I have been trying to have the same conversation with executive teams for twenty years. It is the conversation about the cost of quality — specifically, the cost of poor quality. And in twenty years, I can count on one hand the number of executives who were genuinely willing to have it.
The conversation is not complicated. It goes like this: "Here is what quality failures are actually costing us. The number is bigger than you think. If we invest a fraction of that amount in prevention, the total cost goes down." Simple. Clear. Financially irrefutable. And almost universally rejected.
Why executives refuse the conversation
The refusal is not because they do not understand the math. The math is simple. The refusal is because the cost of poor quality is invisible on the P&L. It is buried in line items that do not say "quality failure" — scrap, rework, warranty, expedited freight, customer service, inventory write-offs, capacity loss, engineering time spent on firefighting instead of improvement. These costs are real, and they are enormous, but they do not appear in a line called "cost of poor quality." They are scattered across the organisation like shrapnel, and nobody adds them up.
When I do add them up — and I have, in every company I have worked for — the number is always between 5 and 15 percent of revenue. Always. In companies that believe their quality is good. In companies that are certified, audited, and confident. The cost of poor quality is 5 to 15 percent of revenue, and it is hiding in plain sight.
The cost of good quality — prevention, appraisal, training — is visible and controlled. The cost of poor quality is invisible and uncontrolled. This is exactly backwards.
The numbers I presented
At one company, I built the cost-of-quality model over three months. I worked with finance to categorise every cost that was attributable to quality failure — directly or indirectly. The categories were:
Internal failure: Scrap, rework, re-inspection, re-test, redesign, machine downtime due to quality issues, engineering time on nonconformance investigation.
External failure: Warranty claims, customer returns, field service, product recall, customer credits, lost business due to quality reputation damage.
Appraisal: Inspection, testing, calibration, audit, supplier surveillance — the cost of detecting defects.
Prevention: Training, quality planning, process improvement, supplier development — the cost of preventing defects.
The totals for one year: Internal failure €4.2 million. External failure €1.8 million. Appraisal €1.1 million. Prevention €0.6 million. Total cost of quality: €7.7 million on revenue of €68 million — 11.3 percent of revenue.
The ratio told the real story: for every euro spent on prevention, the company spent €10 on failure. The P&L showed a healthy profit margin. The cost-of-quality model showed that the company was bleeding €6 million a year through quality failures that could be reduced by shifting investment from failure to prevention.
The reaction
The CFO studied the model for ten minutes. Then he said: "These numbers include costs that would exist regardless of quality. Machine downtime is an operational cost. Engineering time is a fixed cost. You cannot attribute all of it to quality."
He was partly right — and this is the defence every executive uses. Not all downtime is quality-related. Not all engineering time is firefighting. But I had been conservative. I had attributed only the costs that were directly traceable to quality events. The actual number was probably higher.
The COO said: "We cannot reduce the failure costs without spending more on prevention, and the prevention budget is already approved. You are asking for additional investment with an uncertain return."
The CEO said: "I hear you, but we need to focus on growth right now. Quality is under control. Let us revisit this next year."
Next year came. The cost of poor quality had increased to €7.1 million (I tracked it quarterly). We revisited the conversation. The response was the same.
The conversation that finally worked
The breakthrough came not through data but through crisis. A major customer issued a special status — effectively a probation — due to quality escapes. The commercial impact was immediate and visible: €3.2 million in at-risk business. Suddenly, the cost-of-quality conversation was not theoretical. It was urgent.
I presented the same model, updated. This time, the executive team listened. The CEO asked: "If we invest €800,000 in prevention — training, equipment, supplier development — what is the expected reduction in failure costs?" I gave him the projection based on benchmark data: €2.5 to €3.5 million reduction within twelve months. He approved the investment.
The results, measured after twelve months: internal failure costs dropped from €4.2 million to €2.6 million. External failure costs dropped from €1.8 million to €0.9 million. Prevention costs rose from €0.6 million to €1.4 million. Net savings: €1.7 million. The customer removed the special status after nine months. The investment paid for itself in seven.
What I learned
Executives do not refuse the cost-of-quality conversation because they are irresponsible. They refuse because the data is invisible, the timing is never convenient, and the investment requires faith in a return that is counter-intuitive — spend more on quality to reduce total cost. The conversation only works when the data is undeniable, the timing is aligned with a burning platform, and the proposal is framed as a business investment with a measurable return.
My advice to quality leaders: build the model anyway. Present it every year. Even if nobody listens the first time, or the second, or the fifth. Because eventually, the crisis will come, and you will be the only person in the room who already knows the number and the solution. That is when the conversation happens. Be ready for it.
