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THE QUALITY MANAGER’S DILEMMA GETTING ONTO THE CEO’S RADAR SCREEN: METRICS AND TACTICS 6/13/2007 THE QUALITY MANAGER’S DILEMMA GETTING ONTO THE CEO’S RADAR SCREEN: METRICS AND TACTICS 6/13/2007 'The Quality Manager's Dilemma' -- C. Cornwell 1

QM DILEMMA: 'MY CEO DOESN'T GET INVOLVED IN OUR QUALITY SYSTEM' ¡ ¡ ¡ QM DILEMMA: 'MY CEO DOESN'T GET INVOLVED IN OUR QUALITY SYSTEM' ¡ ¡ ¡ 6/13/2007 DISINTERESTED (No participation) DELEGATES QMS RESPONSIBILITIES WITHOUT ACCOMPANYING AUTHORITY SEE THE QMS ONLY AS A NECESSARY 'WALL PLAQUE‘ 'The Quality Manager's Dilemma' -- C. Cornwell 2

[cont’d] QM DILEMMA: 'MY CEO DOESN'T GET INVOLVED IN OUR QUALITY SYSTEM' ¡ ARE [cont’d] QM DILEMMA: 'MY CEO DOESN'T GET INVOLVED IN OUR QUALITY SYSTEM' ¡ ARE FAMILIAR WITH SOME QUALITY STRATEGIES, BUT DON’T AS OFTEN USE THEM: n n WERE MOST FAMILIAR (80% OR MORE FAMILIAR) WITH TQM AND BENCHMARKING AS QUALITY STRATEGIES, FOLLOWED BY ISO 9001 (60%), QUALITY CIRCLES (51%), SIX SIGMA (48%), AND BALDRIGE (40%). USAGE FOLLOWED THE SAME PATTERN, BUT BY 20+ PERCENTAGE POINTS LESS. (Weiler, p. 53) ¡ SEE QUALITY AS A PRODUCT ATTRIBUTE, NOT AS A SYSTEM OF MANAGEMENT (Weiler, p. 54) ¡ BELIEVE THAT “ …QUALITY HELPS THE BOTTOM LINE BUT [FEWER VIEW] IT AS A MANAGEMENT TOOL OR ITS PRACTITIONERS AS PROFESSIONALS. ” (Weiler, p. 52) 6/13/2007 'The Quality Manager's Dilemma' -- C. Cornwell 3

WHY? ¡ POSSIBILITY #1: NO ONE AGREES ON WHAT IS ‘QUALITY’ n n 6/13/2007 WHY? ¡ POSSIBILITY #1: NO ONE AGREES ON WHAT IS ‘QUALITY’ n n 6/13/2007 [THE MILLION DOLLAR QUESTION!] Thousands of published DEFINITIONS of 'QUALITY' As many interpretations of the SCOPE of 'QUALITY' Definitions and scope vary by industry to which applied (e. g. , manufacturing, service, healthcare, education) (Weiler, p. 55) ASQ Certifications exemplify variabilities as of 2007: offers 14 quality certifications 'The Quality Manager's Dilemma' -- C. Cornwell 4

WHY? ¡ ¡ POSSIBILITY #2: THE QMS ITSELF IS AN 'OUTSIDER' (a separate department, WHY? ¡ ¡ POSSIBILITY #2: THE QMS ITSELF IS AN 'OUTSIDER' (a separate department, not integrated into the company) POSSIBILITY#3: THE QMS 'MISSES THE TARGET' n n 6/13/2007 [THE MILLION DOLLAR QUESTION!] QMS was written only to satisfy an 'external' requirement (e. g. , government; customer) QMS was written only by one or more 'outsiders', yielding limited executive 'buy in' from inception. 'The Quality Manager's Dilemma' -- C. Cornwell 5

WHY? ¡ POSSIBILITY #4: IT PROBABLY WASN’T THE CEO WHO DECIDED THE DEFINITION and WHY? ¡ POSSIBILITY #4: IT PROBABLY WASN’T THE CEO WHO DECIDED THE DEFINITION and SCOPE OF 'QUALITY', WHEN THE QMS WAS CREATED n n 6/13/2007 [THE MILLION DOLLAR QUESTION!] 'Not invented here' syndrome QMS easier to 'control' or minimize, if separated from CEO The QMS scope misses the CEO's target: ¡ Is the quality scope limited to the PRODUCT, or does the scope address the BUSINESS? Audits may not produce results of interest to, or successfully communicated to, the CEO (see Table below): 'The Quality Manager's Dilemma' -- C. Cornwell 6

