Context of the Organization – External Issues

external influencesContext of the Organization – External Issues

External Issues Relationship to the Company Scope

The scope of the company explains what the company does and doesn’t do. If it is a steel stamping shop it is unlikely the company also makes cotton candy. If you manufacture parts for a specific industry, your company may not do any design and development. Scope talks about what products and services the company provides. Internal issues are within the company’s control. External issues are usually outside the company’s control. With external issues all the company can do is monitor and react, it cannot control the issues.

External Issues Models

Models used in strategic planning or market research are useful in identifying external issues. There are a large number of models available. One that is effective is PESTEL but any model that allows the company to identify external issues and define how to monitor and react to them can be used.

External Issues Using PESTEL

PESTEL stands for

  • Political – taxes, tariffs, labor laws, trade restriction
  • Economic – economic growth, interest rates, exchange rates, inflation
  • Social – population growth, age distribution, attitudes toward careers and minorities, safety concerns
  • Technological – R&D activity, automation, rate of change, production efficiency
  • Environmental – weather, climate
  • Legal – discrimination, consumer, employment, health and safety, consumer law

Risks and Opportunities with External Issues

The following table shows some examples of an issue, a single concern, the potential risks and opportunities and a method of monitoring them. Most companies will have multiple concerns for each issue.

Issue Concern Risk Opportunity Monitor
Political Tariffs Reduces ability to export Reduces external competition Monitor USITC
Economic Interest rates Limit capital availability Increase capital availability Meet with bank quarterly
Social Aging population Smaller workforce Increased demand for certain products Strategic planning and Annual Management review
Technological Changing markets No demand for current products Large demand for innovation Industry specific information sources
Environmental New laws Require investment Provide new markets Monitor EPA regulations quarterly
Legal Consumer laws Increased cost to manufacture Limits new competition Set google alerts
Style Communication Poor Excellent In-process errors

 

Conclusion – External Issues

The risks and opportunities of external issues can be handled in a very similar manner to internal issues. A key difference between the two is how much control the company has. With internal issues the company management should be able to evaluate and adjust to influence or change the outcome. With external issues the company can only react to the issues.

By looking at the Interested Parties, Internal Issues and External Issues a company can have a better understanding of the business risks and opportunities. With this information they can select a strategic plan which best directs the company to obtain a long-term goal of profitability and longevity.

 

Zero Defects

Zero Defects means no inspectionsThis article is presented as part of an overview of the quality guru’s of the 1980’s. Zero Defects was a key phrase develop by Mr. Philip Crosby and presented by Philip Crosby Associates. Reading “Quality Is Free”, “Quality Without Tears”, and “Quality Without Pain” are helpful in understanding how Mr. Crosby developed his philosophy and encouraged others to use it. For more information about Philip Crosby Associates, go to http://www.philipcrosby.com/pca/index.html.

How does Zero Defects Relate to Conformance to Customer Requirements?

Much of the negative comments applied to the philosophy of Mr. Philip Crosby was a result of taking the term “Zero Defects” out of context. To understand Zero Defects a person must first accept that “conformance to customer requirements” constitutes an acceptable quality level. Therefore the goal is to meet the customer requirements 100% of the time.

Zero Defects is a Goal

It must also be noted that the goal is 100% conformance to customer requirements. To achieve that goal it may first be necessary to meet three sigma and then four sigma and then six sigma. Goals must be set using the cost of quality to determine how to apply resources. If one process is at a 6 sigma performance relative to meeting customer requirements and another equally utilized process is at 2 sigma performance, then scarce resources must be applied to the poorer performing process first.

The Effort to Reach Zero Defect Must Be Continuous

A basic tenet of Mr. Crosby’s philosophy was that improvement is a never ending cycle. This idea is also promoted by Dr. W. Edwards Deming, Dr. Joseph Juran and ISO 9001 and ISO 14001. The effort is continuous and never ending in order to stay in business, provide jobs and make a profit. So simple.

What Does ISO Stand For?

ISO means working together for standardization

Where Did the Name ISO Come From?

