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Managing Risk in Business and Avoiding Quality Failure?

Posted by Emma Harris on 25/05/16 12:09
Emma Harris

Having your organisation in the headlines for all the wrong reasons is something that every member of a leadership team wants to avoid. The question is though – how?

This article explores how managing risk in business will help to reduce the potential of a high profile quality failure.

Quality failures

Quality failures are nothing new of course. They also happen all the time on a limited basis. Small every day quality failures don’t make the news though.

Unfortunately news worthy failures are nothing new either. Googling ‘quality failures’ immediately brings up:

  • “5 Quality Failures that Shook the world”
  • “The Top Five Quality Management System Failures of All Time”

Hubble_telescope.jpg

And examples of quality failures are listed that will never be forgotten:

  • Hubble Telescope – images from an advanced technology, orbiting telescope were only slightly better than Earth based telescopes and very distant and faint objects (the very reason for having an orbiting telescope) could not be seen at all.
  • iPhone 4 - touching the left side of the case at a certain spot interrupted the signal and dropped the call – not a great feature for a handheld device used primarily to make calls. 
  • The 2010 BP Deepwater Rig Explosion - this oil rig explosion was and still is the greatest manmade environmental disaster of US History.

Limiting the search to just 2015 brings up:

  • The Volkswagen emissions scandal (diesel engine VW models sold in the US had software installed allowing cars to falsely pass emissions test)
  • The Toshiba accounting scandal (found to have inflated its earnings over a seven year period by close to $2 billion)
  • The data hack of Vtech (a toymaker that exposed personal data on 6.4 million children and 4.8 million adults)
  • The TalkTalk data hack (data stolen from about 157K customers)

And several more…

The cost of quality failure

Quality failures like these cost millions, not just in addressing the failure exposed, but in damage to the reputation of the brand.

A BBC news report in December 2015 entitled “Volkswagen: The scandal explained” stated that:

“With VW recalling millions of cars worldwide from early next year, it has set aside €6.7bn (£4.8bn) to cover costs. That resulted in the company posting its first quarterly loss for 15 years of €2.5bn in late October.

VW_scandal.jpg

Image from www.telegraph.co.uk

But that's unlikely to be the end of the financial impact. The EPA has the power to fine a company up to $37,500 for each vehicle that breaches standards - a maximum fine of about $18bn.”

Ouch.

But that’s not all. The report also stated:

"We've totally screwed up," said VW America boss Michael Horn, while the group's chief executive at the time, Martin Winterkorn, said his company had "broken the trust of our customers and the public". Mr Winterkorn resigned as a direct result of the scandal. “

So something to be avoided. No doubt about that.

Oddly though, there is often more doubt about how much should be invested in an organisation’s Quality Management System. Rarely is the investment in the Quality team and the Quality System in any way commensurate with the cost of a high profile quality failure.

This is because quality is often seen as all about ticking boxes, compliance, accreditation - an add-on to the core business of the organisation.

Quality at the heart of every organisation

However the most effective way to mitigate against a quality failure is to put quality at the heart of your organisation.

And it is not just me saying this. The Chartered Quality Institute state on their website that:

“In short, we need to create a world with quality at the heart of every organisation.”

The longer statement can be found here: http://www.thecqi.org/Competency-Framework/Challenge/

So how is this done and how does it mitigate the risk of a quality failure?

Business Process Management (BPM)

The approach to quality must be integrated into the organisation’s strategy and seen as a core business system. It must be given status and investment commensurate with the value that it can deliver.

This is done by integrating your Quality Management System with a Business Process Management system which extends (well beyond the quality department) organisation-wide.

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Once this approach is adopted there is a platform in place to:

  • Understand how the organisation currently works and where the risks currently are.
  • Educate your employees in taking a process approach and a systemic dissatisfaction with the status quo, no matter how good the organisation is perceived to be.
  • Identify clearly and visibly responsibility, accountability and process ownership, so that the person responsible for the quality of each process is known – not least by them.
  • Model the risk of quality failure and the various approaches to mitigate against it.
  • Implement improved processes with risks reduced.
  • Adopt a Continuous Improvement culture.

This obviously doesn’t happen overnight and requires investment, leadership support and very often a change in culture. However this has to be worth it to avoid being on the list that comes up when ‘quality failure’ is Googled.

I hope that this article had been useful and won’t keep you awake at night worrying! My company Triaster delivers a Business Process Management system that sits firmly at the heart of our customer organisations’ enabling risk to be understood and mitigated against. We know that the Triaster systems won’t suit all organisations but if you are interested in learning more about what Triaster offers, please have a look at our approach and/or sign up for a webinar.

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Related articles:

Continuous Improvement: How do I create a culture of continuous improvement?

What problem does Business Process Management (BPM) solve?

Topics: Quality




Emma Harris

Written by Emma Harris