Cost of poor quality describes resources consumed because products, services or processes fail to meet requirements. Examples include rework, scrap, repeated service activity and complaint handling. A useful estimate makes assumptions visible and supports priorities without pretending that every loss can be measured precisely.
The QMS Management Review and Performance Evaluation Guide places this topic in its wider QMS context. Distinguish observed costs from estimates and avoid double-counting the same effort in several categories. Not every quality-related cost represents a failure cost.
Define the decision and its boundary
Start with the operating decision that needs to be made. For cost of poor quality, a useful arrangement should identify the affected work and the person who can authorise a change. Establish the starting condition before selecting a form or software screen. Otherwise an apparently complete record can leave the central operating question unanswered. Discuss the boundary with the people supplying and receiving the information.
Hidden effort deserves investigation but should not be invented to make a business case attractive. Interviews can identify repeated checking, expediting or service recovery that accounting codes do not isolate. Use a bounded estimate and explain its basis. Opportunity loss, reputational effects and future revenue may be relevant, but distinguish them from recorded expenditure and do not combine unlike estimates into a falsely precise total.
Put the method into practice
For cost of poor quality, choose an approach people can maintain during ordinary workloads. Make the handovers explicit and explain how a disagreement is resolved. The steps below are a practical arrangement rather than prescribed ISO wording. Local requirements may demand more detail, but additional detail should serve a clear decision or protect the reliability of an important result.
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Define the failure categories and accounting boundary with finance.
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Collect direct costs and justify estimates of less visible effort.
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Use the analysis to prioritise mechanisms and review actual benefits.
Worked example
A fictional consultancy records hours spent correcting issued reports and responding to related queries. It separates those hours from planned review effort intended to prevent errors.
Management finds that one recurring input problem consumes substantial specialist time. It tests an earlier clarification step and compares later rework using the same definitions.
The worked example separates an observation, an interpretation and a response in cost of poor quality. Preserve that distinction when discussing a real event. People can agree that an output was unsatisfactory while disagreeing about why it happened. Obtain evidence that addresses the disagreement, and avoid reporting an appealing explanation as an established fact before the relevant conditions have been examined.
Useful evidence and records
For cost of poor quality, the most useful record is the one that supports the next decision. Include enough context to distinguish a completed task from an accepted result. The suggested fields help preserve that distinction. They can sit in a controlled spreadsheet, an existing operational record or a suitable application; the format matters less than accuracy, availability and clear ownership.
| Record element | What it should establish |
|---|---|
| Failure category | What activity is being counted |
| Cost basis | Rate, quantity and period |
| Assumption | Estimated elements and uncertainty |
| Avoided cost | Basis for a later benefit claim |
Check the result and avoid a common mistake
Counting all quality staff time as poor quality confuses prevention, appraisal and failure. Inflated savings claims can undermine otherwise useful improvement work.
Sample cost entries to operational records and reconcile the method with finance. Check whether reported savings are realised capacity, avoided expenditure or a theoretical estimate.
Judge cost of poor quality against a stated purpose rather than a convenient activity count. Completing meetings, records or training may support the result but does not demonstrate it. Identify what changed for the next process or recipient. If a benefit is claimed, explain the comparison and account for material changes in workload or complexity before attributing the difference to the new arrangement.
Connect the next decision
When cost of poor quality exposes a disagreement, separate missing facts from competing priorities. Further data may resolve the first, while the second needs an accountable management choice. Record the chosen approach and the conditions that would prompt reconsideration. This allows later reviewers to assess the reasoning fairly instead of judging an earlier decision using information available only afterwards.
Use Cost of Quality vs Cost of Poor Quality when the work moves to the adjacent decision. The related guide to corrective action effectiveness explains the wider process dependency. The handover should identify what has been accepted, what remains open and who will review the next evidence. Keep the original decision traceable when later information changes the conclusion.
Practical question
Can staff time count if salary does not fall? It can represent capacity consumed by failure, provided the estimate is justified. Releasing that capacity is different from reducing cash expenditure. State the type of benefit and explain whether the time was actually redeployed, avoided future hiring or remained unused.