ISO is the anachronism for “International Organization for Standardization”. It is not the” International Standards Organization”. The anachronism would have been different in each country – IOS in English, OIN in French. To avoid any problems this would create the founders gave it a short, all-purpose name. They chose “ISO” from the Greek isos meaning “equal”. So whatever the country or language, the short form is always ISO.

What does the ISO do?

The International Organization for Standardization is the world’s largest developer and publisher of international standards. Did you ever wonder who came up the with standard size of a sea-tainer or a tablet of paper? It was the International Organization for Standardization. Most of the time we don’t think about standards, we just expect things to fit and to work well and safely. Standards are hidden given only noticed when absent. The International Organization for Standardization has more than 19,000 international standards. The International Standards provide a common technological language facilitating trade and the transfer of technology.

How Did ISO Get Started?

In 1946 delegates from 25 countries met and decided to create a new international organization with the objective “to facilitate the international coordination and unification of industrial standards”. It officially began operations February 23, 1947. It is not a governmental organization but a network of 163 countries, one member per country, with the central secretary in Geneva, Switzerland that coordinates the system.  Some the members are part of their government structure, others are from the private sector, usually from a national partnership of industry associations. Each member has one vote and all members are on equal footing. Standards are based on consensus among experts in the field and are periodically reviewed, usually every five years to see if they should be maintained, updated, or withdrawn. The standards are voluntary and market driven. There is no legal authority to enforce the implementation of the standards.

How Are ISO 9001, ISO 14001, ISO 27001, ISO 26001 Different?

The majority of the standards are specific to a particular product, material or process. However ISO 9001 (Quality), ISO 14001 (Environmental management), ISO 27001 (information security) and ISO 26001 (social responsibility)are generic management system that can be implemented in any organization, no matter the size, product or sector.

If you would like to learn about how International Organization for Standardization is financed and new standards are selected for development go to http://www.iso.org/iso/about.htm

 

Point 14 – Top Management Commitment to Action

Clearly define top management’s permanent commitment to ever improving quality and
productivity, and their obligation to implement all of these principles. Indeed, it is not enough that top management commit themselves for life to quality and productivity. They must know what it is that they are committed to—that is, what they must do. Create a structure in top management that will push every day on the preceding 13 Points, and take action in order to accomplish the transformation. Support is not enough: action is required!

Dr. W. Edwards Deming

What is Management’s Job – Commitment to Action

One of my father’s favorite sayings was, “lead, follow or get out of the way”. Management’s job is to lead. There must be a commitment to constant and on-going improvement. Each and every morning, management must look at their operation and decide what needs improvement and make a commitment to take action.

The Price of Failed Commitment to Action

If management does not make a commitment to constant and on-going improvement, it
will not happen. Management does not have to implement  the change but they must lead the change or their employees will end up building internal empires or chasing projects with
a lower value to the company.

Part of creating this commitment is developing a structure that guides the employees to
an on-going commitment of improvements in quality and productivity. Management must establish a system, indicate its’ importance to the company and demonstrate their own commitment to constantly and forever improving. It does not have to be fancy, but management must believe and support it.

The Call for Commitment to Action

There is a childhood chant, “Sticks and stones may break my bones but words will
never hurt me.” I wish it were true. How many suicides were prompted by cruel words? Words have power, the power to build up or the power to tear down.When management stands up and says “this is who we are and this is what we stand for” it can change the world.

My first job was with an ethical pharmaceutical company. We had a simple rule,
“Would you want your child to take this medicine?” If the answer was no, we threw it away. Every person on the line had the ability to call the supervisor and point out a problem. Each and every person on that line knew the importance of what they did and that attitude came from the top down. The VP of manufacturing walked through the plant several times a day and any operator
could stop him with a question or a concern. We had power and pride.

So what are you going to do, lead, follow or get out of the way?

Point 11 – Arbitrary Numerical Targets

 

Is your management review a continuous improvement tool or an arbitrary numerical target?