SIX KINDS OF AUDITS SCOPE PURPOSE COMPLIANCE AUDIT* PERFORMANCE AUDIT** SYSTEM¹ AUDIT Consistent implementation SIX KINDS OF AUDITS SCOPE PURPOSE COMPLIANCE AUDIT* PERFORMANCE AUDIT** SYSTEM¹ AUDIT Consistent implementation of a defined system. Promotes stability. Ability to achieve organizational goals. Promotes change. [METRICS FOR THE CEO]§ PROCESS² AUDIT Performance of the ability in accordance with defined processes. Ability of the processes to achieve desired characteristics. PRODUCT³ AUDIT Production of goods or services to defined requirements. Suitability of the goods or services for intended use. ¹System: Group of processes all working together to achieve a common goal (p. 12). ²Process: An action transforming something from one state to another (p. 12). ³Product: Tangible or intangible outputs from processes. (paraphrase; p. 12). *Compliance Audit: Examines whether activities conform to a set of rules, such as tax audits, financial audits, registration audits, regulatory audits (pp. 6 -8). **Performance Audit: Looks for efficiencies and business results; rules are challenged. (pp. 9 -10) § Added by Carol Cornwell Table excerpted from Quality Audits for Improved Performance by Dennis Arter, p. 17). 6/13/2007 'The Quality Manager's Dilemma' -- C. Cornwell 7

WHY? ¡ POSSIBILITY #5: THE QMS ‘DOESN'T DRESS FOR THE CEO' n n n WHY? ¡ POSSIBILITY #5: THE QMS ‘DOESN'T DRESS FOR THE CEO' n n n 6/13/2007 [THE MILLION DOLLAR QUESTION!] Statistics (means; std. deviations; etc. ) are traditionally used to show production performance -Abstract statistics on the QMS performance can be difficult to relate to general business operations The QMS measurement vehicle is the Quality Audit, which is often foreign to a CEO 'The Quality Manager's Dilemma' -- C. Cornwell 8

THE RESEARCH CONFIRMS: n IF QMS METRICS DON’T CLEARLY FACILITATE OR SUPPORT THE CEO'S THE RESEARCH CONFIRMS: n IF QMS METRICS DON’T CLEARLY FACILITATE OR SUPPORT THE CEO'S JOB, THE CEO WILL AVOID INVOLVEMENT 6/13/2007 'The Quality Manager's Dilemma' -- C. Cornwell 9

WHAT DOES THE CEO WANT? n 'COST OF QUALITY' INFORMATION, FOCUSING ON DEFECTS/ ERRORS? WHAT DOES THE CEO WANT? n 'COST OF QUALITY' INFORMATION, FOCUSING ON DEFECTS/ ERRORS? ¡ ¡ Matured the last decade (see ASQ website: 'Economic Case for Quality' – www. asq. org) Distinction between 'Cost of Conformance’ (making a tangible item right the first time, via planning/ testing/ training/measuring), and ‘Cost of Non-Conformance’ (addressing failures) (Stimson and Dlugopolski, p. 27) ¡ n Consider the alternative “Cost of Compliance (following the rules/ regulations [tangibles and intangibles]), and Cost of Non-Compliance (Arter, p. 7) PROBABLY NOT, IF IN THE USUAL FORM (e. g. , statistics focusing on defects/errors 6/13/2007 'The Quality Manager's Dilemma' -- C. Cornwell 10

WHAT DOES THE CEO WANT? n 'PRODUCTIVITY' INFORMATION? ¡ ¡ n (Ryan, p. 3) WHAT DOES THE CEO WANT? n 'PRODUCTIVITY' INFORMATION? ¡ ¡ n (Ryan, p. 3) Frequently calculated as "$ Sales per Employee" Other ‘operational’ productivity measures often used: timeliness of delivery, order processing time, production errors, product lead time Headcount reductions to counteract ‘low productivity’ often ignore profitability implications/ consequences “PRODUCTIVITY” METRICS ARE USEFUL OPERATIONAL METRICS, BUT ARE NOT FINANCIAL (e. g. , return on assets; return on sales), METRICS 6/13/2007 'The Quality Manager's Dilemma' -- C. Cornwell 11

