Six Sigma
Last Word


Phil's Journal
Philip Crosby

What's Free and What Costs?

When I wrote Quality is Free (McGraw-Hill) 20 years ago, many people responded that this was an error in thought.

 "Quality costs money, lots of money," they said. "Consider the inspectors, testers, quality engineers, material review specialists, problem and corrective action meetings, rework to requirements, warranty costs, and customer service. They require a large budget and we still make a lot of errors."

 "Quality control costs money," I replied. "Quality is free. We just have to do the work as it was planned, so it conforms to requirements and we don't need all that quality control."

 During the next few years, companies began to discover that this was true. The quality control approach established acceptable quality levels (usually three sigma), which perpetuated the idea that things didn't necessarily need to be done correctly. This thought intensified as processes moved along, and that required a lot of diagnosis and correction.

 As companies dumped the idea of inevitable errors for a zero-defect policy, their costs dropped dramatically. The old-fashioned approach of "find it, fix it, ship it" had added up to 25 percent or more of the revenue. Suddenly, companies became more competitive and began to regain their market share. Prevention, rather than correction, became the objective.

 Many executives who missed the revolution are now encouraging a return to the old ways. They think that having a SWAT team answer 911 calls is the way to stop crime. They view the establishment of a culture of prevention as an unrealistic way of doing business. However, they apply prevention principles carefully and precisely to their financial operations: They don't chase after lost money; they are careful not to lose it.

 This return to an acceptable quality level attitude (where even a small leak is a leak) has raised costs while making products subject to waivers and deviations. An effective quality control effort adds 15 percent all by itself to the operating costs of the organization. The purpose of the effort is to return things to something like what they should have been in the first place. Organizations like this ship most of their output in the last week of the month. That is when standards have dropped enough.

 I regret that some folks want to do 1950 to 1979 all over again. They should recognize that their competition, particularly overseas, is not following along.


About the author

 Philip B. Crosby, a popular speaker and 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). Visit his Web site at www.philipcrosby.com .

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