This is a question I get frequently. How to sell lean to your boss is a question we have all asked at one point or another. The more fundamental question is really about influence, persuasion, and change management.
Another thing. And this is super important to understand. Change is NOT an intellectual task. Change, at bottom, is emotional. Influence hearts first, then change their heads and their thinking.
With that said, I’ve also learned that money speaks. To that end, let’s now discuss what is commonly known as the Cost of Poor Quality.
Cost of Poor Quality
Managing the quality function of a company has this much in common with every other business function: it must show a return on the investment the company has made in quality efforts. One of the ways this can be done is by tracking and managing the Cost of Poor Quality (COPQ). Traditionally, the cost of poor quality has been divided into three basic categories.
- Prevention Costs: these are costs that are incurred for activities designed to prevent poor quality in products and services. When companies first begin to track the cost of poor quality, they are usually surprised to find that prevention costs are a small percentage of the total
- Appraisal Costs: these are the costs that we incur by testing, measuring, and auditing products and services. Appraisal costs are basically the cost of any activity required to assess whether or not the product or service meets the requirements
- Failure Costs: these are the costs we incur because the product or service fails to meet the needs of the customer. Failure costs are usually divided into internal failures and external failures
- Internal failure costsâ€“â€“ are the failures costs that occur prior to the delivery of the product or service to the customer
- External failure costsâ€“â€“ are the failure costs that occur after the delivery of the product or service to the customer
The total cost of poor quality is the sum of all these costs. Note that the total cost of quality should be of great interest to managers, since it represents the difference between the actual cost of products and services and the improved cost that would result from eliminating failure costs.
Using the Cost of Poor Quality above, let us now categorize these items.
The total annual cost of poor quality is almost $2.6 million. Looking at the costs by category, we have the following.
Clearly, failure costs dominate the cost of poor quality for this company and, so, there are lots of opportunities to drive quality improvement by addressing these failure costs.
Now, my guess is that presenting a case like this to your boss will help a little. But, like I said, start with the heart first, then demonstrate logic to influence the mind. But start with heart.