1. Scott D. Siders Director of Quality Assurance PDC Laboratories, Inc.
2018 NEMC Data Quality, Management & Review Session Integrating Data Review with Quality System Elements to Lower the Cost of Poor Quality (CoPQ)
Scott D. Siders
Director of Quality Assurance
PDC Laboratories, Inc.

2. Presentation Objectives
Data Review and other Quality System Elements represent the Cost of Good Quality. When effective and fully integrated into laboratory.
How Cost of Poor Quality impacts on your laboratory and hurts the bottom-line.
The value of quality programs & initiatives through CoPQ.
2018 NEMC – Scott D. Siders

3. Non-conformance or “O’ Crap Moment” Dorothy Love – TNI Mentor Session
Failure to meet a customer requirement
Data Problem
Systematic Error
Investigations
Loss of Accreditation
Data Recalls
Revised Test Reports
Loss of Client
O’ Crap Moments. All labs have these!
2018 NEMC – Scott D. Siders

4. Non-Conforming Event Management
Purpose: Identify and characterize problems so investigations can be carried out, root causes identified, and improvement projects initiated, thus eliminating reoccurrence.
While considering the degree of risk
corrective or preventive actions
improvement
overall quality of services
2018 NEMC – Scott D. Siders

5. The Struggle is Real Many labs struggle with: Maintaining compliance
Enough resources
Production pressures
Addressing problems adequately
Justifying expending additional resources for FTEs and software for Quality
Effective CAPA
Adequate Data Review
Root Cause Analysis
Understanding need to invest in Quality
Perceived QA overkill
What I have seen in environmental testing labs over the years.
2018 NEMC – Scott D. Siders

6. Cost of Quality
2018 NEMC – Scott D. Siders

7. Cost of Quality = Cost of Good Quality + Cost of Poor Quality
Cost of Quality (CoQ)
Cost of Good Quality
Cost of Poor Quality
To use the American Society for Quality or ASQ definition, the cost of quality is a methodology that allows an organization to determine the extent to which its resources are used for activities that prevent poor quality, that appraise the quality of the organization’s products or services, and that result from internal and external failures.
The total cost of quality is equal to the cost of good quality plus the cost of poor quality.
The cost of good quality is also called the cost of conformance, while the cost of poor quality is sometimes referred to as the cost of non-conformance.
The Cost of Quality concept is definitely not new and has existed for at least 60 years.
2018 NEMC – Scott D. Siders

8. Cost of Good Quality Cost of Good Quality Prevention Costs
Appraisal Costs
The cost of good quality is comprised of prevention costs and appraisal costs.
2018 NEMC – Scott D. Siders

9. Cost of Good Quality APPRAISAL COSTS PREVENTION COSTS
Quality Planning
Training
Preventive maintenance
Design, Implement and Maintain an effective Quality Management System
Trend Analysis
Quality Improvement/Risk Reduction activities aka Preventive Action
Effective Change Management Process
Electronic Records and Control of Documents
Supplier Quality Program
APPRAISAL COSTS
Ongoing Analyst DOCs
Calibration checks (e.g., CCV)
Quality Control (e.g., LCS, Method Blank)
Proficiency Testing
Internal Audits
External Assessments
Data Review
Prevention costs are incurred to prevent or avoid quality problems. These costs are associated with the design, implementation, and maintenance of the quality management system. They could include things like:
•Quality planning
•Training
•Developing and maintaining your Quality Management System
•quality improvement projects
Appraisal costs are associated with measuring and monitoring activities related to quality. They could include:
Competency Assessments
Calibration
Quality Control
Proficiency Testing.
Quality audits, including internal audits performed by the laboratory as well as certification and accreditation inspections performed by external agencies.
2018 NEMC – Scott D. Siders

10. Internal Failure Costs External Failure Costs
Cost of Poor Quality
Cost of Poor Quality
Internal Failure Costs
External Failure Costs
Cost of Poor Quality is divided into internal and external failure costs.
2018 NEMC – Scott D. Siders

11. Cost of Poor Quality the “O’ Crap Moments” from TNI Mentor Session
INTERNAL FAILURE COSTS
Instrument Downtime
Inefficiencies
Data entry errors
Missing samples
Reruns
Reagents/Supplies
Instrument repair
Recollected samples
Correcting data errors
Systematic errors
Investigations
Root Cause Analysis
Corrective actions
Management time
Internal failure costs are incurred to remedy defects discovered before the product or service is delivered to the customer. They could include:
•Waste including time lost due to instrument downtime and inefficiencies.
•Rework or rectification including reruns, recovering missing specimens, recollecting specimens, correcting data entry errors and repairing equipment.
•Investigations and root cause analysis when there are failures
External failure costs are incurred to remedy defects discovered by customers.
They could include:
•Complaints including all work and costs associated with handling and servicing customers’ complaints
•Misdiagnoses and associated costs to the organization
•Harm to the patient
•Corrected reports
•Malpractice and other lawsuits
EXTERNAL FAILURE COSTS
Customer complaints
Losing clients
Wrong decisions made
Missed TAT
Harm to client’s project
Revised reports
Lost reputation
Harm to public
Lawsuits
2018 NEMC – Scott D. Siders

12. Cost of Poor Quality – Soft vs Hard Costs
Internal Failure Costs
External Failure Costs
Hard – Start here
Rework
Reagents/Supplies
Labor
Investigations
Management Time
What I call hard failure costs are those costs that my accountant would be interested in, those things that are wasted as a result of rework. This includes things like tech time and wasted reagents and supplies. These are obvious costs and easy to calculate.
We can also easily calculate the amount of time dedicated to investigations and management’s involvement in corrective actions, for example their time in writing and implementing new policies, processes and procedures. I suggest that you start with these cost accounting activities if you are not currently capturing CoPQ data. This is powerful information and information that your CFO or finance department would likely be very interested in.
I’ve worked for labs in the past that had significant rerun rates. In one instance, reruns had previously been considered just part of doing business, but when the actual rate and cost of poor quality associated with the astronomical rerun rates were calculated, everyone was very surprised.
The reruns accounted for 40% of the operating budget for that section. Improvement on this metric and the associated CoPQ meant a significant cost reduction in the form of supplies, reagents and labor. This is obviously an extreme case, but it really illustrates the point.
A soft internal failure cost would be a cost of poor quality for which it is not so easy to derive an actual cost for, but that we know has a negative impact on the financials of the organization.
An example of this would be low morale. Although we know low morale will have a negative effect on productivity and subsequently the financials of the organization, it is hard to measure the morale level and correlate it to any sort of a monetary loss.
For softer failure costs, I recommend estimating. You want to make sure that it is a conservative figure that key management can agree upon. This figure is really just a placeholder. We know that there is a financial impact, but we don’t know exactly what it is so we make a conservative estimate that everyone can agree on.
For example, you may estimate $250 for lost productivity for a department for low morale in response to a serious event. This is likely very low and obviously would depend on the size of the department, but we want it to be a believable number so that your management will buy in. It helps to record all of the factors that went in to making your estimate so that you can defend your estimate as a believable and conservative number if questioned when presenting your data.
Soft
Low Morale
Delay
2018 NEMC – Scott D. Siders

