In my experience, most people don’t really understand how to track quality in a performance management system.
Over the years, I’ve seen the strategic objectives and KPIs for dozens of organizations; large and small, commercial and public sector, US and International. I’ve previously claimed customer satisfaction is one of the most used – and least understood – measures. Despite the popularity of Six Sigma and Total Quality Management programs, another area that is not well understood is quality.
Most of us might instinctively want to measure quality using defect rates. However, defect rates only refer to conformance to specification, not to overall quality. Twenty years ago, Garvin established there are eight dimensions of product quality: conformance to spec, completeness of features, reliability, durability, serviceability, aesthetics, perception, and performance. (For those of you that sell services instead of products, there are five dimensions of service quality: responsiveness, reliability, assurance, empathy, and tangibles.)
From the customer perspective, a product with a zero defect rate (i.e. conforms to spec in every way) and a low completeness of features (i.e. is not fit for the purpose for which it was sold) is not likely to be considered high quality. In addition, it is important to distinguish between mistakes, which are largely an inevitable by-product of production, and defects, which result when a mistake reaches a customer. Quality processes are designed to ensure mistakes are detected internally before they are delivered to the customer and become defects.
Given this distinction between “completeness of features”, “mistake-free processes,” and “conformance to spec,” a quality objective should have at least measures:
- % of products/services that are fit for purpose
- % of products/services that are completed without mistakes
- % of products/services that are delivered to customers without defects
These measures should be adapted to the particular circumstances of an organization. For example, software companies often substitute “% of customers that experience priority one defects” as a way of capturing the industry practice of identifying and proactively patching defects before they are widely experienced by customers. Likewise, consumer packaged goods (CPG) orgs should add measures that capture other dimensions of product quality: durability, serviceability, and perception.
Having the appropriate objectives and measures is just one part of understanding quality in a performance management system. If you assign harsh penalties for mistakes or fail to reward discovering defects before they reach customers, employees are unlikely to report them or fix them. However, mistakes and defects will eventually be caught, leading to both lower customer satisfaction and higher costs to repair.
This is the inevitable tension when it comes to understanding quality. A true balanced approach considers not just the process and financial impact, but also the employee and customer perspective. That’s the secret in understanding quality in a performance management system