QUALITY MANAGEMENT SYSTEMS
Prove Your Worth
Show top management the value of a quality management system—and the quality department
by Govind Ramu
In the May 2018 Standard Issues column, “Paddle Like the Dickens,” I mention that quality management systems (QMS) often are misperceived by top management as a paperwork exercise necessary for maintaining ISO 9001 certification.1 Quality professionals often have a hard time conveying a QMS’s tangible benefits.
ISO 10014:2006—Quality management—Guidelines for financial and economic benefits can help. The standard builds on interrelated quality management principles to provide guidelines for realizing financial and economic benefits, as shown in Table 1.2
Addressed to top management, the standard uses a self-assessment approach categorized by the quality management principles found in ISO 9000:2015.3 The outputs from the self-assessment are fed into a plan-do-check-act cycle to derive the organization’s financial and economic benefits.
Currently, ISO 10014 is under revision to make it more valuable to top management and organizations.4 To do that, the current state of the quality department and quality at large must be better understood.
I’m not referring to a highly mature, Malcolm Baldrige National Quality Award-winning organization. I’m referring to the vast majority of ISO 9001-certified organizations whose quality departments either are sidelined or reduced to mere compliance management.
Stakeholders often have a narrow perception of the quality department. If asked rhetorically whether their organization can survive without a quality department, stakeholders likely will answer, “Yes, but,” followed by one of the following reasons the quality department is needed:
- It’s required by customer contracts and expectations.
- It verifies compliance.
- It provides a degree of independence (for due diligence and quality decision making).
- It manages system certification maintenance (audits, liaison with certification bodies).
- It responds to customers regarding quality-related complaints.
- It administers highly bureaucratic paperwork required in some industry sectors.
- It monitors dashboards and key performance indicators.
Even though these duties are required for day-to-day tactical operations, this is a rather narrow perception of quality. It stems from legacy thinking that service and product quality is the sole responsibility of the quality department, and quality is limited to quality control.
With consistent communication from leadership and a transformation in the organization’s culture, this narrow perception can be changed over time. However, the quality department must explain to stakeholders the financial and economic benefits it brings to the organization. For example, the quality department:
- Forms true partnerships by solving organizational issues. Quality teams contribute, collaborate, facilitate and coach stakeholders with shared common priorities instead of competing priorities.
- Adds value by proactively anticipating and managing risk, optimizing value and providing objectivity. This is an opportunity for the quality department to participate in the strategic planning process and identify program risks through organizational learning.
- Practices pragmatism by being flexible and reasonable, but also by meeting the intent of the objectives. Quality departments must understand that excessively strict interpretations of requirements won’t improve product or service quality. Instead, the quality department must understand the intent of the requirement or customer expectation and address it pragmatically.
- Simplifies complex issues by disentangling stakeholders from bureaucratic nightmares. With the organization ramping up resources and departments working in silos, QMSs can easily become complex.
- Is sensitive to the bottom line by “thinking like a CEO.” In other words, the quality department should think of compliance as a function of cost. Setting up excessive controls can be administratively costly and slow down the organization. That’s why it’s important to understand the risks and effects before designing controls that prevent or detect.
How many times have quality departments spent significant resources standardizing the format of nonconformance reports or wordsmithing an audit report while the rest of the organization is unable to deliver a new product on time? Most quality departments would diagnose this as a new product introduction (NPI) issue and dismiss it.
It’s this kind of disconnect that leads to a narrow perception of the quality department. However, it’s an opportunity to demonstrate a true partnership. Imagine quality leadership assigning key personnel to the NPI program to help understand any issues and arrive at pragmatic solutions. They can ensure that support from the quality department continues until the organization can consistently deliver its new product on time.
With this partnership, top management and stakeholders will start to see the value of quality in the organization.
Developing an effective closed-loop learning process and compiling comprehensive knowledge management could prevent recurring issues in a major strategic program. This is perceived better than an “I told you so” approach after issues arise.
Typical quality engagement starts with operational execution, possibly because top management perceives quality as a transactional activity. Thus, the quality department is left out of the strategic planning process. Demonstrating value through closed-loop learning and knowledge dissemination results in reducing the cost of poor quality, thus changing the narrow perception of the quality department.
Example: A quality department establishes a structured problem-solving process using a widely known method—such as define, measure, analyze, improve and control, or the eight disciplines—and a detailed process document and standard formats. The quality department also offers monthly training on the problem-solving process.
During an audit, it is discovered that the engineering department has a different approach to problem solving. Its approach also is structured, but uses a method developed in house called “cycles of learning” with the steps: analyze current data, understand the cause and effects, and develop and implement a solution.
Instead of evaluating the merit of this approach and recognizing that it works for the engineering department, the quality department escalates the issue to top management as a major nonconformance and a gross violation of QMS processes.
It’s inefficient to use many different approaches throughout the organization. If a process is working and the stakeholders are meeting the intent, however, the process shouldn’t be standardized just for the sake of it.
It’s not uncommon for different departments to deploy different databases without talking to one another. Sometimes, organizations inherit new databases through mergers and acquisitions. This is the perfect opportunity for standardization because it is costly to maintain and customize many different databases. By eliminating unnecessary touch points (waste), quality professionals can simplify processes, improve productivity and save the organization money.
Error proofing is a best practice. In some instances, however, completely error proofing and achieving zero recurrence may result in a hefty initial investment. And if there’s a chance the product could soon become obsolete, there may not be a significant return on that investment.