Management Review – a Continuous Improvement Tool or Generator of Arbitrary Numerical Targets

 

Eliminate arbitrary numerical targets
Eliminate work standards that prescribe quotas for the work force and numerical goals for people in management. Substitute aids and helpful leadership in order to achieve continual improvement of quality and productivity.
Dr. W. Edwards Deming

Doing it Wrong – Management by Arbitrary Numerical Targets

I think the key phrase is “arbitrary numerical targets”. Various companies I
worked for over the years have had management goals and objectives. Sometimes
the managers chose them, sometimes we were guided in them, and at a few it was
just an outright order. At one particular company we had to find either a 10%
increase in productivity or a 10% reduction in costs each year. To the outside
world we were setting our own goals. In reality we were working to arbitrary
numerical targets. The glossy projection sheets and plans appeared to be the
desires of a motivated workforce. We were motivated alright, we either
delivered on the arbitrary numerical target or lost our jobs.
The reason these goals were arbitrary numerical targets was they were identified
using the wrong method. Management did not sit in the management review and
look at the reported performance, and ask the staff to participate in continuous improvement. They looked at how much money they needed to bring in
to be a hero and then told everyone to deliver on arbitrary numerical targets.

Doing it Right – Management by Continuous Improvement not Arbitrary Numerical Targets

There was one company I worked for that did this right. They decided, from the data
in the management review, which was the worst performing press in the plant. It
was one of those bad economic times and no one had money to replace the
machine. Management built a team of operators, mechanics, supervisors and
engineers and turned the machine over to them. They didn’t set an arbitrary
numerical goal, they asked “what would you do to make this run better?”
The team cleaned the machine and then ran an order. Any place there was an oil leak,
they fixed it. They figured out why the leak had occurred in the first place
and where necessary made improvements in replacement parts like bearings and
seals. Once the machine was functioning as designed, they implemented the
Plan-Do-Check-Act process. They analyzed the production on the next order and
tweaked the machine and tooling. They adjusted gages so they were easy to read
and ran another order. By the time they got through, the machine was producing
at 130% of design with a part-time operator. No arbitrary numerical target
would have set the goal this team achieved.

Which Way Are You – Management Review to Eliminate Arbitrary Numerical Targets

A key tool in eliminating arbitrary numerical targets is the management review. If done well, it leads to aiding the improvement of quality and productivity. If done poorly it leads to arbitrary numerical goals. Look at how the process is managed. Are reports put into place to pass the audit or are they a tool to identifying problems and solutions? Who contributes to the reports? Is this a “dog and pony show” or are
employees encouraged to talk openly without fear of losing their jobs? If a
company wishes to create continuous improvement, to stay in business and create
jobs, then the first place they need to look is the management review. So what
does your management review generate; continuous improvement or arbitrary
numerical targets?

Creating and Maintaining a Corporate Culture Using ISO 9001

 

How do we maintain and communicate corporate culture using ISO 9001?

                I have a Saturday morning secret weapon, to improve my business. I attend the Levy Entrepreneurial Group meeting. Thank you Joe for creating it, Jack and Terry for leading it, and Don for introducing me to it. I love talking to the attendees, they have so much experience and they are happy to share.  Subjects range beyond my imagination, no small feat when you realize I write fiction as a hobby. On the drive home, this week’s meeting  on corporate culture, had my mind running like a squirrel that got into chocolate covered coffee beans. Good thing traffic was light, I was definitely a distracted driver.

                Let’s start by defining corporate culture. It is the psychology, attitudes and experiences of the society formed in a company. It is a blend of values, beliefs, rituals and myths, developed over time. To sum up, corporate culture is the perception of a company by its’ employees, vendors, and clients.

                So how do we create and keep a positive corporate culture? Implementing ISO 9001 correctly.

Communicating Corporate Culture using ISO 9001

It starts with the Quality Policy. It is a simple, straight forward statement of how we treat the customer, our employees and our suppliers. It must be something more than a framed plaque on the break room wall. Company leaders, and that is anyone who supervises, trains, or assists other employees, must live and refer to the values stated in the policy when it comes to decision-making. Thus a requirement of ISO 9001 is communicating the corporate culture.

                Job descriptions also communicate the corporate culture in more subtle ways and are required by ISO 9001. The job descriptions guide the employee to work within specific constraints and include a responsibility to evaluate and improve how the company does business. This should also be reflected in the employee review process and the development of objectives. All of these are requirements of ISO 9001. All of these communicate the corporate culture.

