By Liam O’Neill, Director, bpmd
In today’s cost-conscious climate, businesses are focusing on reducing spend. While quality remains critical, top-down strategies often focus on finding immediate savings. The knee-jerk reaction is to reduce headcount, innovation spending and expansion plans, however, one of the biggest opportunities lies in reducing the Cost of Poor Quality (COPQ).
According to the American Society for Quality (ASQ), COPQ typically ranges from 10-15% of revenue but can climb as high as 40% – moving from worst in class to best in class can represent a 30% saving. Quality is the critical capability to reduce COPQ, but how do you ensure you have the right tools to deliver on this?
Process is Essential for a Modern Management System
Business Process Management (BPM) is an old concept, but it is coming back to the fore. Previously, however, it was built for “architects” and not typical business users. This is changing with modern tools with user-friendly interfaces that empower everyone. Additionally, advancements like data analysis unlock valuable insights into on-the-ground operations.Together these advances pave the way for transforming your Business and Quality Management Systems from a just an archive of documents into a dynamic digital twin. This BPM-driven digital replica provides an interactive model of your organisation, acting as the single source of truth. User-friendly navigation built around your business processes gives people access into how processes must be performed, are performing, and links into your other systems (ERP, DMS, eGRC, LMS, etc.). This visibility into how your business operates and the associated performance, control and accountability is key to driving down the COPQ.
What is the Cost of Poor Quality?
The COPQ can be a significant financial burden for businesses. It encompasses the costs associated with errors and defects throughout the entire production and service delivery process. Fortunately, effective process management can significantly reduce COPQ by addressing two key areas: how the organisation operates (preventable errors) and its overall quality culture.
Combating Preventable Errors
Poor Processes & Documentation:
Outdated, inconsistent, or incomplete Standard Operating Procedures (SOPs) can lead to confusion and errors. If the guidance is not in-line with how you should be operating, you run a major risk of people acting inefficiently or in a counter-productive manner. Gaps in the documentation means that you may lack control over critical elements of the process, whereas overlaps can be even more damaging if they give conflicting instruction leading to confusion over who does what or resulting in rework.
Fix: Implement a top-down “Process Operating Model” with clear ownership and organisational visibility. Map your documentation to this model to identify redundancies, gaps, and opportunities for variation rationalisation. Then build out documentation for the most critical areas and maintain through regular reviews with Process Owners.
Communication Breakdowns:
Ineffective communication can lead to errors at handovers between departments and individuals. Important tasks may have ambiguous ownership, for example sales teams may be relying on order fulfilment or finance teams for recording data on new customers, whereas the downstream teams are delayed in processing orders whilst waiting for sales to act.
Fix: Clearly define responsibilities and expectations within processes, especially at handover points. This reduces misinterpretation and ensures everyone involved knows what needs to be done.
Lack of Training:
If the training content is not fit for purpose, then new joiners may finish onboarding without having developed the capabilities critical to delivering their job, driving poor quality. Further, relying exclusively on experienced staff for training without any documentation is a major risk; if the experienced personnel leave, you will be left with major knowledge gaps.
Fix: Develop and enforce role-based training plans with up-to-date content that is readily accessible and user-friendly. Make training engaging and interactive to promote knowledge retention.
Cultivating a Quality Culture
Quantity Over Quality:
Focusing solely on speed can lead to rushed work and ultimately, rework. From failing to pass a production line QA to a product recall, the potentially high cost of working “too” quickly must be balanced against savings from faster throughput.
Fix: Design processes with Key Performance Indicators (KPIs) that incentivise the right behaviours. Prioritise quality where necessary, focusing on “right-first time” metrics rather than speed in specific areas. Having a clear view of your processes helps you identify and focus quality on those areas which require this most, and efficiency in the others.
Insufficient Quality Controls:
The absence of formal quality controls leaves room for error. Further, organisations may have appropriate controls recorded, but if those delivering the process are not aware of them then they will not influence behaviour.
Fix: Develop documented, codified controls and embed them within procedures. Establish accountability for adhering to these controls through process, risk, and control ownership. Implement data analytics tools to monitor performance and adherence to quality standards.
Lack of Proactive Intervention:
Waiting for problems to occur before acting is reactive and costly. This affects office-based operations as well as warehouse/production lines. As machinery will stop working without suitable maintenance, similarly office operations can break if not maintained (e.g. system issues, lack of compliance with new regulations, etc.).
Fix: Proactively monitor processes and tools. Implement regular reviews of operational procedures to ensure they remain aligned with industry best practices and current execution.
Weak Culture Around Quality:
Quality too often can be seen by a business as an impediment, getting in the way of “getting things done”. This lack of awareness in the workforce of quality’s importance tends to stem from a lack of education on the value they bring, overly bureaucratic quality practices, and misalignment between quality and the business on priorities (including conflicting KPIs).
Fix: Promote a strong process culture with clear process ownership. Empower process owners to make improvements and foster employee engagement in quality initiatives. Build engagement in quality & process performance. Create visibility of what quality practically means in your operational processes – what do they need to do & think about when doing their jobs which results in good quality. Be efficient and effective in providing quality support. Then monitor and celebrate good quality performance across the organisation.
By addressing these areas through effective process management, businesses can significantly reduce COPQ, improve efficiency, and ultimately enhance customer satisfaction and brand reputation.
Conclusion
Quality departments should focus reducing the COPQ, and Business Process Management (BPM) is emerging as a critical enabler for doing this effectively. By implementing effective BPM, you can create:
Visibility: A clear understanding of how your organisation operates, allowing for proactive identification and mitigation of quality risks.
Ownership: Empower employees to take ownership of their processes, fostering accountability and a sense of pride in quality.
Engagement: Increased employee engagement through user-friendly tools and streamlined processes, leading to a more invested workforce.
This shift in focus transforms quality from a burden to an enabler. By providing employees with the tools and resources they need to work efficiently and accurately, BPM empowers them to achieve quality excellence. Ultimately, a focus on quality becomes a driver for significant cost savings, potentially reducing costs by up to 30%.
Leverage Business Process Management (BPM) to transform quality from a perceived cost burden to a strategic imperative, unlocking cost efficiencies and propelling your organisation towards sustainable success.