Quality is a function of Risk

I was recalling the statement, "Quality = f (Risk)," in one of my PMP training sessions and one of them asked how quality relates to risk. The premise behind this thought was on the iron-triangle thinking that quality is controlled by scope, schedule, and cost! It seems like we have a lot of work to do still in understanding about risk and its impact!  

As this person was in semi-conductor space, I reasoned risk is like the hard-wired interrupt that takes precedence over soft logic in the way microprocessor operates. That got the attention. So, I continued to make a connection on the immediate topic of the "Cost of Quality" we were discussing and reasoned out the importance of risk.

Dr. Sriram Rajagopalan's rendition of Quality is a function of Risk

In the diagram above, I have presented the cost of quality made up of two important branches. These are the cost of conformance to avoid risks happening in the first place and the cost of non-conformance to address risks that have happened. 

• To avoid risks as part of the cost of non-conformance, the best approach is to practice the "wisdom of the ages" saying, "Prevention is better than cure!" Here we take proactive steps to ensure quality planning (as part of the Quality trilogy) includes preemptive measures. This involves building quality using quality assurance (QA) with process oriented and proactive steps to train people, have multiple documentation (caters to multiple modes of learning), the appropriate equipment required and the required amount of time to do things correctly (e.g.: right-sizing stories to fit into the timebox, risk driven development methods to prioritize). 
• The next step is to evaluate how well our controls are working by performing quality audit on the work (PM/PO owns the quality audit). Here, quality control (QC) comes from the delivery team that comes in with reactive and product-oriented methods like testing (product testing), inspection (Gemba Walks), etc. 
• Now, if the errors are released such as not missed compliance or security considerations or misinterpreted requirements, or other forms of requests like change request or enhancements are noted, depending upon the triaging process, these could be show-stoppers disallowing the user to realize the intended benefit thus risking value delivery. So, rework may be required, or products may be discarded (prototyping or physical products) as scrap. These corrective actions are adding more time and cost and increase the opportunity cost of people unavailable for improving the benefit in the current project (working on newer functionality) or other business initiatives. Time may translate further into budget risks as available funding may be depleted to pay for contractors and infrastructure.  
• Finally, if these internal errors were not caught and were released to the customer, they become escaped defects! This impacts now the customer's value delivery life cycle as our faulty products may be used in their product assembly or our faulty code may be impacting their applications built. These translates into liabilities for the company, Warranty claims (ongoing free support, recall for the products at our expense) and perhaps even the business lost to competitors. 

As you can see, there are various forms of risks that interface the quality assurance, quality control, and escaped defects side of the equation with some additional risks foundational to the entire quality function in the company through its projects, program, and portfolio functions. The sooner they are addressed (as noted in the green color), the lesser the expenses are. As time passes through this cost of quality function from left to right, the intensity and visibility of risks through corrective and preventive actions (CAPA) to the business is high (as noted in color gradient going to red). 

So, am I not correct to say, "Quality = function(risk)"? Share your thoughts.

Management Debt: Costs of Non-delivery and Non-conformance

The principles of lean have always focused on maximizing the value delivery. In fact, the Japanese term Muda (Arnheiter & Maleyeff, 2005) refers to the seven different types of wastes that one should remove. Expanding on this, practitioners have added the non-utilization of talents introducing the mnemonic or memory aid, DOWNTIME, to capture these eight types of waste an organization or project should closely monitor to increase efficiency. These eight types of wastes are:

1. Defects
2. Over-production
3. Waiting
4. Non-utilized Resources
5. Transportation
6. Inventory
7. Motion
8. Excess Processing

It should be noted that the non-utilization of resources was not part of the original Lean Manufacturing concepts that were formulated based on Toyota Production Systems value chain thinking (Sutherland and Bennett, 2007). However, as the ways of working emerged shifting the focus towards value creation applicable from all levels of the organizational hierarchy such as the open systems thinking (Scott, 1981), non-utilization of resources was added as the eight types of waste! In my opinion, this is applicable in any industry as resources can be both human resources (people's time, skills, talent, experience, competency, etc.) but also non-human resources (facilities, equipment, materials, infrastructure, supplies, etc.)

Often, these eight principles are considered an academic exercise and practitioners have lost connection with these principles. Unless these principles are related in terms of the management language, money, these principles don’t gain the limelight. In this blog article, I would like to synthesize some of these principles in terms of two types of costs as follows that relate to the cost of poor quality. When these two costs are not managed appropriately, it is management debt to the project.

Cost of non-delivery

This principle refers to the “…measure of the costs associated with preventing, testing for, or correcting defective items,” according to Carr (1992, p. 72). The cost of poor quality comes from both the internal and external failure costs where poor-quality costs are associated with rework, redesign, retesting, failure in or shortage of specifications in requirements, bugs arising from poor development practices or myopic understanding of or inaccuracies in requirements or design, or unplanned delays in monitoring the dependencies. All these relate to elements mentioned in the DOWNTIME factors and could lead delivered work that is still not production ready unacceptable for customers. Say, if any of the above factors contributed to a schedule slip of 10% on a project that cost $100,000. At a minimum level, this slip means $10,000 (10% of $100,000) is now an additional cost to the project that could have been effectively controlled.

Cost of non-conformance

Non-conformance means the rules of engagement for a specific development or management methodology are not completely adhered to. For example, not following the integrated change control mechanism to use a tool that is not approved by the organizational policies, not adequately preparing for the specific meetings increasing the cost of a meeting, taking missteps that lead to the escaped defects increasing customer’s bad will, or over-engineering a feature beyond the fitness for use. When these things happen, it often involves more time spent in corrective actions introducing increased testing, executing recalls and incurring expenses on the performing company’s time and money, or attempts at various levels to restore customer satisfaction. The cost of non-conformance retraces its roots to the cost of quality examples on lack of adherence to existing policies.

Summary

Therefore, middle management focusing on delivering products or projects, whether they operate through traditional or agile approaches, should evaluate the cost of non-delivery and cost of non-conformance to ensure that all these waste producing efforts are eliminated. Management is obligated to monitor these patterns that lead to the management debt like the technical debt. Only when this management debt is controlled, does the concept of efficiency grow with the seeds of cost of good quality. 

References

Arnheiter, E.D. and Maleyeff, J. (2005) ‘The integration of lean management and Six Sigma’, The TQM Magazine, 17(1), pp. 5–18. 

Carr, L. P. (1992, Summer). Applying cost of quality to a service business. Sloan Management Review, 33(4), 72.

Scott, R.W. (1981). Organizations: Rational, Natural, and Open Systems. Englewood Cliffs, New Jersey: Prentice Hall.

Sutherland, J., & Bennett, B. (2007). The seven deadly wastes of logistics: applying Toyota Production System principles to create logistics value. White paper, 701, 40-50.