Six Sigma
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Phil's Journal
Philip Crosby


Gaining From a Recession

It's been said that every golf shot makes someone happy. Economic turns, whether up, sideways or down, have a similar result. Inflation, for instance, is good for investors but bad for shoppers. A boom is good for revenues but bad for prevention efforts (no time for that right now).

 The economic world is going to be dragging along for a year or so. Growth will slow, and consumers (both private and corporate) will find that they can get along without certain things. Management will be gloomy, and employees will be nervous. And this is the best time for the quality management professional to strike.

 Corporations think of profit improvement in terms of increasing revenues. They're willing to take lower margins if necessary in order to raise sales figures. But that strategy is going to be difficult to implement in the near future. They're going to have to look elsewhere for profit improvement--perhaps for profit at all.

 Fortunately, there is a mine of money waiting to be tapped. Most organizations, even those with quality programs, spend at least 20 percent of their revenue on the price of nonconformance (PONC). That number can be reduced by 25 percent in a couple of months and by 50 percent within a year. Do the math for your organization. Take 20 percent of revenue and then 25 percent of that number for delivery by the end of the first quarter. Then do the same for the remainder of the year and the beginning of 2002, starting with that much cost already eliminated.

 We do PONC projects with our clients as soon as we begin the relationship. They always think they're running a tight ship. But then they start calculating the PONC--PCA II's CD-ROM explains it all--and find that they're throwing money away. The results are so obvious that there is very little infighting.

 Quality professionals are always looking for ways to become mainstream, and believe me, this is the way. But don't just wing it; the comptroller has to be involved for management to pick up on it right away.

 PONC is a real thing that makes a notable contribution to the health and welfare of the organization. Most of the efforts the quality professionals offer their company are corrective action or neat books of procedures. These are appreciated, but management still has the problem of living through the recession. They will appreciate the help PONC provides and recognize the contribution of the one who brought it in.


About the author

 Philip B. Crosby, a popular speaker and the founder of Philip Crosby Associates--now PCA II--is also the author of several books, including Quality and Me: Lessons from an Evolving Life (Jossey-Bass, 1999). To order a number of products, visit his Web site at www.philipcrosby.com or call (800) 223-3932. .

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