                Using the standard organizes communications to the employees. Clearly defining the corporate culture using ISO 9001 provides consistent values as different people generate job descriptions, reviews and other employee documents since everyone is guided by the quality policy.

                Small companies often do a good job of “presenting the vision” when they start. Growth can change all of that. Training is necessary. Not just job training but also training on the corporate culture. Much of Saturday’s meeting included examples of when this was done well and when this was done poorly. The standard requires the training on the quality policy which defines the corporate culture. Using ISO 9001 requires the communication of the corporate values.

Keeping the Corporate Culture Using ISO 9001

                Documentation  

                When developing your documentation systems it is critical to realize everything is linked and the quality policy it the keystone holding the over arching philosophy together. Using the standard as a guide helps control the dispersal through the documentation process, making it easier to communicate the corporate culture using ISO 9001.

Section 4.2 of the ISO 9001 standard lists the documents a company needs to use for training to keep the corporate culture in place:

  • A quality policy and objectives
  • A quality manual
  • Procedures
  • And documents for planning, operation and control of the processes

All of these must reflect the corporate culture, particularly when it comes to guidance on decision making.

                Management

                According to section 5.1 of the standard, management must accept the responsibility to keep the values important to the corporate culture in place. A key element to keeping corporate culture is stated in clause 5.5.1 of the ISO 9001 standard, “Top management shall ensure responsibilities and authorities are defined and communicated within the organization.” That isn’t just guidelines on who does what and with what and to whom, but also the values guiding each and every interaction, decision and activity in the workplace.

Viewing Employees as a Resource Stabilizes the Corporate Culture using ISO 9001

                ISO 9001  has a whole section on employees. How does management make sure they are competent, aware of the corporate culture, and trained? Does the corporation provide the infrastructure and work environment to make the employees successful at living the corporate culture? Most importantly, the standard recognizes employees are a valuable resource. Section 6 of the standard is a guide to empowering employees. It becomes a simple task to stabilize the corporate culture using ISO 9001.

Outside perceptions of the Corporate Culture using ISO 9001

                The Care and Feeding of Clients

                ISO 9001 requires interaction with the client and a development of a feedback mechanism, not only for errors but in ways to provide better service. The corporate culture has to be built around serving the customer or the company doesn’t stay in business. Thus the clients perception  is improved and the corporate culture using ISO 9001 is propagated.

                Controlling vendors

                Most companies focus on communicating and living their corporate culture  when it comes to their clients and their employees. A much smaller number take the same care to communicate the corporate culture to their suppliers. Implementing ISO 9001 addresses that shortfall. The supplier must have a good perception of how the company expects them to perform and clear communication as to whether these requirements have been met. This goes beyond, meeting performance requirements, on-time delivery, and reasonable price. Consistency is created through the entire process stream and clear perceptions created of the corporate culture using ISO 9001 to deal with suppliers.

                How the standard is viewed and implemented can take many forms. However, creating and maintaining the corporate culture using ISO 9001 is one of the strengths of doing the job right, staying in business and providing jobs.

ISO 9001 Management Review – Going in Circles

Are We Going in Circles ?ISO 9001 Management Review

Implementing ISO 9001 can sometimes feel like you are a dog chasing its’ tail; you can’t just walk down through the standard completing  a section at a time. Instead you have to jump from quality policy to documentation to customer requirements to design and hey isn’t this all about process control? Talk about making us linear, engineering-types crazy with frustration.

ISO 9001 Management Review is really a two-way Street

ISO 90010 management review is a key element in making implementation of the standard a viable continuous improvement effort. Support for change comes from the top down and is communicated in the ISO 9001 management review. Management is responsible for making sure the resources are available to create change. Management is responsible for setting priorities for change. ISO 9001 management review is the place where employees demonstrate what is and isn’t working and conveys to management what they need to accomplish positive change. ISO 9001 management review is the place to communicate and set the goals for the next business cycle, so while it may feel like you are going in circles it is really a two-way street for communication.

