In most industries, quality has never mattered more. New technologies have empowered customers to seek out and compare an endless array of products from around the globe. Shoppers can click to find objective data compiled by experts at organizations such as Consumer Reports and J.D. Power and go online to read user-generated reviews at sites such as Amazon; together, these sources provide an early warning system that alerts the public to quality problems. And when customers are unhappy with a product or service, they can use social media to broadcast their displeasure. In surveys, 26% of consumers say they have used social media to air grievances about a company and its products. And this issue isn’t limited to the consumer space—75% of B2B customers say they rely on word of mouth, including social media, when making purchase decisions.
But just as companies’ margin for error has decreased, the likelihood of error has risen. In many industries, cycle times are compressing. During the recovery from the Great Recession, output gains have outpaced employment growth, and employees report straining to keep up with demands.
As a result of these pressures, managers must find a new approach to quality—one that moves beyond the traditional “total quality management” tools of the past quarter century. For two years CEB has conducted research exploring how companies can create a culture in which employees “live” quality in all their actions—where they are passionate about quality as a personal value rather than simply obeying an edict from on high. We define a “true culture of quality” as an environment in which employees not only follow quality guidelines but also consistently see others taking quality-focused actions, hear others talking about quality, and feel quality all around them.
We interviewed the quality function leaders at more than 60 multinational corporations, conducted an extensive review of academic and practitioner research, and surveyed more than 850 employees in a range of functions and industries and at all levels of seniority. Some of what we learned surprised us. Most notably, many of the traditional strategies used to increase quality—monetary incentives, training, and sharing of best practices, for instance—have little effect. Instead, we found, companies that take a grassroots, peer-driven approach develop a culture of quality, resulting in employees who make fewer mistakes—and the companies spend far less time and money correcting mistakes.
Going Beyond Rules
What embeds quality deep in a company’s culture? And how, precisely, does an organization benefit as a result? These questions were at the heart of our “culture of quality” survey.
A minority of the employees we surveyed believe their company has succeeded in making quality a core value: Roughly 60% said they work in an environment without a culture of quality, especially when it comes to having peers who go “above and beyond.” Such companies are missing out on significant benefits. Employees who ranked their company in the top quintile in terms of quality reported addressing 46% fewer mistakes in their daily work than employees in bottom-quintile companies. In our surveys, employees report that it takes two hours, on average, to correct a mistake. Assuming an hourly wage of $42.55 (the median for CEB client companies), a bottom-quintile firm with 26,300 employees (the median head count) spends nearly $774 million a year to resolve errors, many of them preventable—$350 million more than a top-quintile firm. Although figures will vary according to industry and company, here’s a broad rule of thumb: For every 5,000 employees, moving from the bottom to the top quintile would save a company $67 million annually.
We also studied quality-improvement actions in eight different categories and conducted regression analyses to understand the relationship between those actions and employees’ appraisals of how rigorously their company focuses on quality. We found little or no correlation between the use of standard tools and the achievement of a culture of quality. We are not suggesting that companies abandon those tools; however, they should use them to support rules-based quality measures, not as the underpinnings of a true culture of quality.
We pinpointed four factors that drive quality as a cultural value: leadership emphasis, message credibility, peer involvement, and employee ownership of quality issues. Our research indicates that companies could do much better with all four. Nearly half the employees surveyed reported insufficient leadership emphasis on quality, and only 10% found their company’s quality messages credible. Just 38% reported high levels of peer involvement, while 20% said that their company has created a sense of employee empowerment and ownership for quality outcomes.
