Successfully Avoiding Product and Service Liability

Successfully Avoiding Product and Service Liability

Tom Taormina, CMC, CMQ/OE

Forensic Business Pathologist®

If you are in a manufacturing, service or distribution business, sooner or later you are likely to be blind-sided by a product liability claim or a law suit. Our societal values have been eroded to the point where it is acceptable not to take responsibility for our actions and, instead, look for someone else to blame. There are also more than enough attorneys who are hungry for a questionable, but potentially profitable, product liability suit. In my seven years as an expert witness, I have seen plaintiffs walk away with a cash settlement even though their claim defied reason. Some insurance carrier’s pay-off “nuisance” claims to minimize their exposure while they unwittingly encourage unethical people to continue to file frivolous claims.

Conversely, manufacturers and service providers seldom look at their processes, products and services from the perspective of potential risk. It is not our nature to move 5,000 feet above our company and objectively analyze each step in our business model, looking for potential opportunities for a consumer to be injured by our product or services. At best, most organizations grudgingly implement risk mitigation guidelines from their insurance carriers and consider these measures an imposition and added cost.

There are also a handful of companies that consider risk a usual cost of doing business. In my work as a quality control engineer and business consultant, I have witnessed company leaders who have checked their conscience at the door and built “acceptable risk” into their business model. They build (or import) products that are of questionable quality, sold at discounted prices to an unsuspecting public, knowing that very few will complain and even fewer will attempt to sue the company. The occasional law suits become just another cost on the balance sheet with no regard to individual or social consequence.

Even more egregious are the handful of business leaders who have contributed to our current financial crisis. They methodically dismissed conscience and potential liability to create personal wealth and power. The superficial consequences of their action will likely result in organizational negligence litigation, while the major consequence has had the effect of destabilizing global economies and further creating distrust of corporate entities.

Right or wrong, once a product liability or organizational negligence law suit has been filed, the process is lengthy, expensive and can turn executives and employees into bitter and resentful individuals who may never emotionally heal from the process. The root cause of the personal distress is the result of being “blind-sided.” Most business leaders have never contemplated or anticipated the scenario described in the law suit complaint and their first reaction is shock, followed immediately by denial and anger. They become so obsessed with remediation and defense that the personal and financial trauma may be irreversible.

There are many costly “risk assessment” firms that will come to your company, fill out checklists, and supply you with some very expensive suggestions on how to minimize risk. Most of these schemes are targeted to have their experts work with you over a lengthy contract period to implement remedial programs and train your people in the possible scenarios you should avoid. I was told by another consultant in the financial services world that risk mitigation in securities firms means opening a new department and hiring new experts to prevent recurrence of some pathological problem. Remedial solutions are not the long-term answer.

Over forty years and my work with over 500 companies, I have found a more robust solution to “risk mitigation.” Forensic Business Pathology (FBP)® is a set of tools companies can use for “risk avoidance.” The tools have long been proven by enlightened business leaders for continual process improvement and proactive quality management. FBP does not require the engagement of an ominous staff of consultants mumbling consultant babble and creating new departments. It does, however, require a paradigm shift that keeps many business leaders from opening themselves to diagnostic examinations that may reveal pathological diseases within their organizations.

The “pathology” metaphor was chosen carefully to prepare you for running your business through a virtual CAT scan. The procedure requires that everyone in the organization subject their methods and processes to clinical examination with the real possibility that there may be cancerous cells that we would rather not confront, admit to or treat surgically. I have witnessed business executives who would rather have a root canal than go through the process of self examination of long-established business methods that they perceive as being successful, stable and reliable. In fact, I have been dismissed by those who refuse to undergo self-diagnosis believing that the systems they have established are proven by years of implementation to be solid, effective and immune from disease or dysfunction.

To compound denial, most successful business leaders pride themselves as being problem solvers. I have never found one who boasted about being a problem “avoider.” I have not read of an award being given to an employee who avoided a major catastrophe that did not happen. In fact, many of the folks who worked on the Y2K computer problem (remember only a handful of years ago) have been admonished because “nothing happened” on January 1, 2000 and their years of preventive work were dismissed as irrelevant.

The tenets of FBP for risk avoidance are elegantly simple:

Develop an irrevocable company goal that NO critical defect shall ever reach a customer.
Use quality process improvement tools to map all business processes, their interrelationships and their dependencies.
Assess each process on its own and assign metrics for effectiveness, quality and reliability.
Dissect each process until all opportunities for defects or mistakes are identified and understood.
Objectively improve the processes until they are innately safe, reliable and continually-monitored metrics warn of pending problems before they happen.
Remove the concepts of defect inspection, rework, punishment and blame from your organization.
Replace them with individual and organizational accountability for the outcome of everyone’s work.
Continually elicit and scrutinize customer feedback for potential issues and correct them immediately and proactively as a “gift” of valuable information.

While the tenets are simple, their implementation requires uncommon courage by business leaders to assess their business for systemic disease and eradicate it with tenacity and finality. It requires driving any signs of mediocrity from the organization just as you would remove pre-cancerous cells from your body.

We have not learned pro-activity in business school. Our model is minimizing risk rather than avoiding it. The rewards to an FBP-modeled company can be enormous when we replace rework with products and services that are always compliant, when we replace management with leadership, when we replace punishment with accountability and when we no longer need a customer service department.

Tom Taormina was a Quality Control Engineer at NASA’s Mission Control Center for 14 years. He was part of the Apollo 13 recovery team and heard the words “Houston, we have a problem” first hand. His career has been dedicated to hands-on proactive business excellence and he has written ten books on quality and process improvement.