CROSBYâ€™S CONCEPT OF COST OF QUALITY:Cost of Quality Attitude

<< JURAN AND CROSBY ON QUALITY AND QUALITY IS FREE:Quality Planning

COSTS OF QUALITY AND RETURN ON QUALITY:Total Quality Costs >>

Total Quality Management MGT510

Lesson # 17

CROSBY'S CONCEPT OF COST OF QUALITY

The only performance measurement is the cost of quality. The cost of quality is the expense of

nonconformance. Crosby notes that most companies spend 15 to 20 percent of their sales dollars on

quality costs. Accompany with a well-run quality management program can achieve a cost of

quality that is less than 2.5 percent of sales, primarily in the prevention and appraisal categories.

Crosby's program calls for measuring and publicizing the cost of poor quality. Quality cost data are

useful in calling problems to management's attention, selecting opportunities for corrective action,

and tracking quality improvement over time. Such data provide visible proof of improvement and

recognition of achievement. Juran also supports this theme.

The only performance standard is Zero Defects. Crosby feels that the Zero Defects (ZD) concept is

widely misunderstood and resisted. Zero Defects is not a motivational program. It is as follows:

Zero Defects is a performance standard. It is the standard of the craftsperson regardless

of his or her assignment. The theme of ZD is doing it right the first time. That means

concentrating on preventing defects rather than just finding and fixing them.

People are conditioned to believe that error is inevitable; thus they not only accept

error, they anticipate it. It does not bother us to make a few errors in our work. . . . To

err is human. We all have our own standards in business or academic life-our own

points at which errors begin to bother us. It is good to get an A in school, but it may be

OK to pass a course with a C.

We do not maintain these standards, however, when it comes to our personal life. If we

did, we should expect to be shortchanged every now and then when we cash our

paycheck; we should expect hospital nurses to drop a constant percentage of newborn

babies. . . . We as individuals do not tolerate these things. We have a dual standard: one

for ourselves and one for our work.

Most human error is caused by lack of attention rather than lack of knowledge. Lack of attention is

created when we assume that error is inevitable. If we consider this condition carefully and pledge

ourselves to make a constant conscious effort to do our jobs right the first time, we will take a giant step

toward eliminating the waste of rework, scrap, and repair that increases cost and reduces individual

opportunity.

Crosby summarized his approach to management in what he refers to as the Absolutes of Quality

Management, which answer the following questions.

What is quality?

What system is needed to cause quality?

What performance standard should be used?

What measurement system is required?

Answers

The First Absolute: The Definition of Quality is conformance to Requirements.

The Second Absolute: The System of Quality Is Prevention.

The Third Absolute: the Performance Standard Is Zero Defects.

The Fourth Absolute: The Measurement of Quality Is the Price of Nonconformance.

Cost of Quality

Until the 1950s, manager assumed it was important to improve quality because defects were costly. But

they had no idea just how costly defects were and consequently did not know how much they should

Total Quality Management MGT510

improve. They had no yardstick for measuring the costs of quality. In addition to emphasizing

management's role in quality, Joseph Juran and Philip Crosby gave managers a means of answering a

critical question which remained in their minds: "How much quality is enough?

The cost of achieving a given level of quality is divided into avoidable costs and unavoidable costs.

Unavoidable costs are those related to preventing defects. These include inspection, sampling, sorting,

and other quality control initiatives.

Avoidable costs are related to defects and product failures. These include scrapped materials, labor

hours required for rework and repair, complaint processing, and financial losses resulting from unhappy

customers. Juran and Crosby called avoidable costs "gold in the mine" because investment in quality

improvement can sharply reduce them and lead to substantial savings. With Juran and Crosby's cost of

quality concept, manager could calculate when additional expenditures on prevention were justified.

Unlike Juran and Deming, Crosby's program is primarily behavioral. He places more emphasis on

management and organizational processes for changing corporate culture and attitudes than on the use

of statistical techniques. Like Juran and unlike Deming, his approach fits well within existing

organizational structures.

Cost of Quality Attitude:

In fact in daily life we pay the price for our not so good attitude in rupees, or in the form of lost respect

or rapport or even anger and frustration which are the emotional costs. How to plan to prevent them is

every body's responsibility. Best price or zero cost is the prerogative cost. It is the compliment or

comment given to you by your customer, by your family or by they boss when he or she ask that has he

or she paid you enough for your quality work and are you really happy with him on the given reward!

Quality Management Characteristics for the Future

To succeed in the global marketplace for now and in the future, organizations will have to operate

according to the principles of quality management. Such companies will have the following

characteristics:

♦ A total commitment to continually increasing value for customers, investors, and employees.

♦ A firm understanding that market driven means that quality is defined by customers, not the

company

♦ A commitment to leading people with a bias for continuous improvement and communication.

♦ A recognition that sustained growth requires the simultaneous achievement of four objectives

all the time, forever: (a) customer satisfaction, (b) cost leadership, (c) effective human

resources, and (d) integration with the supplier base.

♦ A commitment to fundamental improvement through knowledge, skills, problem solving, and

teamwork.

Companies that develop these characteristics will be those that fully institutionalize the principles of

quality management. Consequently, quality management as both a practice and a profession has a bright

future. In fact, in terms of succeeding in the global marketplace, quality management is the future.

Consequently, more and more companies are making quality management the way they do business, and

more and more institutions of higher education are offering quality management courses and programs.

Table of Contents: