Recently I walked headlong into a conversation on quality costs, or the cost of poor quality (COPQ), or the cost of quality, or some other term I’ve forgotten from that discussion. I realized that this area is very well-developed in the world of quality, but perhaps not fully understood by professionals outside of the quality department. Perhaps this is due to “finance for managers” classes clouding the issue. Or perhaps it is genuinely not understood by management.

I believe that any manager should have a basic understanding of finance and accounting. Most companies, for-profit or not, need to have leadership that can appreciate which way money flows, and what are the costs in the business. Part of this involves thinking about the causes of your quality costs.

In my career, the cost of quality is usually a divisive topic, mainly due to a lack of a clear explanation as to what it is. There are two distinct camps: the group that believes quality costs are costs that go into creating quality in the business, and the other group that believes that quality costs are costs resulting from not achieving quality.

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