Quality: cheaper in the long run

• Louise Kelly
• 19 August 2008

Restaurateurs say the most popular bottle of wine on any menu is the second cheapest. Unfortunately this is how many businesses buy and sell products and services. So before you sign up for your next deal, take some time to consider the cost effectiveness of quality.

Quality is about walking your talk to deliver a reliable outcome every time. Quality leads to profitability, because customers will pay more to rely on you. Customers pay more for certainty.

The bible for quality fanatics is Six Sigma, an all-you-can-eat buffet developed by Motorola on removing defects through better processes linked to profitability.

Six Sigma works. Jack Welch, one of the 20th century’s greatest corporate leaders, used it to make General Electric the most valuable company in the world.

Quality and small business

The question of quality crops up every day in small business decision-making, and sometimes it takes sheer nerves not to react and stick to your quality positioning.

Just recently, a small business owner approached me with a dilemma for their business. A travel agency had been approached by a tour operator to represent its ‘fighting brand’ product.

The fighting brand is the one that doesn’t spend any money on marketing and quality controls, it only competes on price. They are often the cheap and nasty products in the marketplace. It was a good offer on the face of it but, in the long term, the travel agent owner knew it would kill the company’s reputation. They knocked back the contract.

Another small business, an independent music label, saw a new entrant in the market: recording artists free in exchange for a contract.

The quality response was to sit back and focus on excellence; the free deal was not sustainable. The word ‘free’ can actually create negative perceptions that a business does not value its services. It is also a very effective indicator of poor quality.

However, small companies can also run into the problem of too much quality by focusing on things that don’t matter to the customer. Jim Collins, in his book Good to Great, recommends that you create a Stop Doing List.

These are the key things your business does that make no difference to your customers. Stop Doing Lists have a powerful effect on breaking expensive habits and boosting profit.

So how do you do quality? Here are some helpful tips borrowed from the thinking of quality masters.

A quality team

Make sure you hire and work with people who can walk the talk. Their word is gold. They don’t hype things. They keep their promises realistic and attainable. They behave reliably. They do what they say they will do and don’t have that ever-changing list of excuses as to why it’s not done.

Know yourself and your team

Understand what you are really good at and where you are not so good. Make sure the team has complementary skills.

Some people are great at detail but fail to grasp the big picture. Others see business as a treasure hunt and love to change the plan, while others need to keep to scheduled events. There is no right or wrong, you just need to ensure you have all these strengths represented in the team to deliver quality. Personality tests such as Myers-Briggs may be helpful. You need to see team diversity as an asset and encourage respect for people’s differing strengths.

Discipline

Getting it right – all the time, every time through processes and checks – breeds quality. It also saves a whack on your managerial budget and fixing costs. The cost of defects and mistakes make quality the most profitable course for a business.

When a small business launches, the ideal process often lives in the founder’s head. Founders face the challenge of converting what is in their head into systems and processes that filter quality throughout the business.

Do a due diligence process before you start something new and put aside some contingency for the unexpected.

Be prepared for mistakes and respond quickly to correct them. Arming new staff with the quality processes and rewarding staff compliance to quality is critical for profitability.

Link passion to economics

Look at what gets the business energised and turn that into money. You can see passion in someone’s eyes; passion is contagious. Passion is the energy that drives quality. Make sure your business is following the path of passion – without that fuel, you may not have the energy to succeed.

Continuous improvement

Great businesses are improved one tweak at a time, as Jim Collins puts it: “Keep sweating the small stuff”.

Toyota, one of the world’s most innovative companies, has employees walking around saying: ‘there must be a better way’. Everyone in the company, from the factory floor to the executives, is encouraged to innovate. Encourage a culture where everyone in the organisation is responsible for the continual improvement in quality. Keep your door and mind open to ideas from your employees.

For more on quality, I highly recommend you check out a few books by Jack Welch. Quality is embedded in every action and thought of his business leadership.