The cost of poor quality of data – how much does it cost your business?

Faced with a tough downturn, the oil and gas industry has been working harder than ever to find smarter ways to do business.  Collaboration and a focus on continuous improvement has seen a positive impact in a number of companies.  Having worked for oil and gas operators and directly with oil service companies for over 20 years, and as a true Aberdonian, I think some might say that the penny has finally dropped in our industry.

However despite this positivity, there are still gremlins out there around data capture and data usage that are genuine basics that often appear to be neglected and are costing companies significant amounts of money.  The key challenge is that for many this cost remains unquantified and therefore is not a consideration for many companies.

The cost of poor quality or poor quality costs, are costs that would disappear if systems, processes, and products were perfect. COPQ was popularized by IBM quality expert H. James Harrington in his 1987 book Poor Quality Costs. COPQ is a refinement of the concept of quality costs. In the 1960s, IBM undertook an effort to study its own quality costs and tailored the concept for its own use. While Feigenbaum, being one of the greatest contributors to the development of the term total quality management.  His term “quality costs” is technically accurate, it’s easy for the uninitiated to jump to the conclusion that better quality products cost more to produce. Harrington adopted the name “poor quality costs” to emphasize the belief that investment in detection and prevention of product and process failures is more than offset by the savings in reductions in product and process failures.

FRESH EYES

A great place to start when trying to quantify this cost is believe it or not, right at the beginning!  Using a fresh eyes approach with a degree of independence can uncover significant issues, costs and opportunities.  Carrying out an end-to-end walk through of each key process from start to finish with key individuals, with their combined agenda to improve together can often deliver significant results.

A simple example is time sheet information being captured on paper which in most cases results in poorly managed project data, manual intervention, duplication of effort, time consuming and ultimately is just one of those areas in the “too difficult” box.  Once the time and resource being expended on tasks is quantified in monetary terms, the investment to change, utilise technology and to automate is almost always a positive return on the business if implemented correctly.  There is also the identification of spin-off projects that if addressed can have wider positive implications.  An example being to move away from spreadsheet based reporting to more dynamic dashboards providing real time business focussed analytics and insights.

It’s worth highlighting that one aspect of Poor Quality is inconsistency.  Sometimes the easiest route to a solution is to standardise processes within an organisation, by agreeing a “best practice” approach that can be adopted by multiple departments and teams.

Whilst the perfect solution does not actually exist, it’s the identification and understanding that at least something can be done with some quick wins first to build momentum and support towards the tougher things to change.

MAKE CHANGE HAPPEN

Investment in technology is only one part of the step change, it’s actually being brave and actually making change happen that’s the difficult bit.  The existing challenges in the oil and gas sector dictate that a need for a continuous focus on improvement, smarter ways of working and being more efficient will be fundamental basics for survival.  It is however the basic processes that can uncover the highest value impact and can often be the employee oriented processes including payroll, auto enrolment, pensions and global employment taxes.

What would you give to free up resources to work on things that will truly add value to your business rather than continue with the grind and churn of a dated systems and process?  If nothing else, know the cost and the implications to your business by getting back to basics, review and improve all the time.

For more information please contact Gary Johnstone (gary.johnstone@aab.uk) or your usual AAB contact.

To find out more about Gary and the Payroll and Employment Taxes team, click here.