Continuing our coverage of the ASQ Global State of Quality 2 Research 2016 report, let’s take a look at the second theme: “Business Performance Impact.”
Acknowledging that there is correlation between quality and business performance, the report postulates that the disparity in measuring that correlation and articulating it in financial terms points to an opportunity.
As organizations mature in their quality and continuous improvement endeavors, quality is increasingly being used to drive profitability. However, the data highlights a disconnect between the activity and measurement of the impact on business performance.
As organizations increase their investment in quality, the report argues that greater visibility and measurement of the resulting financial impact could be expected.
In terms of who measures the impact of quality, 82 percent of world-class organizations were found to do so vs. 39 percent of non-world-class organizations. Interestingly, 100 percent of world-class organizations reported an increased investment in quality in the past three years.
The lack of measurement could be attributed to the fact that there is no common method for capturing the financial impact of quality.
When looking at setbacks, the culture of the organization could also discourage calling attention to remediation costs vs. not having the ability to measure.
Again returning to the financial impact of quality, 57 percent of world-class organizations reported an increase of more than $1 million in annual impact, with 13 percent of non-world class organizations reporting the same.
When measuring performance and the impact of quality, it’s important to use standardized measures throughout various levels of the organization. Benefits of doing so include the ability to compare quality performance across products and services, increased data integrity and validity, and more effective communication.
Consistent with the 2013 Discoveries report, service organizations are beginning to adopt more traditional manufacturing quality-oriented metrics, such as first-pass yield, defects per million, and percent compliant (to specifications defined by customers or regulations). In the past three years there has been a 5 percent increase in service organizations reporting usage of first-pass yield, and a seven percent increase in the use of defects per million. Usage of percent compliant remained unchanged at 83 percent.
Adoption of these manufacturing quality-orientated metrics allows service organizations to measure themselves against a broader range of performance criteria. Despite the increased use of these measures being positive, 60 percent of organizations reported not knowing how to measure the financial impact of quality.
According to the report, organizations with a mature quality culture are focusing on innovation to drive profitability as part of their quality strategy. No surprise, world-class organizations were found to leverage quality to spur innovation at significantly higher rates than non-world-class organizations. The data suggests that organizations mostly spur innovation through the use of quality tools and creating open and collaborative environments that focus on idea sharing.
Continue to read The Auditor in the coming weeks for more interesting findings from the ASQ Global State of Quality 2 Research 2016 report.