Next time you hear the usual suspects moaning about “audits and boxticking” and asking what difference quality management actually makes, hit them with this: it boosts British business as a whole by £86 billion a year.
That’s the figure produced by the independent Centre of Economics and Business Research (CEBR), set up by a former economic advisor to both the CBI and IBM. The CEBR was commissioned by the Chartered Quality Institute and Chartered Management Institute to put a financial value on quality management.
While a daunting undertaking, the project worked on a simple basis: CEBR staff questioned 120 organisations about what quality management projects they had put in place and what measurable financial benefits they had produced, then carried out 18 more in-depth case studies of specific businesses.
They then combined these results with data in publications by other firms and extrapolated it into national figures. As well as simply adding up the data from the three types of source, the researchers compared the results across the three to make sure the patterns were generally consistent.
All in all, CEBR estimates that quality management procedures boosted British output by a total of £86 billion last year. That’s equivalent to six percent of Britain’s total GDP. In other words, as rough as 2011 was for British business, it could have been unimaginably bad without widespread quality management.
The £86 billion figure is just one headline from the report, and the CEBR found evidence of a range of benefits: quality management didn’t just cut costs and boost revenues, but it also increased satisfaction among customers and employees. That last point may seem surprising, but it makes sense that workers will be happier when they don’t feel problems in “the system” mean their efforts are wasted.
The CEBR also looked at the economy-wide benefits in other ways. For example, it estimates that were there no quality management procedures in any British business, company performance would have been so inferior that employment would have been lower by the equivalent of 1.43 million fewer full-time workers. It might seem intuitive that good quality management means you can do the same work with less staff, but in reality if you are producing shoddy products or services, you’ll have far less demand and have to start wielding the axe.
The researchers even fired up their spreadsheets and figured out how the effects of quality management affected the tax take, looking at corporate taxes from greater profits, the VAT take from sales, and the payroll taxes from those additional staff. All in all, the CEBR estimates that the public purse was better off by a least £8.4 billion: a welcome boost in tough times.
There’s still a lot to do however. CEBR also looked at the “quality gap”: the lost potential of businesses that didn’t fully implement quality management procedures. It believes that if every firm had the best possible quality systems in place, it could boost the economy by £46 billion a year, create an extra 455,000 jobs, and increase tax revenues by £8 billion!
