to managers at any level? Forget about all the personal fulfillment and doing-the-right-thing arguments. There’s only one real argument to present to someone who considers himself or herself a hard-nosed businessperson: Quality makes and/or saves money.

For those at the top of the management scale, a review of Baldrige winners is a solid start for making this argument. To be blunt, for a business executive to not know by now that quality makes money requires an act of intentional stupidity. Of course, starting with that particular statement is not recommended.

Managers inside an organization need examples that are more specific to day-to-day operations. What follows is an example given to the management personnel at a company after the director of the quality process determined that dividing the number of hours invested in the quality process (and rounding up considerably so that the number was conservative) into the number of hours of time saved gave a return on investment of 14.4-to-1. Keep in mind that this ROI dealt only with the “soft dollars,” the time savings. “Hard dollar” savings due to the quality process--which were considerable--were in addition to the time savings.

The example

Here are some facts about how making an investment in quality can be a direct benefit to those in management positions at all levels. The figures are conservative/antiquality. For instance, the assumption is made that effort put into quality in year one won’t have any impact until the beginning of year two. That’s not actually true, of course; an idea put into place in month two of year one would, in fact, have a positive impact for the remainder of year one in addition to continuing to be a plus for all of year two.

An admitted weakness of the example is that it deals in companywide averages. In fact, an hour invested in quality in one department may bear no fruit at all while an hour invested in another may yield 28.8 hours of saved effort--to match the company average of 14.4-to-1. The solution? Have lots of ideas; build a big enough sample set in your own department that your average will be the equivalent of the company average.

For year one, let’s assume there is a work unit of 10 people at some level. These 10 folks can be expected to produce (and be paid for) 400 hours of work in a normal week. However, because this is our very busy company and the work load keeps going up, let’s assume they’re being called upon to do 420 hours of work in an average week.

Now assume further that the boss of this 10-person unit has decided to take this “quality thing” seriously and directs her or his 10 folks to spend a half-hour a week each exclusively on quality all through year one. As a result, every other week, they have a 30-minute meeting and, in the in-between weeks, they take 30 minutes each to work on putting their quality ideas in place. The cost of this investment in quality: five hours a week.

For year one, these 10 people are going to average 425 hours of work a week, consisting of 400 hours of regular time and 25 hours of overtime, with the overtime being a combination of 20 hours of “normal work” and five hours of “quality time.” So, to be more precise, the cost of the quality process in year one is not just five hours a week, it is five hours of overtime per week.

Along comes year two. Let’s suppose that, predicting an increase in work, the boss has managed to get the size of the unit raised to 11 people. These 11 folks can be expected to produce 440 hours of work a week. But, this still being our company, they’re now being asked to produce everything they did last year plus 80 more hours of work. Total expected work: 520 hours per week. Plus, their boss persists in believing that the time spent on quality is worth it so there’s another 5.5 hours (30 minutes for each of the 11 people) a week.

The good news is that, for year two, there’s some payback for the time invested in the quality process during year one. At an ROI of 14.4-to-1, the five hours a week invested last year now translates to 72 hours of work per week that is no longer necessary--72 hours that used to be required using previous work procedures but which is now available to do currently necessary work.

The totals for year two for this 11-person unit are 440 hours of regular time plus 80 hours of expected overtime plus 5.5 hours for quality meetings/work minus 72 hours of saved time. That totals to 453.5 hours--only 13.5 hours of overtime rather than the expected 80. Net cost of the time invested in quality in year two: 5.5 hours of time spent on quality minus 72 hours of overtime saved for a total of 66.5 hours of overtime pay (and effort) saved.

Net savings for year one and year two combined: Year one’s cost of five hours per week plus year two’s savings of 66.5 hours equals 61.5 overtime hours for this one small unit; and that’s in addition to all “hard dollar” savings realized when the quality ideas were put in place--from savings in paper costs to reductions in losses of income due to poor customer service.

At the end of the example, the author conceded that the quality process did not “guarantee three-day work weeks in a year or so”--only that an investment in quality would make it more possible to “keep up with the ever-increasing workload that comes with our success.”

For many managers, the prospect of not falling behind may be what finally convinces them to “do” quality.

 

About the Author

Pat Townsend and Joan Gebhardt have written more than 200 articles and six books, including Commit to Quality (John Wiley & Sons, 1986); Quality in Action: 93 Lessons in Leadership, Participation, and Measurement (John Wiley & Sons, 1992); Five-Star Leadership: The Art and Strategy of Creating Leaders at Every Level (John Wiley & Sons, 1997); Recognition, Gratitude & Celebration (Crisp Publications, 1997); How Organizations Learn: Investigate, Identify, Institutionalize (Crisp Publications, 1999); and Quality Is Everybody's Business (CRC Press, 1999). Pat Townsend has recently re-entered the corporate world and is now dealing with "leadership.com" issues as a practitioner as well as an observer, writer and speaker. He is now chief quality officer for UICI, a diverse financial services corporation headquartered in the Dallas area. Letters to the editor regarding this column can be e-mailed to letters@qualitydigest.com.