13. Internal Failure Costs External Failure Costs
Cost of Poor Quality
Cost of Poor Quality
Internal Failure Costs
External Failure Costs
External Failure costs can be either hard or soft. Sometimes it is easy to get detailed information on things like litigation and client attrition. Just as an example, a lab performing unethical practices on sample settled a lawsuit with DoJ. The settlement for this was in the millions.
We could count this once as an external failure cost for that particular event or we could divide the settlement costs for the last year by the number of switched specimens over the same period of time and include this figure as the external failure cost for each switched specimen moving forward. If you didn’t catch that calculation, we’ll go over it again in the next slide.
External failure costs, such as patient harm or litigation, likely will occur only rarely. But when they do occur, they are usually quite costly. Applying a failure cost to each failure with the potential to incur these failure costs helps the organization not to lose sight of the financial implications of this type of event.
Sometimes, however, it is not so easy to calculate these external failure costs. Things like reputational damage and patient harm can be difficult to attribute a cost to in the absence of hard data, however we can agree that these types of failures result in some sort of financial harm to the organization.
Some people do not agree with estimating these soft costs, but I believe that estimating for soft costs at least provides a placeholder to allow us to get closer to quantitating the actual cost of poor quality in our laboratories. The ultimate goal of course is to have reliable calculations for all components of a CoPQ calculation.
Soft or Hard
Complaints
Reputational Damage
Harm to Client
Litigation
Client Attrition
Estimate Soft Costs
2018 NEMC – Scott D. Siders

14. Tracking CoPQ: Internal Failures – Hard Costs
Considerations #
Units
Cost/Unit
Total
Wasted Analyst Time 2
Hours
$15.00
$30.00
Wasted Reagents 10 mL
$20.00
$200.00
SOP Revision 3
$70.00
$210.00
Management Time
$80.00
$240.00
Investigation 4
$50.00
Overtime
$45.00
Client Service Recovery
Rework -Failed Run
Runs
$100.00
Complaint Handling
.25
$3.75
$1,158.75
At PDC we will be exploring adding CoPQ as part of corrective and preventive action forms in our non-conforming event management, Listed some considerations and asked staff to make estimates.
They struggled with this and ultimately abandoned capturing it at all because they were so unsure of their estimates for each factor. They needed a more standardized way to calculate CoPQ that would give them more confidence in their calculations. So I developed a simple Excel based tool that can be used to calculate Cost of Poor Quality on an event by event basis that I call the COPQ Calculator. If you are planning on tracking CoPQ, I would suggest that you use something similar.
On this and the next slide you see a mock up of what you could include on a CoPQ worksheet. Listed at left are all of the categories of hard costs, the costs that the finance department in the business would be interested in. You then enter the number of hours, items or other units that might be applicable, the cost per unit, such as hourly wage or cost per vial of reagent and calculate a total.
All of the totals are then added to give you a total hard internal failure cost.
I need to warn you…some people get way too wrapped up trying to get these numbers to the penny. What is really important is that you have a close approximation. For example, you don’t have to represent the exact hourly wage of the tech that did the rework, a department average will definitely suffice.
It’s most important that you have close approximations for every event rather than getting bogged down in granularity and ultimately end up not capturing costs of poor quality for all of your events. You want management to agree that these numbers are being calculated conservatively and including the correct considerations.
You also need to ensure that you are only capturing the costs associated with any rework from not doing something right the first time. For instance, if you reran a test due to failed QC, you would only count the repeated run, not the first run. The repeated run represents the wasted time, supplies and labor.
Also, it is important to be careful not to count time or supplies multiple times in your calculations. For instance, on this slide, management time and investigation are both listed. If management is involved in the investigation, we need to be careful not to count their time in both lines. Try to design your CoPQ worksheet to avoid this false elevation in the calculation.
Internal Failures – Hard Costs
2018 NEMC – Scott D. Siders

15. Tracking CoPQ – Soft Costs via conservative estimates
External Failure – Soft Costs
Internal Failure – Soft Costs
Considerations
$ Estimate
Low Morale
$0.00
Lost Sales $
Equipment Downtime
Harm to Employees
Total
Considerations
$ Estimate
Reputational Damage
$250.00
Contractual Penalties $
Corrected Reports
$0.00
Harm to Clients
Total $
Here, on the CoPQ worksheet, we would do the exact same thing for softer costs, but here is where we would include the conservative estimates and creative calculations.
I’ll go through some examples of utilizing this type of tool later in this presentation.
2018 NEMC – Scott D. Siders

