Why Quality Management Software Makes Dollars (and Sense)

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Sure, the right construction quality management software can increase profits and reduce defects. But, have you considered how much money you’re losing by not having quality management software, and how much of that can you get back with good quality management software? Business is business, so let me show you the money. Then you’ll see how much quality issues are costing you.

See the dollars

Quality issues include anything that is not done right (aka 2nd time quality), for example, installing a window wrong. Other examples include receiving the wrong quantity of a material delivery, a drawing with a missing detail, or handling the rescheduling of work, etc.

If you take the next 5 minutes to work out the dollar amount that your company loses in time alone, you’ll start to understand how expensive 2nd time quality can be.

Here’s how to figure out how much time quality issues are costing you in wages alone:

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Sketch an organization chart that lists job positions for all employees from President to your workers.

  1. For each role, ask yourself what percentage time does each person spend dealing with problems, what a typical annual salary is, and how many people you employ in the role.
  2. For each role, multiply the three figures.
  3. Add all these numbers together.

Below are some ballpark numbers for the cost of time spent on quality issues. The Percentages of Time Spent are averages based on data from construction companies I have worked with over the years.

GC or Homebuilder
Position Percent of Time Spent Salary Number of Employees Annual Cost of 2nd Time Quality
President 10% $150,000 1 $ 15,000
Project Managers 25% $125,000 2 $ 62,500
Superintendents 50% $100,000 6 $300,000
        $377,500

 

Speciality Contractor
Position Percent of Time Spent Salary Number of Employees Annual Cost of 2nd Time Quality
President 10% $150,000 1 $ 15,000
Project Managers 10% $125,000 1 $ 12,500
Superintendents 50% $100,000 2 $100,000
Crew Leaders 25% $ 40,000 10 $100,000
Crew Members 10% $ 30,000 40 $ 12,000
        $239,500

 

Your company’s annual cost of quality issues will differ from my ballpark numbers. The actual cost is much greater when you consider material waste; impact on build time, future sales and reputation; as well as warranty issues and possible litigation costs. Nonetheless, if you are like most construction companies, the annual cost of quality is considerable.

Connect quality directly to profitability

Whenever you avoid a quality issue and things go right, you are contributing to profitability. The more often things go right, the more profit you make. Adopt the simple strategy of first time quality and profits will take care of themselves. Your quality management software should not only help you see quality issues, it should also help you identify when you achieve first time quality, and who is contributing to profitability.

Develop an accountable culture

If you set up your quality management software to connect quality issues to the responsible parties, you will know who is responsible for the quality issues and what had to be done to address them.

Your subcontractors and crews will soon realize that their oversights, errors, and very importantly, their good performance, are visible and they will take more pride in what they do. Without a quality management system, all you often know is that the work was finished, but not if it was done right the first time.

Inspections, scores, and checkpoints can help develop a job site culture focused on getting it right the first time, which will save everyone time and money.

Understand where to focus your time and energy

Having good quality management software helps you see where to focus your time and energy. Your ability to manage effectively is enhanced when you know how often issues recur and how big of a problem they caused. When you track subcontractor and crew performance, you know where your team needs your help to be successful.

You want everyone on your team to be successful, so if an area needs your help, you can determine what kind of help, be it training, changes in work procedures, materials, equipment, or even additional expertise.

It is helpful to have a quality management system that can help your teams discover problems early and address them right away, but having an overall view of all your projects can also be a huge help. While a small problem on a job might feel like an annoyance, if this same problem happens on all your jobs, it might be costing you more than you realize.

Defects should not be part of your normal business; consider them problems – problems can be avoided.

Do more business

When you show clients how you manage quality using a software system, you can help them feel more confident in your work.

You can show your ability to closely monitor quality, discover problems quickly, and address them right away. You need less oversight. Clients will see the value in this. How much more business could you do as the preferred contractor?

Get better bids from subcontractors

Subcontractors and suppliers will learn that things go smoothly on your projects. When they know they can get in, get to work, and get done, you avoid the “hassle fees” they build into other bids.

Conclusion

If you put your mind to it and have the right tools, how much money could you get back in the next year? 10%? 25%? 33%? What about in two years? Where could you be in three years?

Quality could be your company’s biggest profit enhancement opportunity, and it has been hiding in plain sight.

A quality management system can help. If you’d like to learn how FTQ360 construction quality management software can increase your profits and reduce problems with your projects, contact us. 

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