WHAT DOES THE CEO WANT? n CUSTOMER SATISFACTION METRICS? - consider: ¡ ¡ EXAMPLE WHAT DOES THE CEO WANT? n CUSTOMER SATISFACTION METRICS? - consider: ¡ ¡ EXAMPLE CS METRICS: % stating satisfied with product/service; # complaints received; customer retention rates (Ryan, p. 3) QUALITY THESIS: that "Quality" correlates positively with "Satisfied Customers" (debated; Reichheld) ¡ BUSINESS THESIS: that "Satisfied Customers' correlate with "Loyal Customers, and that "Loyal Customers correlate with "Repeat Customers" (also debated; Reichheld) 6/13/2007 'The Quality Manager's Dilemma' -- C. Cornwell 12

DOES THE CEO WANT 'CUSTOMER SATISFACTION'' METRICS? n EVEN THOUGH CSat METRICS WERE ADDED DOES THE CEO WANT 'CUSTOMER SATISFACTION'' METRICS? n EVEN THOUGH CSat METRICS WERE ADDED TO ISO-9001: 2000 STANDARD AS MANDATORY--¡ n 'Customer Satisfaction' must be defined in an ISO-9001 QMS; measurements must be taken for showing 'continuous improvement. ' --- PROBABLY NOT: ¡ ¡ 6/13/2007 [Research indicates that customer]… 'satisfaction lacks a consistently demonstrable connection to actual customer [buying] behavior and [company] growth. ‘ (Reichheld, p. 5) “…the satisfaction survey is a charade that they play along with to remain in the good graces of the manufacturer and to ensure generous allocations of the hottest-selling models“ (Reichheld, p. 5) 'The Quality Manager's Dilemma' -- C. Cornwell 13

[Cont’d] DOES THE CEO WANT 'CUSTOMER SATISFACTION'' METRICS? n [Cont’d] PROBABLY NOT: [Cont’d] DOES THE CEO WANT 'CUSTOMER SATISFACTION'' METRICS? n [Cont’d] PROBABLY NOT: "Most customer satisfaction surveys aren't very useful. . [and yield results] that are difficult for operating managers to act on. Furthermore, they are rarely challenged or audited because most senior executives, board members, and investors don't take them very seriously. That's because their results don't correlate tightly with profits or growth. ' (Reichheld, pp. 3 - 4) n CSat METRICS ARE NOT ‘CEO METRICS’ 6/13/2007 'The Quality Manager's Dilemma' -- C. Cornwell 14

WHAT DOES THE CEO WANT? n THE CEO WANTS INFORMATION DIRECTLY RELATED TO ACHIEVING WHAT DOES THE CEO WANT? n THE CEO WANTS INFORMATION DIRECTLY RELATED TO ACHIEVING ‘CEO-UNIVERSAL’ GOALS: ¡ ¡ ¡ 6/13/2007 COMPANY PROFITABILITY (Reichheld) COMPANY GROWTH (Reichheld) METRICS SHOWING COMPLIANCE WITH FIDUCIARY REQUIREMENTS (e. g. , Sarbanes. Oxley (‘SOX’)) (Stimson and Dlugopolksi) 'The Quality Manager's Dilemma' -- C. Cornwell 15

THEN, WHAT QUALITY METRICS WILL HELP THE CEO? n SUGGEST TWO: ¡ A SPECIFIC THEN, WHAT QUALITY METRICS WILL HELP THE CEO? n SUGGEST TWO: ¡ A SPECIFIC 'CUSTOMER LOYALTY‘ METRIC n ¡ Definition of 'Loyalty": "the willingness of someone… to make an investment or personal sacrifice in order to strengthen a relationship. “ (Reichheld, p. 5) ‘COST OF QUALITY’ METRICS, EXPRESSED IN GENERAL LEDGER METRICS n (Operating Costs, Operating Expenses (labor), Fixed Expenses, Variable Expenses, Depreciated Assets (equipment), Fixed Assets, Inventory (Stimson and Dlugopolski, p. 30) 6/13/2007 'The Quality Manager's Dilemma' -- C. Cornwell 16

