1.2.1 Measuring Quality and performance
To be able to have a tangible effect on improving business performance, Quality strategy must determine what is being done and then suggest ways of bettering it. This involves different methods of measuring performance. Some of these methods are:
- measurement against internal standards
- measurement against customer needs
- business performance measurements in financial terms
- benchmarking internally and externally to set best standards
- Quality measurements that are holistic and seek determining of total performance.
We will now briefly consider each of these methods and outline what they imply.
- Internal standards: The elements that these would typically look at include the direct cost of maintaining quality:
- warranty
- cost of failure to perform to specifications
- costs of setting up and maintaining measures to prevent failure
- inspection costs
- on time delivery
- success of first performance
- value added
- manpower costs, including cost of not having suitable personnel
- inventory levels and turnover
- profit from performance.
- Customer needs: The most often used methods of measuring customer satisfaction are to measure complaints and claims. There is a fundamental problem with this system of measurement because it is widely reported that only 4% of dissatisfied customers actually take the trouble to complain (see for example Bergman and Klefsjo 1994, p. 287). However, each dissatisfied customer will speak to 11 others about his experience, while a satisfied customer speaks to only three (this in itself is a measure of how we have come to expect Quality in our daily dealings). The implication of all this is to actually carry out customer focused studies to get a true picture of customer sentiment.
- Business performance: The basics of measuring business performance are to determine corporate against set goals. In measuring performance against goals, it is important to take into account factors like changes in the market, the business performing its functions as designed, the response to changing market needs, the time taken to respond to such changes, and the outcomes, measured both in financial and market share terms. Key to studying business performance is to include the identification and study of any failures to improve future performance. The measuring function should include input from the customers, employees, business partners (suppliers, sub-contractors), as well as financial and non-financial returns.
- Benchmarking: The aim of benchmarking should be to improve performance and enhance competitive advantage through a process of identifying ways to improve processes. This can lead to identifying new, or better use of, technology or management techniques. The most important areas of benchmarking are to identify the right areas to benchmark, the right organisations/areas, define the questions to which answers are sought, and define ways of recording, analysing and implementing the information obtained. For any benchmarking effort to be successful, the commitment of everyone from senior management to the front line workers to implement the lessons learnt and improve the processes is critical. The essential outcome from benchmarking will often be some desired change to the existing situation. This change can attract resistance from within the organisation. Good communication of the intentions, processes and benefits will help in adoption of the change.
- Quality measurements: This is probably the most difficult to measure because it is meant to be a measure of all activities carried out by the organisation, including the impact on the community within which the organisation performs. Various Quality philosophies have their own systems of measurement ranging from the readily quantifiable systems of ISO 9000 to more holistic and probing systems like TQM, Six Sigma and the Malcolm Baldridge award. The differences emerge because of the roots of Quality systems, which are traced to engineering processes. The further the philosophy has moved to conceptual recognition of Quality, as discussed in the first half of this chapter, the more probing are the measurements. Broadly, the measurements reflect the Quality system that is implemented, the extent and formality of the system in the organisation, and the purpose to which the outcome of the measurement will be put.
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