Archive for the ‘The purpose of organizations’ Category

Is quality the cheapest option?

November 1, 2013

Some of us instinctively think quality products should cost more. But by removing the costs of nonconformity, quality products actually cost less to produce. Nonconformity, by the way, is a failure to meet the requirements including the requirements of customers. Some managers pay the price of nonconformity instead of making quality a reality for employees and customers.

At the normal 2 or 3 sigma, the price of nonconformity is 40% of turnover. Many times the level of profit for most organizations. Leaders may not need to measure these avoidable costs to eliminate the causes of failures to meet requirements from their systems. They may even help their suppliers to remove these avoidable costs too.

But more product verification will not help because it is too late. Inspection or testing merely sorts bad product from good product. Therefore, verification of the product is part of the price paid for failing to design capable processes. Capable processes are validated to result in products that need no inspection or testing.

Accordingly, we work to make sure our organizational management systems help employees and suppliers to add value for each customer. Adding value faster while preventing loss sooner. Having prevented nonconformity in our goods, we should also design the service part of our products so we avoid paying the price of service nonconformity too.

Leaders, who choose to avoid paying the price of nonconformity, invest in their process-based organizational management systems so more work is right the first time. They discover that buying and delivering quality costs a lot less than the alternatives. What’s more, in markets, where quality rarely is delivered, customers may be willing to pay a little more to have their requirements fulfilled exactly.

Even so, “quality is free” because it is cheaper to buy and deliver quality than not. Here we see the cost of quality at its lowest when the product exactly meets the requirements of the customer:

Earlier versions of these cost of quality curves mistakenly showed costs tending to infinity with perfection. The old curves showed perfection is not quality. Thankfully, in 1999, these curves were corrected to accord with reality and Crosby’s 1979 definition of quality. Of course, by then Taguchi had also showed that any deviation from the requirement increases costs to society.

In summary, managers of quality prevent nonconforming products to assure quality and satisfy customers. They govern their organizational management systems for creating more successful customers by making and keeping more competitive promises. Tomorrow’s managers of quality will also be focused on sustainability for all by creating more successful stakeholders.

As we can see, designing and producing quality remains the cheapest sustainable option.

Thriving instead of just surviving

July 4, 2013

Thriving companies make effective use of resources to create successful customers. Zombie companies earn just enough to pay the interest on their debts. Low interest rates allow zombie companies to exist without investing in new products, processes and their management systems. As interest rates rise, the zombie companies will disappear unless they act now.

How do companies stop surviving and start thriving in this economy?

Refocus on your mission:

Your company’s mission is the reason your company exists. It is the system’s purpose. Cutting everything by 20% or more may be instinctive but without regard for the mission, it will put the system, your company, into a death spiral.

Instead, be creative. Your core process (from customer needs to cash in the bank) is mission critical. Determine the vital few changes that will yield most of the efficiency improvements.

Study your marketing and selling process. Perhaps you can go viral via social networks to explain clearly how your company creates successful customers. Study your innovation process. Do you fully understand, from the customer’s point of view, each of their objectives? Then design creative solutions with superlative service (see below) to help each customer to fulfill their objectives. Sell the value as seen by each customer but do not cut prices. Use your management system to improve efficiency and reduce costs but do not offer discounts.

Superlative customer service:

Companies often focus their management systems on tangible goods. Indeed, for nearly three decades, accredited registrars have encouraged their system certification clients to ignore their service design processes!

Leaders know that superlative customer service can influence each customer to buy on value instead of price.

Study your product design process. Ensure it designs the whole experience the customer has with your company. Engage your employees in the redesign of their interactions with customers by analyzing the customer’s experiences as they are. Agree upon the service changes so they are as they should be from the customer’s perspective. Make this new process part of your management system by changing the affected processes such as training, selling and maintaining the computer network. Continually improve the customer experience with your management system.

By engaging your employees in the redesign of their interactions with customers, you inspire them so they help your company to thrive again.

Serving the People to Lead the Organization

May 26, 2013

Live and work to serve the people. This is the vital but rarely mentioned part of any effective management system. Servant leaders live and work this way. They foster a community that shares commitment to the needs of others. Indeed, servant leaders are selfless. They put themselves last. They put first the interests of the community, so their organization can make a positive difference. Next, they put the well-being and interests of the people who rely on them. Last, and last all the time, they consider their own interests.