16. Cost Savings and/or Avoidance
Why does CoPQ matter? Why does an effective and fully integrated Quality Management System matter?
Non-Conforming Event
$$$ Lost
Corrective Action
$$$ Spent
Root Cause Eliminated
Cost Savings and/or Avoidance
$$$ Saved
So, why do we care about tracking failure costs?
>>
When we have a failure (also called a non-conforming event) we do a root cause analysis and come up with a corrective action.
This corrective action eliminates the root cause of the event. Capturing the CoPQ allows us to understand the cost avoidance and/or cost savings that can be realized by eliminating that root cause.
Showing management, executives or the C-suite cost avoidance and cost savings is a way that we can quantitate the value provided by the quality program. This is money that the lab would have lost had our quality efforts not intervened.
Demonstrating the benefit of a quality program in dollars is a way that you can speak the language of the people who hold the key to your lab getting the resources it needs for its quality initiatives.
2018 NEMC – Scott D. Siders

17. Quality as a Cost Center vs Cost Savings There is Value in the Cost of Quality, including Data Review VS
The goal of using CoPQ is to get the executives in your organization to see quality activities and initiatives as cost savings instead of how they have traditionally been seen, as necessary expenses, overhead, a cost center really, for regulatory compliance.
2018 NEMC – Scott D. Siders

18. Definitions
Return on Investment (ROI) The benefit (or return) of an investment is divided by the cost of the investment, and the result is expressed as a percentage or a ratio (Investopedia)
ROI = (Gain from Investment – Cost of Investment)
Cost of Investment
Cost Savings Actions that lower current spending, investment or debt levels. They result in a tangible financial benefit.
Cost Avoidance Any action that avoids costs in the future. They represent potential increases in costs that are averted through specific preemptive actions.
You’ve heard me throwing around words like Return on Investment, Cost Avoidance and Cost Savings. In the interest of time, I’m not going to spend a lot of time on these definitions, but when we use these terms when communicating the value our quality efforts provide, we will need to use them correctly. Don’t use cost savings and cost avoidance interchangeably and make sure you understand what an ROI is.
2018 NEMC – Scott D. Siders

19. Reduce CoPQ = Maximize Profits
Charge
Actual Cost to Lab
CoPQ negatively impacts your bottom line and drives down profits!
Actual Cost of Testing (done right the first time)
CoPQ
Profit
Waste
Profit
Actual Cost of Testing (done right the first time)
Charge
Actual Cost to Lab
This diagram is used with permission from the Clinical and Laboratory Standards Institute. It comes from their special report on Understanding the Cost of Quality in the Laboratory and I think it is an effective way to demonstrate how CoPQ affects the bottom line.
On the diagram on the left, we have the actual cost of testing, if we do it right the first time, the CoPQ, which is just pure waste, and then a profit margin. The actual cost to the lab is the actual cost of testing done right the first time plus any CoPQ.
>>
On the right you can see that if we decrease or eliminate our CoPQ, the actual cost of testing done right the first time remains the same. The charge in most cases will remain the same. It’s the profit that increases. By decreasing our bottom line through CoPQ reduction, we increase our profit margins.
CoPQ negatively impacts your lab’s bottom line and drives down profits.
CLSI. Understanding the Cost of Quality in the Laboratory; A Report. CLSI document QMS20-R, PA: Clinical and Laboratory Standards Institute; 2014
2018 NEMC – Scott D. Siders

20. Focus on Prevention or Lower Risk
Eliminate problems proactively.
Don’t wait until there is a nonconformance, data is negatively impacted, money is lost or client complains or worse fires your laboratory.
Front line employees doing the work have knowledge about things that could go wrong. If you empower your employees to report those issues and management commits to correcting them, your lab will become much more proactive and your CoPQ will be much lower.
2018 NEMC – Scott D. Siders

