[The following article appears in the July 1994 edition of
_TQM_in_Higher_Education_, pages 4 and 5.]

                 CALCULATING THE COST OF NONCONFORMANCE

     Ed. note: Not doing the right things right the first time
has a direct financial cost which often can be calculated
depending upon the complexity of the processes.

     Philip Crosby, in his book Quality Without Tears: The Art of
Hassle-Free Management, states that the cost of nonconformance
(CON) is the cost of not doing the right things right the first
time. The CON in service industries has been estimated to range
from 20% to 35% of budget. If you're not measuring what you're
doing, you not only don't know your CON, but you're also not
managing it properly.

     Most colleges and universities don't know the cost of
nonconformance of many routine services. For example, what's the
cost to your institution when:

     -- the grounds crew improperly lines the football field
     before a game?
     
     -- a faculty member incorrectly places one order for a
     required textbook?
     
     -- the purchasing department orders the wrong supplied for a
     faculty member?
     
     -- the physical plant improperly maintains one car in your
     fleet?
     
     -- the secretary blocked off the incorrect time for a speech
     by the president?
     
     -- the admissions staff complete the wrong form?
     
     Let's look at the cost of nonconformance when a single
student application is improperly handled and the job must be
redone. During the final phase of the admissions process, an
admissions officer is expected to correctly process 18 completed
applications, which each routinely take 11 minutes to examine.

     Let's assume that one of the 18 isn't processed correctly.
Looking at this from a positive viewpoint, 17 of the 18
applications were properly processed, resulting in a 94.5% "good
quality" rating. While that sounds good, let's look at the single
error having an error rate of 5.5%.

     This error rate doesn't show the dissatisfaction of the
customers--which may include the student, the student's parents,
and others. Actually, the cost of "fixing" may be five to ten
times as large as the error rate. It may require up to 10 times
the amount of resources to deal with the error as it does to do
the right job right the first time.

     Since the error rate is 5.5%, the total cost of
nonconformance is calculated as follows:

     -- 17 "good products" x 11 minutes per product = 187
     minutes
     
     -- 1 "defective product" x 11 minutes to redo the product
     plus 35 minutes to catch and repair the error and to deal
     with its impact on other operations. 
     
     (For example, we assumed it took a computer entry technician
10 minutes to identify the error and three minutes to report it
to the appropriate manager. We also assumed it took the manager
10 minutes to track down the admissions officer to have the
application redone. Other times included the additional handling
by other personnel.) Therefore: 1 x (11 + 35) = 46 minutes.

     -- total cost to process 18 good applications: 187 minutes +
     46 minutes = 233 minutes
     
     -- percent of resources spent producing the "good product:"
     198 (total minutes required if the job was done right the
     first time) + 233 minutes (total minutes required with one
     defective application) = 85%
     
     -- the cost of nonconformance for fixing (rework) the one
     error (5.5% error rate) is 15%.
     
WHEN LEADERSHIP IS LACKING 

     The following example actually occurred at a university. At
the beginning of monthly meetings between management (eight
individuals) and union representatives (eight individuals), it
was customary to determine the time and day for the next meeting.
The following is an actual scenario from one meeting: 

Union: Let's set a time for the next meeting. 

Management: Good idea. 

Union: At that meeting we'd like to discuss why management
canceled the previous meeting without notifying us. 

Management: Why? I thought you were submitting a grievance
regarding that event. 

Union: We are. 

Management But we aren't permitted to discuss grievances at the
local level, therefore, we can't discuss this matter with you. 

Union: Before this becomes a grievance, isn't it advisable to
discuss this issue? 

Management: Yes. But we can't negotiate. 

Union: Aren't we supposed to implement the contract at these
meetings? 

Management: Yes. 

Union: But grievances are the direct result of the contract not
being implemented.

     This posturing continued for 35 minutes. Eventually the
parties established a meeting time and date. The rest of that and
future meetings were just as productive.

     The cost to the taxpayers for such meetings is tremendous.
There's no way to determine the actual cost of nonconformance and
the affect such relationships are having on the effective
delivery of instruction. 

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