CUSTOMER LOYALTY (Reichheld) n 'REPEAT BUYING FROM A SUPPLIER WHO GIVES GOOD VALUE IN CUSTOMER LOYALTY (Reichheld) n 'REPEAT BUYING FROM A SUPPLIER WHO GIVES GOOD VALUE IN THE LONG TERM, NOT JUST FOR A SPECIFIC TRANSACTION. ' ¡ n BUY MORE OVER TIME AS CUSTOMER GROWS RECOMMEND YOU AS A SUPPLIER ('FREE'/ 'LOW COST' MARKETING) 6/13/2007 'The Quality Manager's Dilemma' -- C. Cornwell 17

CUSTOMER LOYALTY AND COMPANY PROFITABLE GROWTH RESEARCHED: n RESEARCH IDENTIFIED ONE SPECIFIC SURVEY QUESTION CUSTOMER LOYALTY AND COMPANY PROFITABLE GROWTH RESEARCHED: n RESEARCH IDENTIFIED ONE SPECIFIC SURVEY QUESTION AS THE 'MOST EFFECTIVE' IN PREDICTING ACTUAL BUYING AND RECOMMENDATION BEHAVIOR OF CUSTOMERS (Reichheld, p. 6) n THE ONE QUESTION IS: "HOW LIKELY IS IT THAT YOU WOULD RECOMMEND [COMPANY 'X'] TO A FRIEND OR COLLEAGUE? ‘ 6/13/2007 'The Quality Manager's Dilemma' -- C. Cornwell 18

HOW WAS THE ‘ONE’ QUESTION SCORED? n THE BEST SCALE WAS NOT the LIKERT HOW WAS THE ‘ONE’ QUESTION SCORED? n THE BEST SCALE WAS NOT the LIKERT SCALE (5 -POINT SCALE) n THE MOST EFFECTIVE RATING SCALE WAS 11 POINT ¡ 6/13/2007 From zero (0) to ten (10), where zero (0) means 'not at all likely; five (5) means 'neutral‘; and ten (10) means 'extremely likely. ' 'The Quality Manager's Dilemma' -- C. Cornwell 19

WHY NOT A ‘LOYALTY’ QUESTION? ¡ ¡ ¡ 6/13/2007 TESTED: 'HOW STRONGLY DO YOU WHY NOT A ‘LOYALTY’ QUESTION? ¡ ¡ ¡ 6/13/2007 TESTED: 'HOW STRONGLY DO YOU AGREE THAT [COMPANY 'X'] DESERVES YOUR LOYALTY? ' The 'loyalty' question did not predict actual buying and recommending behavior as strongly as did the 'recommend' question The researchers suggested that the concept of loyalty was less compelling that what may be the ultimate act of loyalty, i. e. , making a recommendation to a friend. (Reichheld, p. 6) 'The Quality Manager's Dilemma' -- C. Cornwell 20

THE ‘ONE’ QUESTION WAS EMPIRICALLY TESTED ¡ ¡ THE SURVEY WAS REPEATED (400+ COMPANIES), THE ‘ONE’ QUESTION WAS EMPIRICALLY TESTED ¡ ¡ THE SURVEY WAS REPEATED (400+ COMPANIES), USING THE 11 POINT SCALE & 'RECOMMEND' QUESTION, FOLLOWED BY COMPARISON OF THE RESULTS AGAINST ACTUAL REVENUE GROWTH DATA. CUSTOMER RATINGS 'CLUSTERED' IN 3 GROUPS: n n n ¡ THE FOCAL SCORE WAS THE PERCENTAGE OF “NET PROMOTERS” (% Promoters, less the % Detractors) n 6/13/2007 'Detractors (Lowest-range scores, 0 - 6) 'Promoters (Highest-range scores, 9 -10) 'Neutrals (Mid-range scores, 7 -8) Detractors and neutral customers often increase costs (service; employee morale and performance) 'The Quality Manager's Dilemma' -- C. Cornwell 21

