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Standardization and integrated managementsystems - A business-practitioner’s viewpoints

January 29, 2010 Ver. 1.2

Juhani AnttilaAcademician, International Academy for Quality (IAQ)Venture Knowledgist Quality IntegrationHelsinki, Finlandjuhani.anttila@telecon.fi , www.QualityIntegration.biz

These pages are licensed

under the Creative Commons 3.0 License http://creativecommons.org/licenses/by/3.0

(Mention the origin)

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1. Rectifying conceptual problems- Even experts should appreciate traditions and recognized practices of businessmanagement.

2. Applying standards with integration, responsiveness and innovation- Organizations aim at competitiveness and sustained business success

3. Considering business environments- Organizations and their business management must adapt themselves to theprevailing business realities.

4. Appreciating information and knowledge in managing an organization- Core of a management system consists of information and knowledge. Mainlythe system is a mental system.

5. Performance of a management system as a fuzzy issue- A management system must be always ready but never finished.

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Integration covers all aspects and expertise subject mattersneeded for the management of an organization.

Standardization and integrated managementsystems - A business-practitioner’s viewpoints

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Major problems in ISO management standards

1. System approach is unclear and not business-focused.2. There is confusion between the system management and system requirements.3. Process approach is unclear.4. Integration should be understood as business-integration.

5. This spiral model isunpractical and naive formanagement purposes. Itdoes not follow Juran’soriginal business-based ideasneither modern PDCApractices.

6. PDCA is a businessmanagement model not a processmodel. This does not cover allnecessary strategic andoperational management needs.All stakeholders should beconsidered. What is the quality (orX) management system?

7. This diagram does notsupport business-integrationthat is necessary in thesystem and processapproaches. The core shouldconsists of general businessmanagement elements.

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Juran’s quality spiral model, The “Big Q” approach

The original spiral model coversthe organizational business scope

comprehensively including allnecessary management aspects

embedded in a natural and logicalway within business activities. It isprincipally a descriptive model and

does not yet give any practicalguidance.

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Problem cases

(defects)

(5) New Performanceplanning

(4) Breakthroughimprovement

Control with new limits

(2) Performance control

Rectifying sporadicproblems

Feedback

0

20

40

0 Time

(Ref. Dr. Juran: Trilogy Approach)

Planning, controlling, and improving the performanceof business (processes)

Prevention

(3) Small step improvement”Kaizen”

Con

trol

lim

its(1) Performanceplanning

A PC D

A PC D

A PC D

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The PDCA Model is a recognized multipurposemethodology for business management.

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The PDCA Model (called also as Deming / Shewhart Cycle) has a long history and a great variety ofdifferent applications, possibilities, and uses in the field of general business management:

– Original PDSA (Plan-Do-Study-Act) model was created by American Walter Shewhart in the1920’s and used for production control.

– The model became popular through American W. Edwards Deming’s lectures of managerialquality during several decades (from 1950’s to 1990’s).

– American Joseph Juran’s Trilogy Model (1964) contains the same elements as the PDCAmodel. He especially emphasized differences between control and breakthrough. His spiralmodel was presented in his well-known Quality Control Handbook (1975).

– In the 1980’s Japanese Kaoru Ishikawa and Masaaki Imai emphasized problem solving andcontinual improvement (“Kaizen”) according to the PDCA model.

– Later Japanese Shoji Shiba has made remarkable work by combining the original PDCA modelwith the ideas of managing knowledge and of Buddhist philosophy.

– In late 1990’s and early 2000’s the SixSigma methodology for large scale businessperformance improvements was developed by Motorola and became popular by its successfulapplication in General Electric. Also SixSigma is based on the PDCA approach.

– The PDCA model has also consistent linkages with traditional systems theory and systemsdynamics.

– To the international standardization the model was used at first in standards ISO 9000:2000 forquality management from where it came e.g. to information security management standards afew years later.