What are the other attributes of the leaders who serve to lead?

Servant leaders understand the power of their organization as a system. They take responsibility for their system. They ensure their organizational management system is responsive to the needs of stakeholders. They consider the needs of employees, customers, suppliers, owners and others affected by the organization. A servant leader does not blame others for the poor performance of their system. They make followers less fearful of speaking up; however unpopular the truth may be.

Servant leaders ensure departments collaborate effectively. Their management system is cross-functional or process-based. Such systems enable organizational learning of future opportunities. Such systems also reduce the associated adverse risks. Servant leaders persuade, monitor and coach users to show respect for the requirements. They also show their respect for the organizational management system. They ensure it is improved and changed as necessary to enable the organization to improve its performance for stakeholders.

Servant leaders know their strengths and weaknesses. They understand that their team members have innate strengths and weaknesses too. They ensure process teams blend the different strengths of individuals for shared success. They nurture the personal, professional and spiritual growth of individual team members so individuals can make the best use of their talents.

Servant leaders are able communicators. Their systems gather data. After data analysis, information helps with effective decisions. Servant leaders actively listen and encourage active listening by decision-makers. Servant leaders also observe and seek to understand the needs of any silent stakeholders.

Servant leaders see beyond the limits of their organization with respect for customer needs and the needs of other stakeholders. Servant leaders focus on long-term organizational change. They develop future leaders so their organization continues to enable success for the stakeholders.

Servant leaders exemplify, align and share the behaviors, ethics and values of their organization. Their inspirational organizational culture creates and sustains a healthy work environment. It is integral to the holistic management system that is conducive to quality in everything the organization does.

How do I measure the effectiveness of training?

February 19, 2013

Why do we feel a need to measure the benefits of doing the right thing? We find this in quality costing too. Most quality costing is about the cost benefits of keeping promises instead of the cost benefits of making the promises valued by customers. Likewise, we need to do enough of the right thing the right way with our organization as a system to fulfill our collective objectives of creating (and keeping) more successful customers.

People, of diverse innate abilities, benefit in different ways from education and training. Some employees benefit immediately from the formal education and training. Others benefit more from workplace experiences following the education or training. Moreover, we all benefit from a process-based management system that helps us to determine requirements and coordinate our work to fulfill requirements.

Taking the individual out of the system, one could measure the abilities, skills and knowledge of each individual before and after the training session. However, we cannot change the innate abilities of anyone and the slower learners from workplace experiences may be marked down. This is not to mention the contributions or impediments of the leaders and the rest of the system.

Diverse process and project teams comprising individuals of different strengths and weaknesses help each other to fulfill objectives. Managers wisely play to the strengths of their people and avoid exposing their weaknesses. We cannot make everyone the same like robots.

What counts is competence of the individual, the process, leadership and the system of which all three are part. Therefore, we have to optimize the system (parts that work together) so it adds value faster and prevents loss sooner. $ per millisecond may be the ultimate metric appearing on the dashboard for all to see as a smoothed moving average.

Playing our part in value networks

December 22, 2012

Stakeholders may dream of having their requirements satisfied by the organizations that affect them. Some politicians and NGOs say the stakeholders have the right to have their requirements fulfilled. Others say that stakeholders, who can, should earn that right. It is intensely political as the forces for “equal opportunities” fight the forces for “equal outcomes”.

Organizations can understand themselves as systems and then develop their process-based organizational management systems to enable workers to add value faster and prevent loss sooner to benefit all stakeholders. They reward employees for working to benefit customers so employees can look after their families, their communities and themselves.

Businesses network and these networks comprise many different organizations so they are complex. Members may organize themselves to become a value network. Organizations are the nodes in the value network. Each node interfaces with other nodes that use contracts to govern their relationships as customers and as suppliers. Building, supporting and running a value network requires transparent, voluntary, consensus standards. Some of these standards specify more reliable management systems. Organizations develop and use their management systems to govern their work. They may even show they are ethical and competent enough to join and remain members of the value network. Once a supplier promises a standard, customers may use contracts to enforce even the voluntary standards. Organizations can and do impose strict selection and re-selection criteria on the members of their value networks.