So, in situations like this, unless it is for safety, security, ethical violations or other serious reasons, it may not make sense to invest in excessive controls. I, too, am a strong proponent of zero defects. However, I advocate zero defects with sensible economic considerations.
The quality department also should learn to speak management’s language and present reports from a cost of quality (COQ) point of view instead of just proportion defectives, defective parts per million or nonconformances, for example.
Every risk and opportunity can be quantified with certain assumptions. Quality initiatives and improvement proposals should spell out the financial and economic benefits to the organization.
The cost of a quality department
Besides ensuring the five key attributes discussed earlier, it’s also important for the quality department to keep its costs to a minimum and consider return on investment. Quality department headcount and expenses—the appraisal cost category of the COQ—should be consistent with the risks and opportunities. Quality headcounts grow significantly when economic times are good and proportionally with the organization.
Sooner or later, new roles are developed to accommodate for the growth. A job previously held by a quality engineer, for example, now is shared among an incoming material quality engineer, in-process quality engineer, calibration engineer, finished goods quality engineer and customer listening engineer. Organizations get innovative with job titles to retain talent. In large organizations, new customized processes are developed with specific tasks and responsibilities to accommodate these newly created roles.
But when market conditions suddenly worsen, top management targets support functions for downsizing, and the quality department is first on the chopping block. This causes the customized QMS processes to break down because there aren’t resources to support them anymore.
By carefully balancing the distribution of quality costs, quality departments can stabilize their talents and provide higher financial returns per quality resource. Figure 1 shows a proposed breakdown of a quality department’s operational expenses—20% to ensuring compliance, 70% to preventing issues and 10% to managing crises.
Ensuring compliance. Every organization needs compliance management to ensure its processes, products, services and systems follow requirements. If the processes and systems are built with adequate automation and controls, the compliance team can be kept to a minimum and even sustain the headcount during difficult economic times. This cost of maintaining compliance is the appraisal cost of the overall COQ.
Preventing issues. The quality department should consider investing most of its operational budget in reducing the COQ by preventing—rather than reacting to—issues. It should invest in building quality into its products and processes by ensuring its designs are robust, and prevent or significantly reduce the occurrence of defects. This includes investing in supplier development and preventing the shipping of defective parts.
An organization doesn’t need an army of quality engineers—it just needs to make design and process engineers responsible for quality through training and sharing of quality knowledge. After all, W. Edwards Deming advised us that quality is everyone’s responsibility.
This approach also will ensure the quality department isn’t downsized if market conditions deteriorate or opportunities are exhausted. Design and process engineers always will be around and, armed with quality experience, can prevent issues in new products and services. This is a worthy investment for any organization.
Managing crises. Finally, most organizations encounter a crisis from time to time, which is why they must budget for problem-solving efforts. This is the failure cost of the COQ. As the organization matures and the frequency of crises is reduced, the budget can be transferred gradually from crisis management to prevention.
5 Key Attributes of a Quality Department
The biggest financial and economic benefits of a quality department are that it:
- Forms true partnerships—Contributes to solving organizational issues.
- Adds value—Proactively anticipates and manages risk, optimizes value and provides objectivity.
- Is pragmatic—Is flexible and reasonable, but also meets the intent of the objectives.
- Enables simplicity—Disentangles stakeholders from bureaucratic nightmares.
- Is bottom-line sensitive—Thinks like a CEO.
The three Cs
Members of a quality department offer value to the organization through the three Cs:
- Contribute: Make visible contributions by helping launch a highly scalable new product on time, helping meet the product and service target profit margin, and addressing key customer needs and expectations.
- Collaborate: Work with key stakeholders. Ensure quality coexists with innovation and speed (time to market) enabled through integration (organizational learning).
- Communicate: Demonstrate the quality department’s value to top management and key stakeholders and industries.
Improving the perception of a quality department and quality professionals as partners, pragmatic value adders, enablers of simplicity and enforcers of the bottom line is important to surviving and thriving in today’s highly competitive business environment.
- Govind Ramu, “Standard Issues: Paddle Like the Dickens,” Quality Progress, May 2018, pp. 62-65.
- International Organization for Standardization (ISO), ISO 10014: 2006—Quality management—Guidelines for realizing financial and economic benefits.
- ISO 9000:2015—Quality management systems—Fundamentals and vocabulary.
- ISO/Technical committee 176/Subcommittee 3/Supporting technologies, www.iso.org/committee/53934.html.
ASQ, ASQ TR 2:2018: Cost of Quality: Guidelines for Development, Implementation and Monitoring to Improve Quality and Performance, PDF, 2018.
International Standards Organization, ISO 9001:2015: Quality management systems—Requirements, 2015.
Govind Ramu is a licensed professional engineer from Ontario, Canada. He is the convener for ISO technical committee 176/subcommittee 3 working group 23 for ISO 10014. Ramu is an ASQ fellow, recipient of ASQ Crosby Medal, ASQ LA Simon Collier Quality Award and holds six ASQ certifications: manager of quality/organizational excellence, engineer, Six Sigma Black Belt, auditor, software quality engineer and reliability engineer. He is an author of The Certified Six Sigma Yellow Belt Handbook (ASQ Quality Press, 2016) and coauthor of The Certified Six Sigma Green Belt Handbook (ASQ Quality Press, 2015) and the American standard ASQ TR 2:2018: Cost of Quality: Guidelines for Development, Implementation and Monitoring to Improve Quality and Performance (ASQ, 2018).