21. Tip of the Iceberg
2018 NEMC – Scott D. Siders

22. Cost of Poor Quality Calculator
2018 NEMC – Scott D. Siders

23. Exercise: Calculating “Hard” Failure Costs
Obvious Costs: Labor, Reagent, Supplies & QC Materials
Example:
5 hours of analyst time wasted rerunning testing due to error or failed QC
5 x $24/hr
= $120 =
Hard internal failure cost
So this first example is just a warm up, the hard internal failure costs are often very obvious and very straight forward to calculate.
In this hypothetical example, we have 5 hours of tech time that was wasted rerunning testing due to QC failures.
So that’s 5 times $35 per hour for a total of $175 for this piece of a hard internal failure cost.
Not difficult to calculate.
2018 NEMC – Scott D. Siders

24. Exercise: Calculating “Hard” Failure Costs
Obvious Costs: Labor, Reagent, Supplies & QC Materials
Example:
1.5 vials QC material wasted due to errors or failed QC
1.5 x $100/vial
= $150 =
Hard internal failure cost
Okay, so here’s our next example for hard internal failure costs.
We have 1.5 vials of QC material that was wasted due to failed runs. So in order to calculate the CoPQ for the wasted QC materials, let’s multiply 1.5 times $100 per vial and that will give us $150 for this component of a CoPQ calculation
So, still not rocket science…
2018 NEMC – Scott D. Siders

25. Example
Failing Seals
In the extractions laboratory, there are seals that are prematurely failing on instruments.
This has led to considerable CoPQ: clean up from solvents spilling on the floor, rerunning testing and significant investigation time as the cause was not known initially.
Testing was delayed by a day or longer due to rerunning samples due to these failures. It was discovered that one of the solvents being utilized was recently changed and is no longer compatible with our seals. Corrective action included an investigation into a new solvent supplier.
So now lets work through an example, drawn from real life but with fake numbers.
There is a toxicology laboratory which has seals that are prematurely failing on instruments.
This has led to considerable CoPQ including clean up from solvents spilling on the floor, rerunning testing and significant R&D time as the cause was not known initially.
Testing was delayed by a day or longer in each instance because we reran specimens due to these failures.
It was discovered that one of the solvents being utilized was recently changed by the manufacturer and is no longer compatible with our instrument seals. Corrective action included an investigation into a new solvent supplier.
2018 NEMC – Scott D. Siders

26. Example: Failing Seals
Internal Failures – Hard Costs
Considerations #
Units
Cost/Unit
Total
Wasted Tech Time 20
Hours
$15.00
$300.00
Wasted Reagents 1
Gallons
$50.00
Spill Kit Supplies 4
Kits
$60.00
$240.00
Occupational Health Visit
Visit
$0.00
Management Time 12
$100.00 $
Investigation 10
$500.00
Overtime
$45.00
Client Education
Rework -Failed Run 9
Runs
$900.00
Complaint Handling 2
$30.00
$3,265.00
For this example, there were 20 hours of wasted technologist time in cleaning up the spills which is entered on the first line. 20 hours times $15 dollars per hour equals $300.
10 gallons of solvent was also wasted in the spills and is represented on the second line of the sheet which at $50/gallon is equal to a total of $500.
We also went through 4 spill kits at $60 each for a total of $240.
Luckily, there were no occupational health visits associated with these spills as no employees were injured, so that line is $0.
Management, a lab director in this instance, spent a significant amount of time working on this issue, so his 12 hours multiplied by $100/hour equals $1200.
An extensive investigation was carried out by R&D scientists as the cause of this issue was initially a mystery. Their 10 hours times $50/hr. equals $500.
No overtime or client education involved….
There were 9 failed runs at $100/run which totals $900.
Our clients were not too happy by the delays caused by this issue and over the course of the 2 months that this issue perpetuated, we had a total of about 2 hours of complaint handling that was taken care of by client services staff. So 2 hours x $15/hr. equals $30.
This adds up to a total internal failure hard cost of $3715.
2018 NEMC – Scott D. Siders