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A triple PDCA (*), a model for good management:Coordinated activities to direct and control an organization (**)

ACTING (A):• Preventing actions• Improving actions• Re-engineering• Communicating• Recognizing andrewarding

PLANNING (P):• Business andmanagement models• Business plan• Approaches andmethodology

CHECKING (C):• Assessing theperformance• Reviewing theperformance

DOING (D):• Deploying the approachand achieving the results• Controlling operationalperformance• Corrective actions

A PC D

Applying a triple PDCA model(“The Eyes of Buddha” (***)):1. Rational control (operational)2. Continual rational small step improvement (operational), “Kaizen” approach3. Innovative breakthrough changes (strategic)

(*) Deming / Shewhart, (**) ISO 9000, (***) Shiba; Bodhnath Stupa, Kathmandu

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Systemic management of business resources

Managing based onsystem recognition andfeedback loops.

(Ref.: Repenning & Sterman)

Plus ca change,plus c'est lamême chose

Stop tothink

3077/2.9.2007/jan

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These principles can be used by senior management as a framework to guide their organizationstowards improved performance. The principles are derived from the collective experience andknowledge of the international experts.

* Principle 1: Customer focus

* Principle 2: Leadership

* Principle 3: Involvement of people

* Principle 4: Process approach

* Principle 5: System approach to management

* Principle 6: Continual improvement

* Principle 7: Factual approach to decision making

* Principle 8: Mutually beneficial supplier relationships

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These principles are relevant for all areasorganizational business management includingalso all expert disciplines.

ISO 9000 quality management principles, QMP

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”Identifying, understanding and managing interrelated processes as a system contributesto the organization's effectiveness and efficiency in achieving its objectives”

Key benefits:• Integration and alignment of the processes that will best achieve the desired results.• Ability to focus effort on the key processes.• Providing confidence to interested parties as to the consistency, effectiveness andefficiency of the organization.

Applying the principle of system approach to management typically leads to:• Structuring a system to achieve the organization's objectives in the most effective andefficient way.• Understanding the interdependencies between the processes of the system.• Structured approaches that harmonize and integrate processes.• Providing a better understanding of the roles and responsibilities necessary forachieving common objectives and thereby reducing cross-functional barriers.• Understanding organizational capabilities and establishing resource constraints prior toaction.• Targeting and defining how specific activities within a system should operate.• Continually improving the system through measurement and evaluation.

ISO 9000 Quality management principle #5:System approach to management

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This principle is relevant for all areas of organizational management.An organization is managed as one single system.

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System concept

System (*) is a set of interrelated or interactingelements (processes).- A system is an entity that maintains its existenceand functions as a whole through the interaction ofits parts.- A system has always an aim or purpose definedby the system’s creators or owners. The system isjust created to accomplish its aim.- A system has interactions and transactions withits environment to get input from and to provideoutput for system’s stakeholders. Stakeholdersmay set requirements to the system.- A system is managed as a whole. Management isbased on knowledge and information and PDCAmanagement model (feedback).

An organization is a system.

(*) Ref. ISO 9000 definition

A system(and its elements)

A system’screators andowners

Management

System environment(Stakeholders and system-competitors)

Inputs and outputs throughinteractions and transactions

System management domain System requirements

Internal interest External interest Effectiveness and efficiency Effectiveness (Ref. Russell's paradox)

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Management disciplines:- MA, MB, MC:O rganization-internal (business) management (system)- AA/B, AB/C: Assurance between organizations (based on organization-internal management system)

At all organizational levels there should be consistency among these disciplines. Both managementand assurance consist of many different expertises.

Organization C

MC

Organization A

MAOrganization B1

MB1

AB/C

AA/B

Two principal domains, management and assurance,of the organizational management

Aim of the approaches:M Excellence (internal interest)A Confidence (external interest)

Organization B2

MB2

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Quality management (QM) and quality assurance (QA)as consistent parts of an organization’s quality approach

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QM = Quality management (focus on excellence of a business approach), ISO 9004QA = Quality assurance (focus on confidence for product conformity), ISO 9001

ISO 9000 standards cannot be understood by ISO 9001 only.ISO 9001 is a part of ISO 9004:- in standard documents as a whole- in individual standard clauses

A QMS covers the whole business management system (BMS).

