Cost of Poor Quality – Are you ready for a treasure hunt?

Quality is an integral function of projects these days. At a conceptual level, it is really simple. You are supposed to ensure “conformance to requirements”. Going by the simplistic representation in the project management triangle, controlling scope, schedule and cost will lead to the expected quality. But we hardly live in an ideal world and every project manager is aware of the complexities involved in balancing the triple constraint. A full understanding of the “cost of quality” is therefore essential to make the right decisions.

Cost of quality is not just the cost associated with the maintenance of quality or ensuring the “conformance to requirements” as the words would imply, but also the costs incurred because the product or service was not done right first time. Philip Crosby refers to this as cost of good quality and cost of poor quality respectively in his book “Quality is Free”.

Some of these costs are more obvious and visible like rejections at customer site, rework, repair costs etc. They represent only tip of the iceberg. Many of the other costs of quality are hidden below the surface of the water in the iceberg and are difficult to identify by formal measurement systems.

Project managers while doing the great balancing act need to be aware of these as well and take them into consideration. Many of these create conflicting situations where one needs to be sacrificed for the other. e.g. In order to avoid late penalties because of missing the planned schedule, employees could be requested to work overtime. However the cost of working overtime needs to be weighed against the late penalties. If the cost is higher, financially it would not make much sense to call for the overtime but considering additional aspects like further delay in project and/or customer dissatisfaction, decision could be made to work overtime regardless of it being higher cost.

It is practically impossible to discover all the hidden factors or take them into consideration while making decisions; but the Pareto principle can be of use here. Project managers need to find the 20% that impact the 80%. Projects are unique by nature. So these high impact items will vary from one project to another.

Most of these 20% are unlikely to be on the tip of the iceberg. They are deep down there in the water. It is important to dive deep and dig beneath the iceberg to discover the real hidden problems. Once the real problems are discovered, handling them is a less complicated affair.

The journey is definitely not simple nor straightforward but its definitely worth it. It’s a treasure hunt – exciting, full of challenges and risks – but most important – highly rewarding.ome of them yields savings that were unthinkable – like unearthing a hidden treasure. Of course not all problems can be fixed but the awareness helps to address them minimizing the impact to the best possible.