How Quality Impacts Your Bottom Line
Test and Monitor | Posted April 11, 2013

In this guest post, Jamie Turner, CEO of 60SecondMarketer.com, talks about a number of businesses that have focused their attention on quality and provides metrics to show how beneficial this decision was for each company.

If you’re reading this, it’s probably because you’re interested in the concept of quality. In fact, quality control may be one of the more important aspects of your job. Whether you’re reviewing code documents or need to create automated functional tests, you recognize that when you focus your attention on quality, customer satisfaction increases.

But running tests to create high-quality products or services does more than just improve your customer satisfaction. It also has a direct impact on your bottom line. In fact, case study after case study shows a direct correlation between quality control programs and profits.

For example, Medrad, a medical imaging equipment manufacturer, experienced annual revenue growth of 15% for four years in a row after instituting a quality assurance program. And United Technologies trimmed almost $1 billion from annual procurement costs when it adopted a similar program.

Johnson Controls has had similar success when they focused their attention on quality. They found that a 1% increase in customer satisfaction equates to a $13 million positive impact on their bottom line. And Clarke American Checks did a survey of their employees that resulted in more than 20,000 ideas on how to improve quality at their company. What happened when they instituted the ideas? They had costs savings of almost $10 million and saw their market share increase by 50% over a five year period.

Creating a Connection Between Quality and Profits

Research into quality shows that, when executed properly, it can have a very real impact on sales, revenues and profitability.

Not long ago, a study conducted in Europe found that 65% of the 288 companies analyzed saw significant benefits from their focus on quality. They also learned that quality shouldn’t be relegated to one division or another. In other words, for a quality control program to have an impact on the bottom line, it has to be part of the corporate culture, not just a responsibility for one division or group within a company.

An important study by Hendricks and Singhal found that companies that win awards for quality outperform the control firms. The chart below indicates that operating income and sales for award-winning companies is more than double that of companies in the control group.

(For additional facts and figures like the ones below, be sure to check out our SlideShare deck at the end of this post.)

Quality Award Winners

A focus on quality also has an impact on the stock price of publicly held companies. The Baldrige Index is an index of publicly traded common stocks of Baldrige-winning companies. In the first nine years of the report, the index consistently out-performed the S&P 500 by significant margins. Another report, conducted by Robinson Capital Management, found that the quality-focused companies they studied saw a 26.97% return compared with a return of 17.59% for the S&P 500.

How All This Applies to You and Your Business

Not long ago, we posted a blog post called What is Quality to a QA Engineer In it, we provided several ways you can achieve quality within your own organization. The original blog post is worth reading, but we wanted to add to the list of suggestions. Here goes:

  1. Understand that a focus on quality can’t remain in a silo. Instead, it must become part of the entire corporate culture.
  2. Don’t expect results overnight. Quality is an ongoing effort and, like a marathon, needs to be executed one step at a time.
  3. Try to draw a clear correlation between your quality efforts and their impact on the bottom line. This requires setting up a clearly defined set of metrics and measuring your success against those metrics.

Putting Your Quality Control Program to Work

It’s easy to understand why quality is important. And it’s easy to talk about it with other members of your company. But it’s very hard to actually execute a program that is based on goals and metrics. That said, if you can take that last step – actually executing a quality program across every aspect of your company – you’ll see a direct impact on your bottom line.

The information below (which can also be viewed on our SlideShare page) provides a variety of data about quality and the impact it has had on companies like yours. Feel free to print it out and share it with members of your team. The more people who understand the connection between quality and profits, the more likely your company will support your quality efforts across the board.

 

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