Return on Quality (ROQ): Making Service Quality Financially Accountable

TLDR

Companies have been disappointed by the lack of tangible results from quality initiatives, and executives now question the financial benefits of quality, demanding managers justify improvement efforts with clear financial outcomes. The authors propose a return‑on‑quality framework that treats quality as an investment, requires financial accountability, recognizes the risk of over‑spending, and distinguishes between valid and invalid quality expenditures. They provide a managerial framework to guide quality improvement efforts. The framework delivers managerial relevance and financial accountability, making it an attractive tool for quality improvement.

Abstract

Many companies have been disappointed by a lack of results from their quality efforts. The financial benefits of quality, which had been assumed as a matter of faith in the "religion of quality," are now being seriously questioned by cost-cutting executives, who cite the highly publicized financial failures of some companies prominent in the quality movement. In this increasingly results-oriented environment, managers must now justify their quality improvement efforts financially. The authors present the "return on quality" approach, which is based on the assumptions that (1) quality is an investment, (2) quality efforts must be financially accountable, (3) it is possible to spend too much on quality, and (4) not all quality expenditures are equally valid. The authors then provide a managerial framework that can be used to guide quality improvement efforts. This framework has several attractive features, including ensured managerial relevance and financial accountability.