Principles of evaluating quality investments

Abstract

Quality departments often experience difficulties selling the idea that first priority should be given to quality improvement. Most approaches to project budgeting favour traditional investments such as new product development, which are perceived as potential profit boosters. To compete with such investments, a clear economic logic is needed, which stresses the long-term benefits of better quality. The aim of this paper, therefore, is to provide a concise framework of how to think about quality investments in economic terms. By focusing on the principles of an economic evaluation, it highlights the major aspects of an improvement assessment and derives a simple measure for helping practitioners to determine the advantageousness of a quality initiative.