Copyright John Cachat
What All Quality
Professionals Must
Know About CFOs
John M. [email protected]
440-915-2650
Copyright John Cachat
About John M. Cachat
• Driving Business Performance
– Helping companies align their business and technology
– Focus on people, process, and then the technology
– Subject matter expert on business process management
– On-going research into next generation of technology for enterprise
systems
• 28 years experience in enterprise systems
– USAF Research Project (1985)
– Founder of enterprise quality software company (1988)
– Chair of ASQ technical committee on computerizing quality (1992)
• Trusted advisor to global organizations, government agencies,
and professional groups
http://www.linkedin.com/in/johncachat
Copyright John Cachat
Housekeeping
Phones are muted
Use the question
block for questions Copy of presentation
available upon request
Copyright John Cachat
Today’s Discussion
• Quality professionals need a better
understanding of financial terms and
approaches
• CFOs need a better understanding of
Quality terms and approaches
• Everyone needs to learn how to
significantly improve situations over
which they have control
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Are We That Different?
Finance – SOX, GAAP Quality - ISO
Documentation Documentation
Training Training
Audits Audits
Risk Management Controls
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Copyright John Cachat
Are We That Different?
Finance Quality
Likes Numbers Like Numbers
Like Process and Audits Like Process and Audits
Talk about Cash, Profit, etc Talk about PPM, CAR, Cpk, etc
Reports what has happen Can explain why it happen
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Copyright John Cachat
The Disconnect
• Finance has been consumed with GAAP and audited financial statements for external reporting
• Operations is not happy with standard financial reports
– Operations ability to understand?
– Financial ability to provide information?
• Great gains can be made from “management accounting”
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Quality Costs Model
• Prevention - Cost to
prevent mistakes
• Inspection - Cost to
find mistakes
• Failure- Cost of
mistakes – internal &
external
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Management Accounting
• Information for internal business support, not
external financial reports
• Great gains can be made by Quality and
Accounting working together
• The main focus should be cause and effect
analysis
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Cause and Effect ExampleIncrease Profit on New Products
10
PEOPLE
MFG PROCESS
EQUIPMENTPRODUCT
DESIGN PROCESS PURC PROCESS
INCREASE
PROFIT ON
NEW PRODUCTS
Copyright John Cachat
Increase Profit on New Products
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INCREASE
PROFIT ON
NEW PRODUCTS
0
20
40
60
80
100
120
Design Proto Pre-Prod Production
Program A
Program B
Number of Engineering Changes by Product Stage
Copyright John Cachat
Increase Profit on New Products
12
INCREASE
PROFIT ON
NEW PRODUCTS
Process Capability by Product Stage
0
0.5
1
1.5
2
2.5
3
3.5
4
Design Proto Pre-Prod Production
Program A
Program B
Cpk
Copyright John Cachat
Increase Profit on New Products
13
INCREASE
PROFIT ON
NEW PRODUCTS
Supplier Changes by Program
0
2
4
6
8
10
12
New
Suppliers
Suppliers
Dropped
Same
Suppliers
Program A
Program B
Copyright John Cachat
Cause and Effect Example
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PEOPLE
MFG PROCESS
EQUIPMENTPRODUCT
DESIGN PROCESS PURC PROCESSINCREASE
CUSTOMER
SATISFACTION
REDUCE
COST OF
NONCONFORMACE
INCREASE
MARKET SHARE
REDUCE
INVENTORY LEVELS
INCREASE
PRODUCTIVITY
Copyright John Cachat
Corporate Performance Management
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D-DB-
EA-
C+
Overall Score
Last Period4/1/09 - 6/30/09
Current Period7/1/09 - 9/30/09
B+C-C+BC
Human Performance
C+ D+
Corporate Responsibility Performance
Top Line Summary of Assessment Score Current Reporting Period
Example, Inc7/1/09 - 9/30/09
Ticker Stock Price
EXA $3.70
Sustainable Performance Index (M1)
A 850-1000Index
C+ B 700-849
C 550-699
D 400-549
E 0-399
Pillars of Performance ScoresLast Year
7/1/08 - 9/30/08
DB-
E
Innovation Performance
Operational Performance
Financial Performance
C+B
February-01
August-01
March-02
September-02
September December March June September
Actual Industry Avg. Alert
695
www.3ppartnersdls.com
Deb Shumar
Copyright John Cachat
My Quality Projects Never get Funded!
• You have a lot of
great projects to pick
from
• You have limited $$
to invest
• How do you decide
which project to
fund?
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Copyright John Cachat
Finance Terms
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• Return on Investment (ROI)
• Net Present Value (NPV)
• Internal Rate of Return (IRR )
• Payback Period
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Things to Consider
• Formal training on performance management
• Cause and effect workshops
– Multiple departments
– What makes these numbers go up / down
• Business process and data collection analysis
• Technology support requirements
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About Us
John Cachat
440-915-2650
Contact
Proven expertise in
corporate performance
management systems
Rapid Solution
Development™ process
ServicesAssess Current Status
Develop Short and Long
Term Plans
Develop Specific Solutions
to Your Problems
Assist in ROI Analysis
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Copyright John Cachat
What All Quality Professionals Must Know About CFOs
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John Cachat
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