How to Find an Extra 15 Percent in Your Budget

When the economy is good and the money is flowing, people lose sight of how they make use of the resources available. I have seen management in some companies throw huge amounts of money at software quality problems with little to show for it and no accountability for the bad decisions. I hear things like, "We have lots of money, so who cares?"

Now, however, when budgets are being slashed and people are being laid off, there is more focus on how the get the most value from the fewest resources.

Fortunately, there are ways to find that extra in your budget. Here's how, using the teachings of W. Edwards Deming.

First, consider that everything your company produces has a "cost of quality" (COQ) associated with it. This COQ is comprised of:

• The cost of preventing problems
• The cost of finding problems
• The cost of fixing problems

For most companies, the cost of software quality (SCOQ) is between 20 and 40 percent. However, many companies don't even measure these costs.

(By the way, in the SCOQ, there are additional costs not seen in the manufacturing environment. To read more about that, click here.)

There is no "right" or "wrong" SCOQ percentage. What's important is to establish a baseline and improve from there.

An Example

Let's say that in your software projects, you start to measure the SCOQ. You determine that on average:

• The cost of preventing problems = 15% of the total project costs
• The cost of finding problems = 20% of the total project costs
• The cost of fixing problems = 20% of the total project costs

Your SCOQ would be 45%.

Now, let's say that you are working on a project with a budget of $500,000.

If you could improve your testing process to do less testing and find more defects, you could perhaps reduce the cost of finding problems by 5%, or spend 15% of the total project costs on testing. (In most cases, I can save 10% or more).

If you could revisit your prevention methods and save 5%, or spend 10% of the total project costs on prevention (but prevent more problems), that would help the testing effort and lower the rework costs.

If you could find better and faster ways to fix problems (plus have fewer problems to fix in the first place), you could save another %5 or more on rework, or spend 15% of the total project costs on prevention.

Add all this together and you have reduced your cost of quality by 15% and now your SCOQ would be 30%.

What Would You Do With an Extra 15%?

This is all budget and resources that you have now "found" at no direct cost, except for the labor of improvement. That's what Phillip Crosby wrote about in the 80's in his book "Quality is Free." Quality more than pays for itself.

In our example, we have found $75,000. With this additional money you could perhaps avoid laying off someone, you could buy some tools to do the job of testing even faster and better, etc. There's no limit as to what you could do with the savings.

What's Needed

You could probably identity several areas of improvement that are needed right now. Perhaps you have been suggesting them for years, but to no avail. Management doesn't doesn't seem to care.

Well, here's your business case.

You also need someone to 1) make the message without worrying about getting fired and 2) know where to make improvements.

That's where I come in. My solution is not to have another training course. Instead, have me come in, perform an assessment, and propose recommendations and a plan going forward. Then, I can help you work the plan, if desired.

The only thing is that every day you wait is one more day of needless expense accruing. I think you have much better things to do with your time and money.

More Help?

If you would like me to work directly with you and your teams, contact me. I'll be happy to learn more about your needs and propose ways I can work just with you and your team on an ongoing basis.