THE RESULTS WERE STRIKING: ¡ THE ‘% OF NET PROMOTERS' STRONGLY CORRELATED WITH THE THE RESULTS WERE STRIKING: ¡ THE ‘% OF NET PROMOTERS' STRONGLY CORRELATED WITH THE COMPANIES’ AVERAGE GROWTH RATE OVER A 3 -YEAR PERIOD n ¡ ¡ 6/13/2007 This correlation appeared to hold regardless of industry, with a few exceptions dominated by monopolies. Enthusiastic customers, who will recommend, appear to be crucial to growth. ‘% OF NET PROMOTERS’ IS THE CUSTOMER LOYALTY METRIC THE CEO NEEDS TO KNOW (Reichheld) 'The Quality Manager's Dilemma' -- C. Cornwell 22

THIS DEFINITION & MEASUREMENT OF 'QUALITY' IS IMPORTANT TO A CEO n QUALITY MANAGERS: THIS DEFINITION & MEASUREMENT OF 'QUALITY' IS IMPORTANT TO A CEO n QUALITY MANAGERS: THE CORRELATION BETWEEN ‘% OF NET PROMOTERS’ and AVERAGE GROWTH RATE OVER A 3 -YEAR PERIOD CONNECTS COMPANY 'QUALITY' TO COMPANY PROFITABLE GROWTH (Reichheld, p. 8) 6/13/2007 'The Quality Manager's Dilemma' -- C. Cornwell 23

THIS DEFINITION & MEASUREMENT OF 'QUALITY' IS IMPORTANT TO A CEO ¡ THIS MEASUREMENT THIS DEFINITION & MEASUREMENT OF 'QUALITY' IS IMPORTANT TO A CEO ¡ THIS MEASUREMENT IS IMMEDIATE, TIMELY, AND CAN BE USED TO SET IMPROVEMENT GOALS THAT ARE CLEAR, ACTIONABLE, AND MOTIVATING n n n 6/13/2007 E. g. : "Improve a Company's 'Net Promoters' score in 6 months by 5%" E. g. : "Improve a Branch's "Net Promoters' score in 3 months by 2%" E. g. : "Managers are eligible for promotions and bonuses when their branches' ‘Net Promoter' scores match or exceed the Company's average score. " 'The Quality Manager's Dilemma' -- C. Cornwell 24

REVIEW: WHAT DOES THE CEO WANT? n THE CEO WANTS INFORMATION DIRECTLY RELATED TO REVIEW: WHAT DOES THE CEO WANT? n THE CEO WANTS INFORMATION DIRECTLY RELATED TO ACHIEVING ‘CEO-UNIVERSAL’ GOALS: √ COMPANY PROFITABILITY √ COMPANY GROWTH ¡ NEXT: METRICS SHOWING COMPLIANCE WITH FIDUCIARY REQUIREMENTS (e. g. , Sarbanes-Oxley (‘SOX’)) 6/13/2007 'The Quality Manager's Dilemma' -- C. Cornwell 25

QMS METRICS & “SOX” REQUIREMENTS n PUBLIC COMPANIES MUST COMPLY WITH SARBANES-OXLEY (“SOX”) REQUIREMENTS QMS METRICS & “SOX” REQUIREMENTS n PUBLIC COMPANIES MUST COMPLY WITH SARBANES-OXLEY (“SOX”) REQUIREMENTS FOR FINANCIAL ACCOUNTING ¡ ¡ Must report ‘material’ costs; the Quality Manager should measure “Cost of Quality’ to know whether it is ‘material’, or not (re: Title III, Sec. 302, Corporate Responsibility). The Intl Acctg Stds Board (IASB) defines ‘materiality’ as “Information is material if its omission or misstatement could influence the economic decisions of users taken on the basis of financial statements. ” (Stimson and Dlogopolski, pp. 27, 29) 6/13/2007 'The Quality Manager's Dilemma' -- C. Cornwell 26