QM business system aspects(QMS = Quality Management System)

QA elements

QM principles

Tailoring case-by-case

Situation is very analogous with all expertise areas of businessmanagement, e.g. information security management.

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Quality assurance (QA):- strengthening the confidence among the customers

Process (product realization) Output/Product

Input

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Quality assurance (*)

Customer

Processmanagement

(*) Standard model ISO 9001 or tailored, and quality assurance plan / agreement

Product deliverychannel

QA communicationchannel

“e-Certificate”

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Division Directors

Unit / function managersand professionals

Process owners

Process team members

Portion of time spent on activity

Top managementBreakthroughactivies

Improvementactivities

Routineoperationaland maintenanceactivities

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Managing activities and responsibilities (a management system) cover the whole organization.

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3...5years

1...3years

Realization means0,4...1year

Strategic plansPurposeof the

company

Infrastructure and elementsof an organizational management system

Actionjust now

Mission(Purpose,

justificationof the

existence)

Vision

Policies

StrategiesActionplans

Resources,Procedure

documents,Tools

Developmentprojects,

”Becoming Better”

Operationalprocesses,

”Earning Money”

S H A R E D B U S I N E S S V A L U E S

Separate X systems within this typical business framework are very artificial.All X actions must be integrated with the management system.

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Integration is the main strategy for a professionalexpertise approach within an organization (system)

Integration means:• Implementing effective and efficient expertise

items embedded within normal businessmanagement activities (especially in businessprocesses)

• Acting against building distinct ”expertisesystems” (i.e. lack of integration). Business-separated expertise initiatives are artificial.

One must understand and take into account thenature of the organizational system, its businessand its realities when implementing expertiseinitiatives of business management. Integration isalways an organization-dedicated solution.

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Expertises may include:–Finance–Quality–Business risks–Information security–Human resources–Information and communications–Knowledge–Occupational health and safety–Environmental protection–Innovation–Ethics–Social responsibility–etc.Cross-application of all expertise areas is needed.

E.g. information security is needed in qualitymanagement and quality in information securitymanagement.

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Business standards are established throughorgnizations’ business structures and processes.Separate management systems are illusions.

Business-integrationof the standards ”systematicity”

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Management integration takes place at two levels

• The strategic level, where one makes decisions and undertakes measures concerningthe entire organization (business system of business processes) and considersespecially the future competitiveness of the organization.

• The operational level, where decisions and measures concerning daily managementare made and undertaken. Emphasis is on operational questions of the individualbusiness processes.

These two managerial areas are very different by their purpose and thereforedifferent methodology is needed for them.

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Integration covers all aspects needed for themanagement of an organization.

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Qualitymanagement

Occupationalhealth and safety

management

Environmentalmanagement

Human resource

management

Riskmanagement

Financemanagement

Information security

management

Conflicts: - on strategic level: General manager’s commitment - on operational level: Business processes’ commitment

Information/knowledge

management

Issue Xmanagement

Conflicts of needs and expectations from specialized management areas

A consistent and balanced integration is needed for avoiding conflicts!

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Integrating specialized domains of managementstandardization and ensuring natural business diversity

3342/20.8..2009/jan (Ref.: ISO Management systems standardization, MSS)

General management

responsibilitiesand business

system

Risks

Finance

Product quality

Occupational health and safety

Security

Environment

Socialresponsibility

Ethics

The Finnish modelfor integration (MSS)

Organizational diversity

Organizationalidentity & privacy

General managementsystem based on PDCA

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Valuesand

apprecia-tions

Profound knowledge: Business management sciences and experiences +Expertises in quality, information security, environmental protection, etc.

