Control financiero y calidad

ECONOMIC CASE FOR QUALITY

Financial Control And Quality
by William Stimson and Tom Dlugopolski

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ver the years there have been many quality strategies, but Six Sigma has gotten the most attention from top management. ASQ has examined the Six Sigma phenomenon and understands that Six Sigma’s success is based on its attention to the corporate bottom line. As a result, ASQ has undertaken amajor program, “The Economic Case for Quality.”1 The case should be easy to make. Quality brings a distinct financial advantage to those who practice it diligently as opposed to those who don’t.2 However, we believe the case for quality is not at all obvious to the top floor. Regardless, top man-

In 50 Words Or Less
• There are two aspects in measuring financial control: materiality andliability. • Every CEO can understand the financial measures of quality in terms of the strategic goals of the company. • Knowing the true costs of quality enables effective management reviews and helps identify anomalies, causes and trends.

agement must be aware of and control its corporation’s finances to comply with the Sarbanes-Oxley Act (SOX). There are two aspects to measuring financialcontrol: materiality and liability. When quality is expressed in these terms, its value should be clear to executive management. The goal of this article is to measure the cost of quality in materiality and liability because they are critical financial measures for any company.

Rationale for Financial Metrics
In the era of mass production, many companies can no longer ensure the quality of theirproducts. In-stead, producer and consumer risks are accepted and product or service quality becomes problematic. Top management determines an acceptable level of a producer’s risk. Through warranty or marketing ploys, management compensates for that increased consumer risk. Why would

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top management choose to accept poor quality if this option was really pooreconomic strategy? In reality, the cost of quality is expressed by a large variety of metrics, many of which are obscure to many top executives. There are financial measures of quality in terms that every CEO and CFO can understand, relating to the company’s strategic goals. Moreover, the measures can help ensure compliance with SOX. The time is ripe for quality to reassert its importance by fusingwith finance to show management that quality, too, is a strategic choice. Reporting the cost of quality in terms of materiality attracts the attention of management because these are the metrics taught in business schools. Moreover, materiality reveals the true weight of quality on operations. Two aspects pertain to the cost of quality: the cost of conformance and the cost of nonconformance. Theformer is the cost required to make things right the first time, from competent management and operators to top-of-the-line equipment. Knowing the true costs of quality enables effective

management reviews and helps identify anomalies, causes and trends. Expressed as strategic goals of the company, quality shows top management it is not a pie-inthe-sky luxury, but is the critical appraisal of howwell the company does what it does. If you can tie quality to market value, then SOX becomes the best ally that quality ever had.

Sarbanes-Oxley Act
SOX is divided into 11 titles that mandate strict requirements for the financial accounting of public companies.3 Only two are needed to develop a rationale for financial metrics in quality: Title III— corporate responsibility and TitleIV—enhanced financial disclosures. Title III—corporate responsibility: Section 302 requires the CEO and CFO of every company filing periodic financial reports under the Securities Exchange Act of 1934 to certify the reports are true and that they represent the company’s true financial condition and the results of its operations. This protects the investor. It concerns quality professionals because if the...