Assuring quality to manage risks

Quality management can help firms control professional liability and maintain financial health.

Asking 20 design firms to define quality will likely elicit 40 different answers. What is quality? For many civil engineering firms the word may mean not getting sued, not losing clients, checking the documents before they are released to the clients, or even delighting the client. But quality in any design firm should encompass much more, especially since wholehearted attention to quality management can play a significant role in helping a firm manage its professional liability risks and maintain its financial health.

Quality management is a method for ensuring that all the activities necessary to design, develop, and implement a product or service are effective and efficient with respect to the system and its performance. The quality/continuous improvement movement began in the industrial setting, in the manufacturing of things. Therefore, the manufacturing sector is more adept at quality assurance issues than other industries.

Quality experts W.M. Lindsay and J.A. Petrick said in their book, Total Quality and Organizational Development, that manufacturing companies define quality within the following parameters:

  • performance—operating characteristics;
  • conformance—match to specifications;
  • durability—longevity, service life;
  • serviceability—ability to repair; and
  • aesthetics—perceived quality.

However, Lindsay and Petrick said, service companies define quality with the following parameters:

  • time—how long a customer must wait;
  • timeliness—the extent to which a service will be performed when promised;
  • completeness—the extent to which project delivery is consistent with client expectations;
  • courtesy—the extent to which all employees treat the client cheerfully and politely;
  • consistency—the extent to which services are delivered in the same fashion for every customer, and every time for the same customer;
  • accessibility and convenience—the extent to which service is easy to obtain;
  • accuracy—the extent to which the service is performed right the first time; and
  • responsiveness—the extent to which service personnel react quickly and resolve unexpected problems.

Design firms face a number of challenges as they pursue development and implementation of a quality management plan. While it would be nice to use a model plan, all firms are unique and no single plan will fit every firm.

Developing an approach
Quality management can be defined as the analysis, planning, implementation, and control of programs designed to create, build, and maintain beneficial exchanges with clients for the purpose of achieving organizational objectives. In other words, quality management involves managing demand, which in turn involves managing customer relationships. Note that nowhere in this definition does "quality design," "quality engineering," or "risk management" appear. This definition starts with company strategy. Each firm’s management team needs to ask itself the following questions:

  • What business are we in?
  • What client market sectors do we serve?
  • What possible margins exist within these sectors and how can we best capitalize on them?
  • What is it that these clients need?

All businesses, not just design firms, should start with this knowledge. Since design currently accounts for less than 1 percent of the total lifecycle cost of a building, what other needs of the client can the firm satisfy? Quality management begins with the client—and the client’s needs, desires, and vision for the project.

If quality rests ultimately only in the client’s eyes and is measured only by the client’s yardstick, then it follows that it is essential to discover what clients really want. Unless a design firm learns everything it can about a client, it is operating in a strategic information vacuum. Even the smallest amount of information can help a firm better anticipate its clients’ expectations, better design solutions to meet those expectations, and better price those solutions profitably. The firm can integrate this information into the everyday life of the company via continuous improvement processes, providing a view of the changing client horizon.

Always improving
Many firms are tempted to jump right in on an improvement process. But a company’s management team should first give serious consideration to what it hopes to achieve, and to think through the consequences. In the design world, for example, if a company jumps into an improvement program quickly and begins to measure hours spent on rework, savvy project managers may just bill rework hours to "marketing" or "overhead" categories on the company’s accounts. While rework hours may appear to be decreasing, other categories are increasing at an equal rate. The central problem of rework has not been dealt with; it has only been displaced into other billing categories.

Tracking a single benchmark will not result in total improvement of the company. Watching single benchmarks, in fact, often results in an "unbalanced" company. Unbalanced companies sacrifice for a single measure, and that can cripple them over the long term.

A more rational scheme is provided by the Balanced Scorecard approach first suggested in 1992 by Harvard Business School Professor Robert S. Kaplan, Ph.D., and David P. Norton, Ph.D. Their concept revolutionized conventional thinking about performance metrics. This approach calls for using a handful of interlocking measures that account for overall corporate alignment.

Before any improvement is attempted, it is important to have some benchmarks of current performance. The Balanced Scorecard is a well-rounded beginning to this effort, although design companies may want to add some design-specific measures to Kaplan and Norton’s approach. For example, A/E benchmarks might also include profitability by project type and client type, the amount of money spent in rework, costs associated with legal and settlement fees, and ratios of budget-to-actual costs on projects.

Management should also make concrete decisions about what the company wants to achieve through its improvement program. For example, does the company demand a 15-percent pre-tax profit? How will the improvement program contribute to the profit goal? Does the company expect an 8-percent growth in revenue per year with a commensurate yield on profit? Again, how does the improvement program directly align with this goal? Goals will never be reached without measurable steps to achieve them; measurement without goals is wasted effort at best, and at worst can be a destructive and self-consuming exercise.

Just as every design firm serves unique clients and markets in unique ways, no cookie-cutter quality approach can serve all firms. However, the principles of quality remain the same:

  • quality starts with the client;
  • measurement is a constant; and
  • measurement must be actionable.

This means that standardized quality programs—those that focus on checking results at the end of the process—are considerably less effective than those that focus on improving the process that results in quality output. Quality output complies with the expectations of the client. Therefore, to develop a workable quality management plan for an A/E firm, define the following:

  • quality from the client’s perspective, determined as simply as using the "project triangle" of schedule, cost, and scope to understand the client’s drivers;
  • barriers to achieving this level of quality, internally and externally; and
  • steps that will be taken to measure, change, and measure again any efforts in improving the process.

In refining the concept of quality, avoid the tendency to view quality as simply an end process. Focus on the idea that quality management begins with understanding the individual client’s needs, desires, and vision. And remember that every member of your firm should understand and support the firm’s definition of quality.

As design firms become more sophisticated in measuring performance against their clients’ needs and expectations, they may expect not only increased business opportunities but also increased profitability.

Randy Lewis is risk control regional leader in the Design Professional Group of the XL Insurance companies ( Through its Design Professional Group, XL Insurance offers professional liability insurance programs for architects and engineers. Its specialized programs protect against and minimize professional liability risks through insurance, proactive loss prevention techniques, and expert claims service.

Posted in Uncategorized | January 29th, 2014 by

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