Of course, the leaders and managers of the value networks and the organizations that comprise these networks should personally be transparent and accountable. However, to encourage risk taking to generate wealth, the individual decision makers are largely protected by their organization becoming the person accountable in the eyes of the law.

This separation of the organization from the people that run it creates mistrust. How then are customers confident enough to do business? Personal relationships count for a lot in making and accepting promises. The organizational management system helps salespeople and sales processes to make and keep competitive promises for their customers.

Customers and other stakeholders rely more and more on the law to protect them from poor decisions and broken promises. Organizations can see the rules are changing and want to stay ahead by broadening their duty of care to include customers, employees and communities. Indeed, the 2006 Companies Act in the UK reminds company directors of these wider duties.

Now we see companies climbing on the long bandwagon named “Sustainability for ALL Through Being Socially Responsible in Everything We Do”. Even if it were available, ISO 26000 certification would not “prove” social responsibility or sustainability credentials.

Instead, organizations have to perform to prove their heads, hearts, decisions and actions are socially responsible to their stakeholders. Stakeholder trust may then grow from websites that truth-check the social responsibility and sustainability claims of any organization. Indeed, stakeholders may fund these websites directly or indirectly.

Instead of publishing socially irresponsible versions of “greenwash”, may we see more leadership by global companies benefiting their stakeholders wherever they operate?

Productive work creating prosperity for all

September 11, 2012

Can we live within our means without robbing future generations of their livelihoods? Yes, by productive work within process-based organizational management systems that eliminate causes of waste, assure quality and assure social responsibility for sustainability.

Process-based organizational management systems, driven by lean sensibilities, enable the people who work within them to add value faster and prevent loss sooner. Productive work adds value to metals, plastics, soils, food, people, data, information etc… That is to say confident customers will happily pay a lot more for the output than the cost of all the inputs. Supported by a management system, work may increase the value of inputs tenfold or more. Some of the increase in value pays for sustainable design, production and delivery. The increase in value also pays for the facilities, investors, money lenders (or partners) and taxes. That leaves the employees who use their share to look after their families, their communities and themselves.

However, countries and their citizens cannot prosper by enabling their people to polish each other’s shoes. Nor can they rely on their citizens continuously shopping for stuff. Nor should they print money willy-nilly. Countries must compete or cooperate on opportunity and quality to export more and earn new money to invest so their citizens can feel secure and confident enough to invest, work, study, play and enjoy family life. Therefore some nations’ taxpayers invest in healthcare, infrastructure and education (especially in the sciences and engineering) to enable thriving enterprises to protect the environment while adding a lot more value for global markets. This way inventors and entrepreneurs are encouraged to solve problems that create wealth and well-being through more value adding work.

Trade imbalances vary according to the relative productivity of each trading nation and that influences the value of each country’s currency. Sharing low value adding work with other countries may result in less inequality globally between countries. Enabling customer countries to make what they would otherwise import could more responsibly improve sales (such as making Range Rovers in Saudi Arabia). Devaluing currency is widely seen as a sign of economic failure but may be temporary to boost exports.

In the eurozone we see the results of nation states affected by these economic facts of life while, unfortunately, sharing the same currency. Germany invested long term and sold its products all over the world. People living in the ‘club-med’ region bought these imported products with cheap borrowed money, instead of earned money, or in place of privatizing and paying taxes to invest in creating more value themselves. Consequently, regions that largely comprise government workers, food growers and hosts of tourists are not adding enough value to compete with “Vorsprung Durch Technik”. Years of nonproductive work, easy money and underemployment are now having their tragic consequences on the lives and fortunes of ordinary people.

Process-based organizational management systems are used to make work more productive in farming, education, training, purchasing, design, production, delivery, operations, maintenance, government, and recycling. Just about every enterprise can benefit or suffer consequences of not providing the means for teams to determine and fulfill requirements. Without process-based management systems we see silos of like-minded individuals trying to keep their bosses happy instead of earning the confidence of customers and other stakeholders. Occupying jobs instead of working productively for customers is a road to ruin. The future may see food producing countries, coupled with government reforms and the removal of subsidies, earning enough for a positive balance of payments with their trading partners. Apart from the adverse and beneficial effects of global warming it all depends on the quality delivered and value added by work of farmers aided by animals and then machines. More productive farmers tend to result in farmhands becoming factory workers adding value to other materials thereby earning more dependable incomes.