27. Example: Failing Seals
Internal Failure – Soft Costs
External Failure – Hard or Soft
Considerations
$ Estimate
Low Morale
$0.00
Lost Sales
Equipment Downtime $
Harm to Employees
Total
Considerations
$ Estimate
Reputational Damage
$750.00
Litigation/Malpractice
$0.00
Corrected Reports
Harm to Patients
Total
Next we look at the soft costs. In this example, we estimated $2500 as a very conservative figure for equipment downtime as the equipment was down for several days. This took significant resources to work through the backlog after the equipment was operational again. Be sure to count overtime as a hard cost and not in the soft costs. Make certain you’re not counting supplies, reagents, QC materials and overtime or regular labor twice anywhere on the worksheet.
Next, determine your external failure costs. In this example, I attributed $ to reputational damage. This could be just a conservative placeholder estimate because of the turnaround time delays and the subsequent complaints. We know this drawn out quality issue has had some effect on our reputation, but it is very hard to quantify.
You could have also had a provider get so mad about the delays that they started telling their colleagues not to use your lab. If one of these providers told your sales team that this is the reason they did not go with you, you could estimate the amount of business you anticipated you would have received from them for the next 6 months or year and enter that figure. This is much harder information to get but it makes your figures more reliable. Of course, you’ll want to include those notes with your CoPQ worksheet so you can answer any questions and defend your estimation.
Once you have included all of the CoPQ considerations that you feel were caused by this event, you can then total the hard costs and the soft costs and the total CoPQ. So for this example, the total hard costs were $3715 while the soft costs were $3250 which gives us a total CoPQ of $6965.
Total Hard Costs
$3,715.00
Total Soft Costs
$3,250.00
Total CoPQ
$6,965.00
2018 NEMC – Scott D. Siders

28. Articulating the Value of Quality Demonstrating Cost Saving and Cost Avoidance Example - Presenting the CoPQ Data
2016 CoPQ Data
Total Hard Costs
$120,000
Total Soft Costs
$230,000
Total CoPQ
$350,000
Once we have our CoPQ data for all of our events that are reported, we can use this data to demonstrate the value provided by our quality initiatives.
Here, we present a summary of the total hard and soft CoPQ for 2016 with a line graph representing the month to month CoPQ data. This particular graph is demonstrating a reduction in CoPQ month over month as a result of our non-conforming event management processes.
In the past as a conservative estimate for my presentations to executives, I have assumed that for all events for which the effectiveness check was successful and the root cause was successfully remediated, that our quality initiatives prevented that event from reoccurring just one time over the course of the next year. In this way we can demonstrate a cost savings and/or cost avoidance for the following year.
Anyone involved in event management knows that this estimate is very conservative as when events happen, many of them happen again and again until they are finally remediated. When you are talking about cost avoidance for the following year though, it is important though to exclude all CoPQ data for events for which the effectiveness checks failed and the root cause has yet to be effectively remediated. If the root cause hasn’t been eliminated yet, you won’t see cost avoidance for the that issue for the following year.
Instead of hard and soft costs, you may want to display internal and external failure costs, but I do think it is useful to separate out hard costs from soft costs for the benefit of any finance people who may not be able to buy in to estimates or softer calculations but will have a definite appreciation for cost accounting of wasted time, QC materials, reagents and supplies.
Think of who you are presenting to and what you think would be impactful and believable to that person or group of people.
2018 NEMC – Scott D. Siders

29. Example - Presenting the CoPQ Data
You can further demonstrate the value of your quality department and its efforts by creating some context. When you make a year over year graph of CoPQ data, it is not adjusted for any sort of uptick in business.
Here, the graph that was shown on the last slide also demonstrates that the total CoPQ for the lab decreased despite an significant increase in test volume.
2018 NEMC – Scott D. Siders

30. Example - Presenting the CoPQ Data
Likewise, this graph shows that the CoPQ decreased despite a significant increase in revenue over the 4 years.
2018 NEMC – Scott D. Siders