Typically, the management representative pulls all the information together for the ISO 9001 management review and generates the agenda for the business cycle. Note, it should be for the business cycle. In most companies the business cycle is annually so a single ISO 9001 management review per year suffices. However, I have seen companies where the business actually cycles multiple times a year. In this case, for the ISO 9001 management review to be an effective tool, and not just “the ISO 9001 standard requires it so we have to sit through it” meeting, it should be performed multiple times per year.

The management representative is responsible for keeping the presentation on track, but that does not mean doing the entire ISO 9001 management review, single-handedly. Each area should report and take full responsibility for the presentation of the data and answer questions related to that data.

Organizing the ISO 9001 Management Review

The data being presented at the ISO 9001 management review should not come as a surprise to management. They should have been receiving, and reading, regular updates. This meeting is to present trends from the data to be used to guide future actions and goals and most importantly, determine if the system is working or needs serious revision.

Each activity in standard implementation should link back to and communicate to management through the ISO 9001 management review. The ultimate responsibility of management is to allocate resources, develop a plan to be competitive, to stay in business and to provide jobs. For this reason, during implementation of the ISO 9001 standard it sometimes feels like the efforts take the employees in circles, always returning to the ISO 9001 management review. Continuous improvement is a cycle and a never ending quest following the Plan Do Check Act model. ISO 9001 is a tool for continuous improvement and therefore is cyclical in nature. ISO 9001 management review is the two-way street for communication to create constancy of purpose for continual improvement of products and service to society, allocating resources to provide for long range needs rather than only short term profitability, with a plan to become competitive, to stay in business, and to provide jobs[1].


[1] Dr. W. Edward Deming, 14 Points, “Constancy of purpose”

Point 5 – Improve Every Process

Improve every process

Improve constantly and forever every process for planning, production, and service. Search continually for problems in order to improve every activity in the company, to improve quality and productivity, and thus to constantly decrease costs. Institute innovation and constant improvement of product, service, and process. It is management’s job to work continually on the system (design, incoming materials, maintenance, improvement of machines, supervision, training, retraining).

Dr. W. Edward Deming

Improve constantly and forever, Wow, that is a tall order. Larger companies are able to staff for improvement, but what can the little guy do?

The first step is to prioritize, go for the biggest bang for the investment first. That does mean collecting data. Start with a Cost of Quality report. How much do you scrap? How much do you spend on rework?

When I go into plants to implement ISO9001 I expect to get them certified in system that is indicative of the company culture but I also look for where there is waste and I can reduce costs. I take a visit to the scrap bin and here is the trick, I look for similar parts with similar defects. This tells me there is a system failure. It can come from two places, the design of the part or the method of manufacture. I work backwards from the parts and look to save my client the annualized cost of my contract.

Service providers are a little different. There is no scrap box to look in. What I generally find with them is each employee has a different way of doing each job and there are no written directions or procedures. Each person is sure their way is best. Frequently they have found out about a customer problem and have incorporated a preventive measure in their own method. By listening and applying this information and then training the entire staff, making sure to acknowledge the source and reason for the preventive measure we create a streamline system that addresses all customer issues. We have searched out the problems and created improvement.

Both the manufacturer and the service provider do have customers. Both have complaints that can be used to create real and systematic improvement. Both have the opportunity to call their customers and really listen to what the customer wants and needs. A requirement of ISO 9000 is continuous improvement. The companies that deliver on that element grow.

My bank is ISO 9000 certified. I talked to one manager and he said the certification didn’t mean much to the average customer. What did make a difference was the consistency of accurate and reliable performance, from both new and long time employees. The customers found the bank listened to them and implementing safe new systems that made banking easier at no charge. ISO 9000 had created a system of continuous improvement that kept and drew in new customers. The bank has been able to stay in business, loan money and provide jobs. To quote the good Doctor, “So simple”.

ISO 9000 is a Change to a Healthy Life Style, Not a Crash Diet

ISO 9000 is a change in the way everyone in the company thinks and behaves. It is not easy to implement correctly and it is very easy to back slide into the old way of doing things.

Think of ISO as a corporate change to healthy living from a junk-food junky. Ninety-nine percent of people don’t get up off the couch dust off the potato chip crumbs and start running five miles while munching on tofu.