QMS METRICS and “SOX”: MEASURE ‘COST OF QUALITY’ TO SEE IF IT IS A QMS METRICS and “SOX”: MEASURE ‘COST OF QUALITY’ TO SEE IF IT IS A ‘MATERIAL’ COST ¡ ¡ Costs of Non-Conformance (Non-Compliance) [for scrap, rework, labor, sorting, downtime, complaints, recall, unpaid invoices, etc. ]: Map to General Ledger items such as Operating costs, Operating expenses (labor), variable expenses, losses Costs of Conformance (Compliance) for Appraisal [for receiving, in-process inspections, final inspections, test equipment, test technicians, lab maintenance, quality control, QC overhead]: Map to General Ledger items such as Operating expenses, Fixed expenses, Depreciated assets (equipment), fixes assets Costs of Conformance (Compliance) for Prevention [for quality planning, training, housekeeping, packaging, special sourcing, life cycle tests, field tests; pre-production tests, inventories, cash flow]: Map to General Ledger items such as Operating expenses, fixed expenses, variable assets (cash flow), inventory. Source: Stimson and Dlugopolski 6/13/2007 'The Quality Manager's Dilemma' -- C. Cornwell 27

HOW TO MEET THE ‘SOX’ REQUIREMENTS FOR ‘INTERNAL CONTROLS’ FOR FINANCE AND OPERATIONS? ¡ HOW TO MEET THE ‘SOX’ REQUIREMENTS FOR ‘INTERNAL CONTROLS’ FOR FINANCE AND OPERATIONS? ¡ CEO must ‘verify effectiveness of internal controls in the areas of finance and operations. ’ n ¡ ¡ 6/13/2007 SEC’s definition of ‘internal control’ is ‘a process to ensure the effectiveness of operations, reliable records and reports and compliance with standards. ’ The IT Governance Institute has identified a system of processes and controls (Cob. IT) that map nearly one-to-one to ISO 9001 requirements. Therefore: Implement ISO 9001 QMS, and audit its effectiveness (required by ISO 9001 as well as ‘SOX’) 'The Quality Manager's Dilemma' -- C. Cornwell 28

CONCLUSIONS? n SUGGESTED ACTION ITEMS FOR QUALITY PROFESSIONALS IN THE CORPORATE ENVIRONMENT 6/13/2007 'The CONCLUSIONS? n SUGGESTED ACTION ITEMS FOR QUALITY PROFESSIONALS IN THE CORPORATE ENVIRONMENT 6/13/2007 'The Quality Manager's Dilemma' -- C. Cornwell 29

ACTION ITEM 1: INCORPORATE INTO YOUR QMS THE FOLLOWING ¡ ¡ Add the ACTION ITEM 1: INCORPORATE INTO YOUR QMS THE FOLLOWING ¡ ¡ Add the "Customer Loyalty” definition, as a component of 'Customer Satisfaction' Add the "Customer Loyalty” measurement: try the "ONE" customer survey question, via two or more collection methods (e. g. , company website for customer feedback; email survey; mailed survey; telephone survey) ¡ ¡ Measure your company’s ‘PROMOTERS” & ‘DETRACTORS’ Report the ‘NET-PROMOTER’ PERCENTAGE to the CEO (SUGGEST ACROSS THE ORGANIZATION, ALSO) 6/13/2007 'The Quality Manager's Dilemma' -- C. Cornwell 30

ACTION ITEM 2: INCORPORATE INTO YOUR QMS THE FOLLOWING: ¡ ¡ 6/13/2007 Begin to ACTION ITEM 2: INCORPORATE INTO YOUR QMS THE FOLLOWING: ¡ ¡ 6/13/2007 Begin to correlate your Company's revenue and profit numbers with your "Customer Loyalty' survey question results, and track (quarterly, semi-annually, etc. ), looking for trends. Suggest incorporating this correlation into Company goals and objectives. 'The Quality Manager's Dilemma' -- C. Cornwell 31

ACTION ITEM 3: INCORPORATE INTO YOUR QMS THE FOLLOWING n AS OFTEN AS POSSIBLE, ACTION ITEM 3: INCORPORATE INTO YOUR QMS THE FOLLOWING n AS OFTEN AS POSSIBLE, DO QMS EFFECTIVENESS EVALUATIONS THAT: ¡ ¡ 6/13/2007 ARE AT LEAST PARTIAL "SYSTEM PERFORMANCE" AUDIT(S) (PER ARTER’S TABLE) GIVE FINANCIAL MEASUREMENT FEEDBACK TARGETED TO THE CEO THAT RELATE TO “SOX” AND TO COMPANY GOALS. 'The Quality Manager's Dilemma' -- C. Cornwell 32

