Waste Disguised as Quality?

Quality is expensive… Or is it? If you are suffering from quality issues, or you find that your improvement initiatives aren't achieving their intended results, I think you'll enjoy this article. I hope to demonstrate how quality can be a source of enrichment for customers, organizations, and employees alike. Quality and the competitive advantages it affords can be pursued without incurring additional cost. As the title of Phillip Crosby's famous book declares, Quality Is Free. Not only is quality free, it can become an important source of profit and a competitive advantage for you and your organization.

According to the Oxford English Dictionary, the definition of quality is, "The standard of something as measured against other things of a similar kind; the degree of excellence of something." In practice, the definition of quality can prove to be elusive. Quality can be one of those things where, "I can't define it, but I know it when I see it." By the most basic practical definition, quality might be considered simply meeting customer expectations.

Other definitions might only serve to explain what quality achieves: brand reputation, functionality, customer loyalty, durability, fewer defects, and so on. Perhaps due to lack of a simple yet universal practical definition, the creation of quality is often seen as resource intensive, in some cases prohibitively so. As the logic often goes, the higher the quality of a product, the more expensive it is to make, thus the higher price it commands from consumers. Commodities and services which effuse quality usually carries the price tag to prove it.

Although quality may evade a tidy operational definition, its pursuit is not exactly a groundbreaking endeavor. Quality is understood universally as not only desirable, but a vital characteristic of goods and services. When a product is said to have high quality, we understand that it's trustworthy. The performance of the product reliably and consistently achieves the aims of the customer and the claims of the producer. Everyone believes quality is good, and everyone wants to achieve it. The question is, how is quality made? Herein lies the dilemma.

It has been my observation that most quality improvement initiatives are focused on continuously increasing the process rigor around a particular outcome. We default to managing outcomes by applying ever increasing layers of inspection, oversight, and supervision. "This is measure twice cut once" on steroids.

Why do we behave this way? Partial blame may be attributed to false assumptions about the competency or motivation of the front-line workers, and the perceived need to apply close supervision and control to manage outcomes. Some of it from management's inability to apply systematic problem-solving methodologies, instead deferring to old habits and the so-called "best practices" of management (For more on management, consider reading What is Accountability, Really?)

The knife cuts two-ways. By the time a batch of product is made, the poor quality is already present. Through the process of creation, inspection, and rejection/rework, both the defective product and the resources committed to its detection and remediation are lost. I recognize that this might sound counter-intuitive. If inspection prevents defective product from getting to the customer, surely that's a good thing, right? Inspection may be necessary, but it does not create quality. Through our best intentions, we commit a 12,000 year old mistake. Since the invention of agriculture we've been stuck in a cycle of make, inspect, sort, and discard. We have created waste disguised as quality.

The idea of waste disguised as quality borrows some key concepts from Frederic Bastiat's seminal 1850 essay titled, "That Which We See and That Which We Do Not See", commonly known as the Broken Window Fallacy. As the story goes, a shop owner finds that a rock has been thrown through her storefront window. Dismayed, the shop owner is consoled by a gathering of onlookers who observe that, if there were no broken windows, what would become of the glass making industry? Surely, when things are destroyed or wear out, the economic activity spurred by the need to replace them benefits society.

What remains unseen is what those same resources might have been used for had the window not been broken. The shop owner might have elected to purchase new equipment to expand her business, invest in a second location, or hire an additional employee. From a dollar for dollar standpoint, the economic impact of either outcome appear equal and cancel each other out. However, the shop owner has lost the opportunity to create value in the form of new innovation and productivity. Everyone involved, the shop owner, her business, and society is worse off having lost the opportunity for innovation and growth.

The lessons of the Broken Window Fallacy are obvious when presented within its own context. What's less obvious are the examples we experience, but don't recognize in our daily lives. In fact, a large segment of the economy our modern consumer society is built upon is waste disguised as quality. For example, each year billions of dollars are spent on 'quality' healthcare for the treatment of preventable diseases. Similarly, we spend billions in pollution mitigation as we attempt to avert a climate disaster. We siphon resources from under-developed parts of the world to satisfy a disposable economy. Hard-line drug enforcement policy is yet another example. The cost to society for the remediation of these problems are not considered when creating them. Were our systems designed and optimized to prevent these undesired consequences, what innovations and quality of life might we all enjoy today?

The broken-window theory, applied in the context of quality improvement, is summarized like this; The resources consumed through the act of detecting and fixing defects occurs at the expense of quality, productivity, and innovation. Instead of building process rigor dedicated to the detection and removal of defects after the fact, our resources should be spent on ceaselessly improving the repeatability and reliability of systems and processes with the aim to continuously reduce the number of defects made in the first place. The old idiom, "an ounce of prevention is worth a pound of cure", couldn't be more true. Inspection, as practiced, doesn't create quality, it creates waste ( as resources and skills). To this point, reducing the dependence on inspection is the key to creating quality.

I want to take a moment to point out that I'm not advocating for the abolishment of all inspection. To the contrary, inspection serve a vital function, just not in the assurance of quality. And this raises a critical distinction, which is the difference between quality assurance and quality control. Although this topic deserves a thorough discussion, I'd like to take a moment here to briefly discuss some key points.

Limiting inspections to Quality Control, where process outputs are periodically verified against standard expectations creates valuable data which can inform further action. This is by nature a reactive function. Accordingly, we should take great care to not inspect more than is necessary to gain actionable data. If the Quality Control function breaks down or becomes ineffective, there is a tendency to compensate by creeping inspection and supervision into the Quality Assurance function.

Quality Assurance on the other hand, is a proactive function, the purpose of which is to prevent defects through the planned and systematic design of processes and systems. Further, Quality Assurance exposes the factors that are Critical to Quality (CTQ) and seeks to establish key measurements accordingly (for more on metrics, consider reading Re-Thinking Measurements). It's important to note that QA and QC serve as a powerful functional tandem, and that neither can effectively stand alone. Only through the measurement of process outputs can informed improvements be made.

Instead of "measure twice, cut once", a better axiom might be to "measure once, cut once, control, improve". Here the measure and cut steps are designed from the outset to produce accurate and repeatable results, with controls in place to ensure the process is performing as designed. Finally, the improve steps takes data collected in the control step to inform continuous improvement and innovation in the aforementioned measure and cut steps.

In the very best circumstances, bulk inspection and supervision results in marginal improvement. Worse, the true result is almost always net negative; the cost of the implementation offsets any perceived improvement, at a cost that generally isn't calculated. There is no line in the P&L statement to account for the losses incurred by management through bulk inspection and supervision.

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mike@ballisticzero.com