Swinging at Pinatas in the Dark

If you cannot measure it, you cannot manage it. Can we all agree on that as a starting point? It’s a management cliche, I know, but it’s also a truism. If you cannot measure the output of a process, then trying to drive process productivity is like trying to direct the swings of twelve stick-wielding, blindfolded first graders as they attempt to whack a candy-filled pinata in a lightless supply closet. You’ll only end up with a lot of wasted effort, some crying, half the team begging for some light and the other half groping for the door. And no damn candy, to boot.

When it comes to quality management, certain outputs are easily measured. How many defects did you count? What were the results of your measurements? How accurate is your measuring system? Is the operation successfully reducing the number of defects in the process? The only quality metric that ultimately matters, however, goes unmeasured in all but a minority of organizations, leaving the quality function marginalized and swinging at pinatas in the dark.

If your organization is serious about improving the quality of its product or service, then you likely already know the metric I’m referring to. If your organization isn’t serious about this kind of improvement, then you’re likely gearing up to be indignant or queuing your favorite “why quality can’t be measured” argument. If that’s you, then do me a favor and hold your thought as if it were chicken salad and you are Jack Nicholson’s waitress in the Five Easy Pieces cafe scene.

The only quality metric that ultimately matters, is, of course, impact on organizational expenses, or EBITDA. Any organization can measure the impact of their quality function in dollars, and do it specifically in a controlled manner validated by the Controller. Most simply chose not to go that route. Doing so is like flipping on the lights in the supply closet. Most executives are smart enough to know what that closet will look like after being trashed by a dozen blindfolded first graders armed with bats, and would rather focus on other problems. The problem with willfully blind organizations, though, is… well, that they’re willfully blind.

They are also less than informed as to the specific nature of their improvement opportunities. Implementing Quality Cost Principles can shed all kinds of light on the nature of organizational waste. Here’s one simple approach that can be modified to fit just about any cost accounting system:

1. Classify all expenses as either quality costs or non-quality costs (an expense is a quality cost if it relates to organizational defects in any way).
2. Break quality costs into three main categories: internal defects, pre-distribution external defects (after production but before use), and external defects (those defects discovered by the customer).
3. Sub-categorize quality costs as design costs, prevention costs, appraisal costs, control costs, or improvement costs. Training expenses, for example, can be categorized as prevention costs focusing on the reduction of internal defects. Expenses relating to re-work can be categorized as appraisal costs (identifying re-work) or improvement costs (performing re-work) associated with pre-distribution external defects. You can come up with your own approach and definitions – the point is to have a classification system and consistently apply it.
4. Provide an accounting code to each quality cost as it passes through finance.
5. Develop monthly reporting processes summarizing quality costs as a percentage of total costs.
6. Incorporate the resulting quality cost data into monthly scorecard reviews.
7. Utilize quality cost data to drive improvement by reducing the ratio of defect-related expense dollars to total expenses that your organization spends in a given month, and by moving quality cost dollars from control and appraisal buckets to design, prevention and improvement buckets.

Hey, I said it was simple. I didn’t say it would be easy.

Process Focus = Quality Focus

If you are running an organization and are paying me to give you one piece of critical advice, I’ll probably choose this one: build your organization around process, not people. Do that and you will have an excellent chance of avoiding a Danian outcome and becoming a Quality-focused organization.

According to The Economist in a recent article, The Battle for Brainpower, the fiercest competition in the future will be for talent. The article makes the observation that within five years or so, the baby boomer generation will begin to retire, and organizations will need to compete to backfill the executive positions that this generation of employees now occupies.

My advice would seem to stand in opposition to this observation, but in fact it does not. Many failed organizations have focused on hiring the best and the brightest in large numbers – Enron and Long Term Capital Management were two notable corporate disasters that had a full stable of incredibly bright minds – but have neglected to create strong, well-aligned processes within which talented people can drive organizational success. Focus first on processes that are tied to organizational CTQs and then recruit good people to work within and improve those processes. Do this and you’ll avoid the crab-in-a-bucket mentality of scrambling to beat your competitors to the hiring punch.

