The Dollar Value of Quality

Every contractor that I have ever worked with has proudly defended his company's ability to deliver quality. Often I hear, "Oh no Brad, when we say we produce quality, we really mean it! There is no better pavement maintenance company in the area when it comes to putting out quality than my company."

As much as I know that the contractor is sincere when he shares this statement, I also know that almost every one of his competitors would give this same statement if pressed about his own company's ability to provide quality results.

This article isn't about whether you have quality or not. If you are reading this article you are probably committed to bringing the best quality possible. No, this article is about the dollar value of delivering quality.

There was a great book published many years ago entitled Quality is Free. The author, Phillip Crosby, was one of the true modern day educators and "gurus" of the quality movement. In this revealing book Crosby made the statement that if work is executed correctly the first time, the cost of delivering quality is actually free.

To determine what quality is, one has to assess what the cost might be if the work is not executed correctly the first time. Developing a general formula for this assessment, Crosby estimated that to correct a mistake might cost three times the original amount of the initial cost associated with doing a project or task. Let me briefly translate for our pavement maintenance industry.

Let's say you own a sweeping company. One of your drivers has a route that includes sweeping four major retail centers three nights a week. On the second night of sweeping the four retail centers your driver does a poor job of sweeping one of the centers and you receive a call about it the next day from the property manager.

You direct the driver to sweep the center again on his next evening of work. However, because he must spend time re-sweeping a retail parking center that should have been swept better on the previous evening, he does not take this period of time sweeping a "new" lot. Let me line out for you where the "3 x $" comes into play to the contractor.

  • First $ Cost: Initial costs associated with first time to perform work that was not done correctly.
  • Second $ Cost: Rework (i.e. Re-sweeping) costs associated with having to correct the problems generated on the first time work was performed.
  • Third $ Cost: "Lost opportunity cost" due to newer work or job not being able to be performed due to cost associated with second time for correction purposes.

Now, let's put some dollars to this situation. For our sweeping example let's assume that we have a $150 cost for each time the retail parking center is swept. (You can insert your own costs.) Since we had a poor execution on one of the retail centers we must go back and repeat our effort. We now have about $300 in costs associated with our correction effort. However, while we were correcting our problem on the one retail center we were not able to have the driver clean a new lot which would have a $150 cost that we were not able to capture, thus a lost opportunity to make more money.

Using this scenario it looks like our $150 mistake really costs us about $450. If we make this same mistake with the same customer we might completely lose the business. How much is such loss of work worth to us? Certainly more than
"3 x Original Cost."

The dollar value of the quality that your company realizes is not a mystery. It is very easy to calculate most of the processes and decisions associated with making your company a true quality provider.

Brad Humphrey is president of Pinnacle Development Group, a consulting firm that specializes in the pavement maintenance industry.

He will be presenting a number of seminars, including "The Dollar Value of Quality," at National Pavement Expo, Jan. 31-Feb. 3 in Nashville.

For more information and complete seminar descriptions visit www.nationalpavementexpo.com. For more information about Pinnacle Development Group visit www.pinnacledg.com or e-mail Brad at brad@pinnacledg.com.

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