The 2016 Quality research agenda includes several key topics, but no topic can be more important than the business case for quality. Why? Because the business case for quality both determines funding and, possibly more importantly, sets the stage for executive engagement/sponsorship. If done right, it can give the boardroom and C-suite the hard reasons they need to champion quality, either for traditional reasons or as a part of a greater Digital Transformation effort. Who better than the CEO to champion the intersection of Quality and Digital Transformation, and why that matters to the customer?
So why is Executive Commitment important to quality, what does that have to do with the business case for quality, and how does our research dovetail into this discussion? Let’s dive in.
Why is Executive Commitment Important?
If your company considers Quality to be the responsibility of the Quality Department, if Quality is the Quality Police, if quality data and processes are siloed, then the following is an important thought experiment. “The journey of one thousand miles begins with one step”, and sometimes that step is simply a change in perception. Recognize that quality has Executive Commitment at many organizations, and not only at the standard exemplars, like Toyota. There are many companies across the value chain and across industries where Quality is indeed an Executive Commitment. It is attainable, so take heart!
What Does Executive Commitment Mean?
- Voice in the C-Suite and/or Board of Directors (BoD)
- Top-down sustained support for Quality
Executive Voice: With priority, Quality is a business partner at the highest executive level with the ability to influence the creation and execution of corporate strategy. With the appropriate executive voice, Quality can help determine timing on global expansion plans, set direction across functions, and suspend operations to ensure quality. Did you know that the VPs of Quality at Coca-Cola and other leading organizations have direct access to the board and can shut down any plant at any time to ensure quality?
Top-Down Support: Active support from the C-suite creates culture change and results more quickly and effectively than decades of bottom-up (or mid-up) consensus-building. As an example, Mary Barra (CEO, General Motors) personally transformed risk management at General Motors. In the wake of the recall crisis, Ms. Barra added the role of Chief Risk Officer to her role as CEO, and personally led development of top corporate risks. She requires the heads of the Business Units to own risk for their BU, report about Risk to the Board of Directors, and demonstrate progress actively tracking and reduce risk.
The take-away is that executive champions have the power to create culture change and make sweeping changes that are otherwise nearly impossible.
Resources and Investment: Consider the total Quality Operational Excellence model – People, Processes and Technology. Are there critical gaps that prevent the job from being “done right?” Is Quality Management performed on paper, are their multiple EQMS solutions, or is there a harmonized and integrated EQMS approach? This is a good litmus test of Executive Commitment – how, when, and why are resources prioritized? If quality isn’t getting critical resources, it does not have Executive Commitment.
The Role of the Business Case
Why do quality leaders need to accomplish Executive Commitment without a major quality failure? Put yourself in the shoes of the C-suite. Every function is looking for funding and focus. The only way executives can prioritize is by business case, or the executives’ personal experience and convictions. The business case must meet three criteria:
- It must be relevant to the executive team. It cannot describe value in terms of the quality department alone, but capture value to multiple functions, or to the corporation as a whole.
- It must be meaningful enough that it deserves their attention. The business case must substantiate value that advances corporate strategy and financial performance.
- It must be believable, and therefore must be evidence based.
Quality leaders need an evidence-based connection from quality management practices to outcomes aligned to corporate strategy and financial performance.
Today there are no clear evidence-based answers. We “know” that quality is important to customers, that quality can “make or break” companies, and that engineering, service, sales, support, manufacturing, and so on all care about quality. And we’ve all heard the “1-10-100 Rule”, which says that $1 spent in Prevention saves $10 in Correction and $100 in Field Failure, similar to “an ounce of prevention is worth a pound of cure”.
Unfortunately, these are either not meaningful to a CFO, or simply wrong, as in the case of the 1-10-100 “Rule”. A business case cannot be built on any of this information, and therefore, without a major quality escape or other way to get executive focus, quality cannot clearly demonstrate the connection between its operational excellence and measurable outcomes.
LNS Business Case for Quality research
The research that has been performed clearly captures the connection between specific quality practices and outcomes. In coming posts, webinars, and eBooks we’ll discuss the frameworks and data to establish a clear evidence-based linkage between deployed practices and important metrics, and how to use this information to build a business case for quality that will result in Executive Commitment.
Access this NEW eBook, "Manufacturing Metrics in an IoT World: Measuring the Progress of the Industrial Internet of Things," presents results from the fourth iteration of the biennial Metrics that Matter research study conducted between LNS Research and MESA International. It places particular focus on what IIoT means to manufacturers in the MOM space.