ACTION ITEM 4: INCORPORATE INTO YOUR QMS THE FOLLOWING n n n SET UP ACTION ITEM 4: INCORPORATE INTO YOUR QMS THE FOLLOWING n n n SET UP A METHOD TO DETERMINE ‘COST OF QUALITY’ AT YOUR COMPANY (Suggestion: get guidance in mapping Operations to Finance/ General Ledger from your CFO’s office) CALCULATE ‘COST OF QUALITY’ PERIODICALLY, AND UPDATE/ IMPROVE IT AS YOU GAIN EXPERIENCE REPORT ‘COST OF QUALITY’ TO THE CEO IN GENERAL LEDGER LANGUAGE 6/13/2007 'The Quality Manager's Dilemma' -- C. Cornwell 33

ACTION ITEM 5: INCORPORATE INTO YOUR QMS THE FOLLOWING n A NON-METRIC QMS TACTIC: ACTION ITEM 5: INCORPORATE INTO YOUR QMS THE FOLLOWING n A NON-METRIC QMS TACTIC: QUARTERLY, PROVIDE TO YOUR CEO ONE OR MORE OF THE FOLLOWING INPUTS DOCUMENTED AS IMPORTANT TO CEO’S: (Weiler, p. 55) ¡ QUALITY-SUPPORTIVE CONVERSATION(S) WITH CEO PEER(S) -- 89% of CEO’s surveyed named this as influential ¡ QUALITY-SUPPORTIVE TESTIMONIAL FROM SOMEONE WHO HAS USED THE QUALITY TECHNIQUE SUCCESSFULLY -- 78% of CEO’s surveyed named this as influential ¡ RELEVANT CASE STUDIES – 73% ¡ COMPETITORS’ FINANCIAL RESULTS – 51% 6/13/2007 'The Quality Manager's Dilemma' -- C. Cornwell 34

THE END n n THANKS FOR LISTENING TO THESE IDEAS THIS PRESENTATION IS A THE END n n THANKS FOR LISTENING TO THESE IDEAS THIS PRESENTATION IS A ‘WORK IN PROGRESS’ SEND FEEDBACK (ESP. IF YOU IMPLEMENT ANY OF THIS) AND I WILL INCORPORATE IT IN NEXT EDITION SEND FEEDBACK TO: [email protected] com 6/13/2007 'The Quality Manager's Dilemma' -- C. Cornwell 35

REFERENCES n n n Quality Audits for Improved Performance (3 rd Edition). Dennis R. REFERENCES n n n Quality Audits for Improved Performance (3 rd Edition). Dennis R. Arter, ASQ Quality Press, Milwaukee, Wisconsin, 2003. "The One Number You Need to Grow", Frederick F. Reichheld, Harvard Business Review, December 2003 (Reprint), Pp. 1 -11. "Economic Case for Quality: Financial Control and Quality", William Stimson and Tom Dlugopolski, Quality Progress, May 2007, pp. 26 -31. "Economic Case for Quality: What Do CEOs Think About Quality? ", Greg Weiler, Quality Progress, May 2004. "Making the Economic Case for Quality", John Ryan, ASQ White Paper (undated; posted at www. asq. org as of May, 2007). 6/13/2007 'The Quality Manager's Dilemma' -- C. Cornwell 36

FOR FURTHER STUDY: n n FOR FURTHER STUDY: n n "The Case for Quality: Taking it to Management" -Virtual Course offered by ASQ. Web-cased registration at www. asq. org/courses. Brien Palmer, Instructor. ASQ website "Making the Economic Case for Quality": www. asq. org/economic-case/ or contact Kim Hauswirth, Program Leader, 800 -248 -1946, or [email protected] org. Numerous materials available, including case studies in various sectors (manufacturing, medical, education, etc. ) n Making Change Work: Practical Tools for Overcoming Human Resistance to Change. Brien Palmer, ASQ Quality Press, Milwaukee, Wisconsin. 2004. 6/13/2007 'The Quality Manager's Dilemma' -- C. Cornwell 37