Curt Fowler

Time is money. True, but not as important as the following.

Time is life and time is a finite resource. We are only given 1,440 minutes a day. We only get to spend each minute one time. While we can earn more money, we can never get a day, minute or second back. A moment spent it is gone forever.

What does this have to do with rework? First, what is rework? Rework is also referred to as waste – which is a more fitting term. Rework is when something is done incorrectly and must be done again. Messing stuff up is a part of learning if you are doing something for the first time.

Waste is when you make a mistake that didn’t have to happen. For instance, if someone else has done that task perfectly in the past, did they leave instructions on how to do it right? If they did and you or I did not follow those instructions, that is waste. The mistake wasted time, money and precious minutes off someone’s life. That is waste.

Before we can make the decision to spend time on fixing anything, we must understand what the benefit will be of the fix. If there is no benefit, why bother?

It is estimated that the average company spends 20-40 percent of their sales on the costs of quality. That tells me there is a great return on investment if we can improve quality by reducing waste.

There are many costs associated with waste. There are many benefits associated with quality. I define quality as lack of waste or doing it right the first time.

Intrinsic Benefits of Quality

• Pride – We love being a part of a winning team. Winners produce great stuff and have fun doing it. Think Chick-fil-A in the fast food world or Southwest Airlines.

• Family & Community – Research shows that having a good job is the number one determinant of happiness. If we leave work happy, we are better for the people we love outside of work. That is priceless.

• Culture – Culture tells us how we should act and what we should do. A quality culture attracts the right people and repels the rest. A quality culture imbeds the imperative to do things right the first time.

• Turnover – Both of the above lead to lower turnover. Lower turnover saves money on training and hiring. A great team delivers fantastic customer service.

Internal Costs of

Rework

• Opportunity Cost – Where could I have spent the time and money I wasted doing something wrong? I could have spent that time with family and friends or volunteering in the community. I could have sold another widget or solved another problem.

• Time – Work that is done incorrectly must be done again. That requires two times the effort to produce the product or service if we get it right the second time. Don’t forget the cost of reviewing the product twice.

• Overhead & Burden – Never calculate the cost of time without considering the costs that don’t show up in a paycheck. Insurance, benefits, training, lights and utilities are real costs.

• Physical Costs – Did the error require you to scrap materials or print things two times?

External Costs of Rework

When bad work gets out the door, the costs become greater.

    

•Lost Customers – You lost the profit associated with the customer and must spend the money to replace that customer. How much does it cost to acquire a new customer?

•Fewer Referrals – Referrals are the best way to get new customers. Referrals are low cost. Low quality will reduce the number of times a customer refers you to their friends and family. Fewer referrals increases your cost of customer acquisition. Higher customer acquisition costs increases the cost of a lost customer. It is a vicious cycle!

• Reputation Damage – Reputation damage used to occur by word of mouth. Now our customers will post about their experiences on the web for everyone to see. A lesser reputation makes it harder to acquire customers and more difficult to get good people to work for you.

There is much to gain by doing things right the first time. We’ll dive into ways to do more things right the first time in future articles.

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Curt Fowler is President of Fowler & Company (http://valuesdrivenresults.com/) and Director at Fowler, Holley, Rambo & Stalvey (http://valdostacpa.com/). He is dedicated to helping leaders create and achieve a compelling vision for their organizations.