Fundamentals of Management, 8th ed

malcolm Baldrige

Award

Named after a

former secretary of

commerce, this

prestigious award is

given annually to

firms that achieve

major quality

improvements

474

Part 5: Controlling

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assumption is almost always wrong. If a firm installs a meaningful quality-enhancement

program, three things are likely to result. First, the number of defects is likely to

decrease, causing fewer returns from customers. Second, because the number of defects

goes down, resources (materials and people) dedicated to reworking flawed output will

be decreased. Third, because making employees responsible for quality reduces the need

for quality inspectors, the organization is able to produce more units with fewer

resources.

Costs

Improved quality also lowers costs. Poor quality results in higher returns from

customers, high warranty costs, and lawsuits from customers injured by faulty products.

Future sales are lost because of disgruntled customers. An organization with quality

problems often has to increase inspection expenses just to catch defective products. We

noted in Chapter 14, for example, how at one point Whistler Corporation was using

40 percent of its workforce just to fix poorly assembled radar detectors made by the

other 60 percent.

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