Most people get on the scale and come to the realization they have to make a change. They may start out with a crash diet or they may add a walk to their daily routine, the diet may make a big impact in the short term with disastrous long term results while starting a reasonable exercise program will create gradual improvement your need for long term good health.

The corporate scale is the Cost of Quality report. It measures where there is waste and what it costs to keep control of problems. This is a report you should craft carefully because it is how management is going to measure your success or failure. Understand where the numbers come from, what it takes to collect them, and just how closely it relates to the P&L report. If you can’t find a close correspondence between the two reports, you need to revise the Cost of Quality report.

You need to break management into the idea that you are looking at a 5-10 year plan. Yes there will be measurable improvements in the short term but the real benefit comes from continuously monitoring and improving. You are about to implement Dr. Deming’s, Plan-Do-Check-Act and you better do it right or don’t bother doing anything at all.

Don’t Skip the Good Stuff Part 6

Management Responsibility

            There is a saying, “What goes around, comes around” or you can look at this circle and considerate it the visual definition of “synergy”. There is a reason this is a circle. Management responsibility, resource management, product realization, measurement, analysis and improvement are interrelated. Take away any one of these and the ball, better known as your company profits, drops dead. It is another way of looking at Dr. Deming’s ‘Plan Do Check Act” model.

 

            Looking at section .2 the top box in the circle is management responsibility. I have seen many corporate executives abdicate this point to the quality manager. Usually they pass along the responsibility but not the authority. So what is management responsible for doing?

  1. Steer the bus

This means providing a long term plan, as in a 10 year objective and nothing as vague as “make money”.

  1. Provide the fuel

Management must find the people, funds, equipment and raw materials to make the process work.

            If a company is going to grow and remain in business there must be a written policy for doing business and goals to be achieved. Unless a company is a charity the basic is to make a profit. The question is how much profit? A company isn’t going to double in size without planning, or if it does, it won’t stay that way for long. Management must set out a clear and definitive game plan to get long term positive results.

            The fuel is something else management must provide. Imagine making medicine with untrained people. The result would be catastrophic. Management must find the right people and provide training. Good people are hard to find, they should not be treated as a commodity or the long term growth will suffer.

            Equipment is another resource management is responsible to provide. This does not mean going out and ordering a one of a kind machine to make your particular widget. It does mean making sure the machine consistently produces acceptable product. There is a tool called total productivity maintenance. I have seen examples where using team work and asking the operators for input has resulted in a machine which is 10 years old increasing in productivity by 30% and reducing variation by 50%. Normally productivity goes down and variation increases as a machine ages.

            Raw materials are another matter. There is an old saying, you can’t make a silk purse out of a sow’s ear. Raw materials must be capable of turning into good product. At one point I worked for a pharmaceutical company. We produced an injectable drug. The basic material was organic so there were variations. However on one particular lot an extraneous peak showed up in the gas chromatograph analysis. Checking backwards, that same peak had been in the raw material. Countless man hours were wasted because the raw material was not capable. Management had approve the purchase because they were desperate to fill a stock out situation and didn’t want to acknowledge the material was bad.

            Having provided everything necessary to make the product it is time to do just that – produce something to sell. There is an element of QS 9000 I like to implement in ISO 9000 applications. It is called the Pre-Production Approval Process (PPAP). It tests the ability to make a consistent product over a reasonable duration of time, usually half a shift.

            Once the product has been produced, it is time to measure and analyze for improvement and send it to the customer for feedback. One of my clients made toothpaste closures. They made millions of them and were very proud that they only had 12 open closures per 100,000 manufactured. The cost to the toothpaste company was huge down time. Every open closure shut the line down for cleaning for 10 minutes they were filling at the rate of 600 tubes per minute. Seven people stopped producing salable product and wielded scrub brushes for every open cap. With this feedback, my client designed a machine to make sure the closures snapped shut and removed those that did not. Cavity marking on the rejects gave the root cause of the problem and before too long they were whistling along at 3.4 parts per million open caps. Without the analysis and the customer feedback, my client would have lost a very important piece of business. Which would have impacted the long term plan.

So there you have it. The really good stuff for ISO 9000 is before you even get to the standard.