Performance improvement. Part 2
| DOI | https://doi.org/10.1108/02635579910289194 |
| Pages | 257-265 |
| Published date | 01 September 1999 |
| Date | 01 September 1999 |
| Author | Ian Millar |
| Subject Matter | Economics,Information & knowledge management,Management science & operations |
Performance improvement. Part 2
Ian Millar
Director, Advanced Manufacturing Engineering, Case Corporation, Burr Ridge,
Illinois, USA
In the first part of this two-part series (Millar,
1999) I discussed the need to change the
behaviour of everyone in the company to
improve business performance. Everyone in
the company needs to understand team
dynamics and that change affects everyone
from top to bottom and from bottom to top
throughout an organisation. Bosses set the
values within a company. Bosses need to be
actively involved in training their people.
How do we put all that was proposed in
Part 1 into effect? I recommend that you use
Cost of Quality (COQ). This is a process that
can use all that I discussed in Part 1. It is a
process that can produce behaviour change
and dramatically improve business perfor-
mance. What follows gives you a strong
framework to try it.
Cost of Quality
If we use COQ (or cost of poor quality, or cost
of non-conformance as it is sometimes
known) data as a symptom of our problems
then we can attack problems that exist with-
in our business in a logical and effective way.
Management must release the energy of
their workforce. Managers and supervisors,
for today and tomorrow, must accept that
their role as one of coach, supervisor, men-
tor, trainer, planner and leader, not control-
ler and manager. How effective is the
contribution of our people? The amount of
control we wish to administer or how we
educate, train and develop them is the only
limiting factor. We have got to expose all our
people to an effective education, training and
development programme as a pre-requisite to
launching new initiatives. An hour of plan-
ning prevents many hours of chaos, of
uncertainty or below par performance.
Overview
First, we will look at how we capture, collect
and categorise COQ data. Second, we will
look at how we use COQ data to manage our
business.
Before we start to collect COQ data we
must first define what we mean by preven-
tion, appraisal, internal failure and external
failure. These are the four key segments
within an effective and successful Cost of
Quality process. Prevention reflects the up-
front investment of time and effort to prevent
a problem from occurring the first time.
Accounts (how we collect COQ costs) in this
category are all about what we do to prevent
or minimise the need for appraisal and to
minimise or eliminate internal and external
failures. Appraisal includes the activities the
customer should not be expected to pay for.
Think of any operation with a process that
involves checking, inspecting or auditing
and you have an appraisal cost. Internal
failure cost is a result of quality failures
within the company. It involves both staff
and shopfloor activities. These costs occur
prior to delivery or shipment of a product or
service. They include non-value adding ac-
tivities, costs associated with opportunities
to improve process costs. External failure is
cost resulting from products or services not
conforming to customer requirements.
Getting Started
Having defined the four main elements of
prevention, appraisal, internal failure and
external failure, we can start to identify
individual accounts within the categories.
We can use British Standard (BS) 6143: Part 2
to help us do this. We can use the methods
proposed by Lars Sorqvist (1997) or The
American Society of Quality Control (Burns,
1991), or we can identify our own or a
combination of any of the previous men-
tioned approaches. Table I is an example of a
combination of data. It is important we take
some time to identify the accounts and
involve a diagonal slice of the business when
we do this. By this I mean managers, super-
visors and hourly or shopfloor people and
across several functional units. Use the
people who have practical experience of what
actually happens in the company to identify
where the costs are incurred. Do not allow a
select few managers to do this in isolation.
The more sources of cost you can identify, the
more opportunities for improvement are
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[ 257 ]
Industrial Management &
Data Systems
99/6 [1999] 257±265
#MCB University Press
[ISSN 0263-5577]
Keywords
Performance improvement,
Organizational change,
Cost of quality, Teams,
Employee involvement
Abstract
The series of articles focuses on
the need to ignore the many
acronym-based initiatives and pro-
grammes that tend to drive busi-
ness performance. The author
recommends that people must
play a critical role in any perfor-
mance improvement initiative ±
people working in an effective
team environment and with senior
management visible involvement.
A tool, Cost of Quality, is de-
scribed in some detail. Utilizing
people and Cost of Quality can
reduce cost and change an orga-
nisation's culture. Part 2 provides
a framework for use of Cost of
Quality, suggesting that it can
help reduce costs and increase
margins.
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