The Cost of (Not Doing) Quality

(Hint: It’s bigger than you think)

Think about it. Even being 99.9 per cent right is not good enough. If it were, then banks would deduct 22,000 checks from the wrong accounts each hour, pharmacists would process 20,000 incorrect prescriptions annually and hospitals would give 12 babies to the wrong parents every day.

These players are all in a high-stakes game. Their professions depend on being right. But when it comes to the rest of us in the business world, you’d almost think quality is little more than an afterthought.

Reports show that only 26% of all projects are deemed successful – that means the cost of quality is about 15-25 per cent of sales. If businesses want to be successful (and who doesn’t?), then it’s important that we agree on what defines success – and often this requires more than looking at the bottom line.

Most business leaders already appreciate that in order for a project to be successful it needs to achieve these two objectives:

  • Completed at or under budget
  • Completed on or under schedule

Then there are the other more subjective aspects of project delivery to consider:

  • Meets the clients and/or sponsors’ objectives
  • Meets defined requirements
  • And finally, the customer is satisfied

The truth is only 34% of successful projects meet all of these criteria. The result is, a considerable amount of money is left on the table. Multiply that in a nation filled with under-performing projects, and you have a real problem.

The Standish Group in its 2003 CHAOS Report revealed an estimated $38-billion in lost dollar value for US projects alone, but another $17-billion in cost over-runs. When it comes to IT projects alone, 21% of the money spent is being thrown away.

So why do projects fail?

Here are some top reasons:

  • Lack of training
  • Poor documentation
  • Staff turnover
  • Poor knowledge management
  • Wrong service/product provided
  • Rework from product/service failure
  • Delivering late
  • Handling unnecessary customer service requests when things aren’t working as designed
  • No risk or change management
  • Lack of project management training

You CAN afford quality

Back in the late 1970s when the US was losing ground to Japanese manufactured products (think RCA televisions versus Sony), businessman Phil Crosby introduced the concept of total quality, and the cost of falling short in his book Quality is Free.

Crosby argued that there was no true cost associated with it because once businesses and manufacturers adopted the principles, the payback would more than compensate for any investment.

It was a game-changer, if a slow one to implement for some – even today. But bottom line – quality is what differentiates an organization from its competitors. It’s what everyone is looking for.

I’ll explore how to get from here to there, in the next post on Quality Management Systems. For more on quality, see also Part Three in this series.


– Software Delivered as Promised. No Surprises.

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Melissa Martin

Insight written by Melissa Martin

Quality Control Manager at Rand Group

Melissa Martin has spent 13 plus years focused on quality control management and the implementation of strategic initiatives. An expert at seeing organizational blind spots, she has helped companies improve their bottom line by streamlining business processes that eliminate revenue leakages and increase resource utilization.

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