For example, what does your recruiting process look like? What is its goal? If it is simply to hire the “best” employee for any given opening, what specifically does that mean? A Quality-focused hiring process would answer the question both graphically, via a SIPOC and detailed process maps at a task level, and strategically, by tying the definition of “best” back to organizational CTQs. “Best” would mean, in a Quality-focused organization, something specific and measurable. If your organizational strategy involves growing revenue, then all critical hires should be looked at through the lens of their ability to assist in driving to that strategic goal. Post-hire, their performance should be managed via goals tied to revenue growth and tracked in relationship to revenue growth, and over time your HR department should be able to definitively answer the question, “how successful is our recruiting process” by talking about its influence on key organizational goals.

If you have this level of process integrity and alignment for all critical organizational processes, you’ll be successful over time, whether or not you are able to outbid your competition for the top 10% of the 2006 Harvard MBA graduating class. That’s what it means to build your organization around processes, not people. That’s also what it means to be a Quality-focused organization.

Danian Management

My wife quizzed me yesterday on general popular culture, and I failed. Her question, pulled from the article she was reading in the Sunday paper, was “who is the hottest new comedian today?” Having recently seen the Kat Williams HBO special (The Pimp Chronicles, Pt. 1) and finding him substantive and slightly outrageous and full of great energy, I of course guessed Kat Williams. Not so, according to the article she was reading. The hottest new comedian today is actually Dane Cook. I also saw his HBO show, the Vicious Circle, laughed out loud not at all, and in fact flipped away from it in search of something funny, which led me to discover a rerun of Arrested Development, a show I’d heard of but never seen before and that immediately made me laugh. So I guess I have Dane to thank for something.

Why is this relevant to a Quality discussion? Because Dane Cook is a good pop culture example of style over substance. Like a boy band, he’s being packaged and marketed and will have a lifespan of the traditional fifteen minutes. In the business world, he’s the organization with a short term planning horizon, concerned with everything other than continuously improving core competencies (think Enron). Dane Cook is relevant to a Quality discussion because he’s responsible for all of the problems facing American business today.

Okay, not Dane personally. But he’s emblematic of what I’ll refer to from here on out as Danian organizations. A business can be great only when its focus is on improving its core competency. By focus I mean that all of its processes are aligned to serve the goal of improving the core competency. Danian businesses routinely neglect to formally identify their core competency or, if they have identified it, forget about continuously improving it for long stretches of time. When Quality systems are used as an organization’s primary building blocks, institutionalized neglect and forgetfulness is not possible. People forget about and neglect things. Processes, however, are incapable of producing anything other than the outputs they have been designed to produce, and quality systems are all about the development of strong and repeatable processes.

The Quality Geek

My name is Cass, and I am a Quality Geek. As I’m sure you’re aware – some of you painfully so – “geek” is typically a term of derision. The New Hacker’s Dictionary, for example, defines a geek as “one who eats bugs for a living. One who fulfills all the dreariest negative stereotypes about hackers: an asocial, malodorous, pasty-faced monomaniac with all the personality of a cheese grater…” Nice. Malodorous? That’s just uncalled for.

I am an 80’s child, which at least in my wife’s opinion is an automatic qualifier for geekdom. One thing that separated the 80’s from other recent decades, though, was the undercurrent of geek love in the culture, exemplified by movies such as Sixteen Candles, Revenge of the Nerds, and what was perhaps the penultimate geek movie, Real Genius. In all of these films, the geek or geeks won the day by embracing their geekdom (Farmer Ted in Sixteen Candles: “Sure I’m a dipshit. But I’m the king of the dipshits.”) rather than running from it or attempting to mask it.

So I was shaped in part by bad 80’s movies. But like Anthony Michael Hall’s Farmer Ted I’m choosing to embrace my geekery. Sure it feels good, but beyond that, it’s a winning strategy. Pragmatically. I’ll quote Real Genius’ Chris Knight (Val Kilmer): “When you’re smart, people need you.” He was saying something wise here, and we would all do well to listen.

When you choose to own the geek label, you also get to choose the definition you’re applying to it. I like this one for geek: “An intellectual who is bent on a particular profession.” In embracing the quality geek label, I choose to focus professionally on a particular approach to doing business, and to brand myself in a specific manner. Namely, as a quality professional bent on the application of quality principles to business management. I’m interested in both the specific and the strategic application of quality tools and systems, for reasons not only specific to good business practices but also for reasons relating to how the quality geek approach meshes with my ideas of how to best live in the world today. You can expect to see and participate in a broad quality conversation that I intend to begin here. We’ll own the quality geek label together. As Gilbert says in Revenge of the Nerds, “Join us, because no-one will really be free until nerd persecution ends.”