Success depends on knowing exactly what it costs your company every time mistakes are made. And if you aren’t measuring the cost of those mistakes, you can’t fix them. Even if you have a rough idea of what mistakes are actually costing the company, you are far more motivated to add
ress them. Profitable firms spend a great deal of money on mistakes; fixing them, trying to find them before they happen, avoiding them.
In our experience, we have learned that in a well-run firm, the cost of mistakes is often 5-10 percent of sales. This may sound incredible, but firms that are not dealing with mistakes can experience costs as high as 20 percent! Measuring these “quality costs” provides the best way to reduce expenses, guide multiple improvement programs, and engage employees.
Think about this: How would it change things for you to be able to see all three: prevention expenses, measurement expenses, and the costs of mistakes? What kind of behavior changes would occur? How could you take charge of change? Would it drive a culture shift at your firm?