While more organizations in 2016 view quality as a strategic asset and competitive differentiator when compared with 2013, a majority of organizations don’t know or don’t measure the financial impact of quality, according to a new report by ASQ, Milwaukee, Wis.
According to the “Global State of Quality 2 Research: Discoveries 2016” report, 36% of survey respondents said their organization views quality as a strategic asset and competitive differentiator, up from 22% in the inaugural “Global State of Quality Research of 2013.”
The increase in organizations viewing quality as a competitive differentiator and strategic asset is a positive shift from organizations that simply view quality as a compliance, or check-the-box activity. In 2016, 14% of survey participants said their organizations view quality as simply a compliance activity, compared with 22% in 2013.
This study examines the state of quality and continuous improvement worldwide, providing organizations with insights into gaps and opportunities. The latest research expands upon the 2013 research, which is said to provide the first-ever view of quality and continuous improvement on a global scale.
New to the 2016 research is the addition of a world-class profile that allows organizations to benchmark their quality and continuous improvement programs against other high-performing quality organizations. ASQ and research partner, APQC, Houston, Texas, analyzed responses from nearly 1,700 participants worldwide, identifying world-class organizations that possessed the strongest end-to-end quality practices. The research also offers 10 steps organizations can take to advance toward world-class quality.
According to the research:
- One hundred percent of world-class organizations increased investment in quality over the last three years, compared with 54% of non-world-class organizations.
- Ninety-three percent of world-class organizations’ most visible metrics center on performance against customer needs, compared with 34% of non-world-class organizations.
- World-class organizations have half the rate of quality setbacks, like recalls, product defects etc., than non-world-class organizations.
- Ninety-six percent see quality as a strategic asset and competitive differentiator — triple the non-world-class rate.
As more organizations transition their quality function from a compliance activity to a strategic asset and competitive differentiator, more companies rely on quality departments to drive profitability through innovation, new product development and a focus on customer experience.
According to the research, 39% of non-world-class organizations use quality to drive innovation, compared with 75% of world-class companies. Furthermore, 43% of non-world-class organizations use quality to drive new product development, and 63% of non-world-class companies use quality to drive customers focus.
But, while organizations use quality to drive innovation, new product development, customer experience and more, few measure the financial impact of quality. According to the report, 60% of all respondents say they don’t know or don’t measure the financial impact of quality.
Beth Cudney, associate professor at Missouri University of Science and Technology, Rolla, Mo., says the intangible aspects — like lost market share or company reputation due to poor quality — are difficult to measure.
“Capturing (the cost of those intangibles) and truly putting a financial number to that is still so difficult, and no one’s doing that well,” Cudney says. “There needs to be more work in that area to find a better way to capture that number, so companies have a good estimate.”
The report suggests the lack of measuring the financial impact of quality could be a result of a common method. It also suggests an organization’s culture may discourage tracking remediation costs because it might call unwanted attention to recalls, product defects and more.