And today marks another painful anniversary of four evil acts never to be forgotten. Nations enjoying a temporarily bonanza in non-renewable resources may invest in healthcare, infrastructure and education but some do not oblige their young men and women to work for a living. Wherever the idle live, if they don’t feel loved or are taught they are superior, they may harbor hate for strangers or colleagues. They may even choose work that adds no value and destroys life and lives. Hopefully the reawakening of the people will restore wise leadership, respect for others, productive work and leading-edge science and other important human endeavors.

Sustainability, from being socially responsible in all that we do, can prevail if all nations prepare. Visionary leaders prepare people for the era beyond the loss of abundant natural resources. They enable work to increase value while conserving resources. They cooperate internationally for justice so more people have a chance to work for a secure living. They encourage cooperation and responsible competition. Their example makes us want to volunteer, to contribute to the arts, and to invest so we prosper more equally and sustainably with time for play and well-being from our productive work.

Accordingly, all organizations in government, not for profit and commercial sectors are well advised to develop and optimize their process-based management systems so workers help each other to fulfill stakeholder requirements while removing all work and waste that does not add value for all.

Reasons ISO 9001 projects fail or succeed

September 26, 2011

Big Q thinking says everything the organization does is for quality. Organizational thinking in this way can result in highly successful holistic system development projects. Some organizations, though, are stuck in little-q thinking, perhaps kept in that state of mind by their dying QC department.

Since 1986 here are four reasons we have observed for organizations failing to obtain the full benefits of ISO 9001:

1. The leaders are not willing volunteers in developing their system.
2. The leaders ignore the system that actually is their organization.
3. The leaders delegate implementation of procedures written around ISO 9001 instead.
4. The quality professionals do not include the financial processes in the management system.

The key to developing a process-based management system is to go with the flow of work in the organization.

Embark on a voyage of discovery rather than implementing a standard:

A. Discover what the organization already does to determine customer requirements (and get paid for meeting them).
B. Discover what the organization already does to fulfill these and other requirements.
C. Discover the processes in the management system (and determine any new ones needed by the management system).
D. Discover what is done in each process to prevent nonconformity instead of how nonconformity is detected.

Telling an individual to implement ISO 9001 is not a good idea. The system development project needs a cross-functional team that is able to analyze its system, determine its key processes and analyze each of those key processes and their interactions.

Just a few of the management system’s processes need to be newly designed and implemented after training of the process team.

Respect the system that is the organization otherwise the system development project will fail. One way to do this is to use the “as-is rule”. Document the process lightly as it is not as you would like it to be. Then, by using and improving the management system it will cause any needed improvements and grow the detail where needed.

What if the process is so bad it does not conform to the standard? Well then, use the two-week rule: record the nonconformity and say “you have a fortnight to correct the process then we will re-document the improved process as it is”. If too difficult to correct in two weeks then feed the nonconformity into an early corrective action using the newly developed management system.

A summary of common mistakes:

i) Leaders not showing their commitment to requirements.
ii) Putting the documented procedure ahead of the process.
iii) Ignoring the system that is the organization.
iv) Implementing ISO 9001 instead of developing the organization’s existing management system.

The system should help people to determine and meet requirements including the requirement for continual improvement. The procedures should be owned by the people not the “we know best department”. That way QA is delivered as a result of everyone using their management system to fulfill requirements.

Learn how to do this for yourselves here.

Creating more successful customers

July 31, 2011

Many people say business is all about making money. Just the other day in London while working on the global standard for management system requirements someone from local government said this. Fortunately he was quickly corrected by his colleagues who know better:

“Business is all about creating more successful customers”.

Indeed a quality organization determines the products, processes and management system they need to create even more successful customers. They then design and invest so the products and processes are improved by their management system to create more successful customers.

Their management systems include product design processes to translate the customer’s needs and objectives into specifications. Design and planning processes specify the delivery processes. Their customers review and approve their specifications and place a value on having them fulfilled.

Determine what your customers need to be successful and when they need it. Determine what value your customers place on being successful. Ask them to pay a little less than that value. Agree upon the promise using the approved specification so it is measurable and keep the promise.

By understanding customer needs we can see if we are the best organization to fulfill those needs. If not we may be able to recommend another organization to fulfill those needs so we can focus on fulfilling the needs of customers that match our strengths.

More successful customers are the most important products!