31. Example – Presenting the COPQ Data
COPQ (as % of static annual budget)
Here we have a graph demonstrating a decreasing COPQ as a percentage of a static annual budget. You can see that the COPQ used to comprise about 36% of the annual budget, but with our quality improvement efforts, we’ve seen a significant reduction in COPQ from year to year, ending at about 4% of our annual budget. This type of data will really help you make your case.
2018 NEMC – Scott D. Siders

32. Typical Relationship/Progression of CoPQ Important Diagram!
= Cost of Good Quality
= Cost of Poor Quality + $
External Failure
This is another diagram that you can use to demonstrate the typical progression that occurs as you improve quality in your organization. The x axis shows quality improving left to right. The y axis is dollars. Before you invest in quality through appraisal and prevention, costs of good quality, your cost of poor quality will be high. You can see this by combining the orange and green on the left of the graph.
As you invest in quality through prevention and appraisal moving right, you can see that your overall cost of quality decreases. It is a common view among management that higher quality means higher cost.
You can use this diagram to articulate why cutting resources to your quality program will likely not result in overall cost savings for the organization.
Internal Failure
Appraisal
Prevention
Quality Improvement
2018 NEMC – Scott D. Siders

33. Example - Demonstrating Return on Investment (ROI)
Cost of Good Quality
Cost of Poor Quality vs
Prevention Quality 2.0 FTEs = $150,000
Internal/External Failure Costs
~$350,000 for (very conservative estimate)
Here’s an example of what you might share with your corporate executives …..
If you have a quality manager and a specialist managing a quality program and doing root cause analyses and corrective actions on all of your lab’s non-conforming events with salaries totaling about $150,000
Say that the total Cost of Poor Quality for the events for 2016 for the 95% of events where the root cause was successfully eliminated was $350,000.
We confirmed root causes were eliminated by doing effectiveness checks after the corrective and preventive actions were implemented at intervals that made sense for each type of event.
We made the assumption that each event would not occur just one more time in the course of the following year because we successfully eliminated the root causes.
In this example, we would achieve a return on investment for the entire quality department in just 5 months in the following year based on a very conservative estimate just taking into consideration the successful remediation of the non-conforming events from the previous year.
This doesn’t count any of the other great stuff that quality professionals do such as overseeing the lab’s compliance activities every day so that the doors can stay open to care for patients.
Remember to have your more granular data handy when presenting summaries. At least initially, executives may want to review the data feeding into your CoPQ summaries to ensure that it is reliable and calculated in a reasonable manner. This is why it is critical to get buy in from your management before using an estimate for soft costs and when using those creative calculations.
What may be deemed reasonable for one lab may not be deemed reasonable for another. Some management may only be interested in seeing hard costs for which there is a verifiable calculation. Others may appreciate a reasonable estimate as a placeholder for those costs that are very difficult to calculate.
It may be helpful to sit with management and review how you are calculating CoPQ data initially to ensure that you will have buy in once the results are compiled and it is time to present.
ROI in 5 months for entire year FTE devoted to quality program just considering non-conforming events
2018 NEMC – Scott D. Siders

34. Summary: Cost of Quality Breakdown
Cost of Poor Quality
Internal Failure Costs
External Failure Costs
Cost of Good Quality
Prevention Costs
Appraisal Costs
Cost of Quality
Here is a breakdown of the Cost of Quality.
It might be helpful to start the conversation with your management with a slide like this so you can clearly communicate the concept.
2018 NEMC – Scott D. Siders

35. Keep These Thoughts
“If you don’t have the time to do it right, you must have the time to do it over.”
If you don’t have the time to do it right,
you must have the time to do it again,
then do an investigation,
a root cause analysis,
implement corrective action, and
follow-up with an effective check.
2018 NEMC – Scott D. Siders

36. Special thanks to Jennifer Dawson, MHA, FACHE, DLM
Thank You
QUESTIONS
Scott D. Siders
Special thanks to Jennifer Dawson, MHA, FACHE, DLM
2018 NEMC – Scott D. Siders