Page 398 - The Handbook for Quality Management a Complete Guide to Operational Excellence

384 M a n a g e m e n t o f H u m a n R e s o u r c e s R e s o u r c e R e q u i r e m e n t s t o M a n a g e t h e Q u a l i t y F u n c t i o n 385

allocation for prevent ing these costs is small relative to total quality costs,
management can see for themselves the potential impact of spending in
the area of quality cost reduc tion. Likewise, if external failure costs are
high relative to appraisal costs, addi tional appraisal expenditures may
be justified.
A shortcoming of using quality costs to determine resource require-
ments for the quality function is that the highest costs are difficult to
determine with a high degree of accuracy. What is the cost of someone not
buying your product? As difficult as it is to measure the value of keeping
an existing customer, it is more difficult to know when a prospective cus-
tomer didn’t con sider your product because of a poor reputation for qual-
ity. It is also hard to estimate the cost of future failures with new products
or processes. For exam ple, a company decided to begin manufacturing
their own gear boxes. The quality department’s request for an expensive
gear-checker was turned down because they couldn’t precisely quantify
the benefit of the equipment (the cost was easy to determine, $50,000).
Two years later a field problem with the gears lead to a $1.5 million field
repair program. Afterwards, the purchase of the gear-checker was quickly
approved.
Another problem with quality costs is that they measure negatives,
rather than the lack of positives. Quality is not only the absence of nega-
tives (e.g., defects); it is the presence of desirable features. Quality costs
measure only the cost of the former. While techniques exist for estimating
the cost of lost busi ness due to a lack of desirable features, they are not as
well defined or standardized as quality costs. Thus, it is difficult to make
a general statement regarding their use in securing resources for the
quality function.

Performance Evaluation

Few subjects raise so much ire as performance appraisals. There are strong
feelings on both sides of the issue. We will discuss the traditional employee
appraisal process, some criticisms of the approach, and some alternatives.

Traditional Performance Appraisals
Performance appraisal systems typically include:

• Standards of performance. The standards are usually both qualitative
and quantitative. Both the supervisor and the employee must know
what the stan dards are and, usually, both agree to the standards in
advance. Often both employ ees and supervisors work together to
develop the performance standards.
• Evaluation period. Usually the evaluation period corresponds to the
budget cycle, that is, 1 year. This is because performance appraisals

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