According to a study covered in a recent Harvard Business Review article, companies with highly developed quality cultures spend, on average, $350 million less annually fixing mistakes than companies with poorly developed ones.
The research, which was commissioned by CEB—an advisory firm of more than 60 multinational companies—revealed that employees who ranked their companies in the top-quintile in terms of quality made 46 percent fewer mistakes in their daily work than employees in bottom-quintile companies.
The High Price of Everyday Mistakes
In the survey employees reported that it takes about two hours to correct a mistake. Assuming an hourly wage of $42.55 (the median for CEB client companies), a bottom-quintile quality firm with 26,300 employees (the median head count) spends nearly $774 million a year to resolve errors, many of them preventable. Top-quintile firms, on the other hand, spend about $424 million annually.
The report’s authors, CEB directors Ashwin Srinivasan and Bryan Kurey, suggested a broad rule of thumb: For every 5,000 employees, moving from the bottom to the top-quintile would save a company $67 million annually.
Creating a Culture Around Quality
Given this tremendous financial impact, CEB sought to identify the key attributes of an effective culture of quality. Contrary to popular belief, offering monetary incentives, training and sharing best practices failed to do the job. Rather, it was this constellation of factors that proved to be the most critical:
Walk the talk. It’s one thing for leaders to say that quality is important, but are they really willing to stand up for that viewpoint? In the face of everyday business challenges, will they make the decision for quality performance? If they do, they are much more likely to be successful at embedding quality into the culture.
Create credible messaging that's not one-size-fits-all. Quality means different things to different people, and one size does not fit all. For example, some people are motivated by customer satisfaction, while others are all about the cost savings. The quality message must be delivered by someone employees trust and believe in, so rather than forcing one direction on everyone, top-quintile organizations encourage front-line managers to choose the message for their employees.
Foster peer involvement. The study’s authors report that too much top-down involvement destroys authenticity, but not enough sends the message to employees that the initiative need not be taken seriously. The goal is to balance leadership engagement with peer engagement, prompting employees to develop and execute their own ideas for quality improvements as business circumstances change, and to take collective pride in their individual and departmental accomplishments.
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