Right Focus 06.24.19 // Michael Canic

The Cost of Quality: The 1-10-100 Rule

Early in my career, I was trained in the field of service quality. One concept that has always stuck with me is “The 1-10-100 Rule.”

The 1-10-100 Rule is related to what’s called “the cost of quality.” Essentially, the rule states that prevention is less costly than correction is less costly than failure. It makes more sense to invest $1 in prevention, than to spend $10 on correction. That in turn makes more sense than to incur the cost of a $100 failure.

The cost of prevention is what it takes to get things right on the front end. Such as taking the time to design good processes or providing employees with skills training.

The cost of correction is the cost of fixing things once a problem has been detected. Poorly designed processes may result in products with high defect rates. Poorly trained employees may make an excessive number of errors. In each case, there is a significant cost of having to fix or rework.

Finally, the cost of failure is the resulting downstream cost if a problem isn’t fixed. This cost is often much greater than we realize. If a poor product gets to the customer, then, yes, the customer is likely to be dissatisfied. But worse, it may cause them to never buy that product again, never buy your brand again, tell others about how poor your product is, and post negative comments about you on social media. If a poorly trained employee similarly upsets a customer because they lack the skills to effectively handle a complaint, the outcome may be the same.

It’s tempting to put off prevention because there’s a natural disincentive of having to invest time, money and effort now to avoid something that may or may not go wrong in the future. Yet when it does …

Rationale questions to ask yourself: How could things go wrong, how are things going wrong? What is the cost and likelihood of things going wrong? What is the investment required to prevent things from going wrong?

Then decide. Just don’t forget the 1-10-100 Rule.

Make it happen.

Michael

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