Business activities:-Operational duties-

-Strategic development-

Vision

Mission

Action plans Infrastructure

Strategies PoliciesManagement+

Management system

Owner,(Business creator)+Purpose

AN ORGANIZATION

From a businessestablishmentto satisfyingrequirements

Promotionand support:

* Standardization* Political impact

* Consultancy* etc.

Stakeholders+ Needs and expectations:

* Performance* Price and cost

Competitors

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Defining a business-integratedexpertise management, “X management”

X management: Coordinated activities to directand control an organization with regard to X

Note: X management is not management of X butmanagement of an organization.

X management is a responsibility of the businessmanagement, and it is taking place through themanaging actions of business leaders.

Experts have assisting roles both in Xmanagement. Cooperation of different experts isstrongly recommended.

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X:–Finance–Quality–Business risks–Information security–Human resources–Information and communications–Knowledge–Occupational health and safety–Environmental protection–Innovation–Ethics–Social responsibility–etc.

(Ref. e.g. ISO 9000)

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There are two elements in the concept X management system, XMS:

1. Management System (of an organization), MS:- System to establish policy and objectives (of an organization) and to achievethose objectives

2. X:- A qualifier (attribute) characterizing a management system (MS) characterizing how X is taken into account in the management system

XMS = X of/in/for MS

XMS is a concept for systematic approach, “systematicity”, for X in an organization’smanagement.

XMS is principally aimed for organization’s own internal business management needsand purposes.

In fact, the concept XMS is not at all needed for practical quality approaches inorganizations. It has caused a lot of confusions, especially when translated intodifferent languages.

X management system, a core concept in X management standardization

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253737/2.1.2010/jan

Necessary emphases in modern X management?

1. Integration:– Implementing effective / efficient and business-

relevant X principles and methodologyembedded within organization’s normal activitiesof strategic and operational management

2. Responsiveness:– Being able to adjust quickly to suddenly altered

external conditions, and to resume stableoperation without undue delay

3. Innovation:– Striving continuously for new organization-

dedicated innovative and unique solutions andencouraging various choices for X managementin different organizations.

X management X of/in/for management

Standard approach An organization’s uniqueapproach

Dynamic and flexiblebusiness management

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A problem among management standards users:Standards crumble organizations’ identity

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There are still organizations that build and maintain separatesystems for specialized management areas including quality,information security, environmental protection, OH&S, etc.Even that is promoted by consultation and training.

Organizations’ specialized systems - e.g. based on differentstandards - are distinct from the business systems.

Still the usage of different standards is promoted by differentcertifications.

Standards users have different (and even strange) opinions aboutstandards.

There are very little evidence on innovative standards applications.

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Standardization and users’ business reality

Standardization X: Issue X / Standard element X / Consensus process X

Organization A: Realization elements A: Innovation process A

Practical realization ofthe subject area

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Standardization subject area

Standardization Y: Issue Y / Standard element Y / Consensus process Y

Organization B: Realization elements B: Innovation process B

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”A desired result is achieved more efficiently when activities and related resources aremanaged as a process.”

Key benefits: * Lower costs and shorter cycle times through effective use of resources. * Improved, consistent and predictable results. * Focused and prioritized improvement opportunities.

Applying the principle of process approach typically leads to: * Systematically defining the activities necessary to obtain a desired result. * Establishing clear responsibility and accountability for managing key activities. * Analysing and measuring of the capability of key activities. * Identifying the interfaces of key activities within and between the functions of theorganization. * Focusing on the factors such as resources, methods, and materials that will improve keyactivities of the organization. * Evaluating risks, consequences and impacts of activities on customers, suppliers andother interested parties.

ISO 9000 Quality management principle #4:Process approach

This principle is relevant for all areas of organizational management.An organization is managed as one single system of processes.

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Historical notes for the process approach

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• Process approach was used already in ancient plant and construction activities. The conceptis often referred to in cases of natural development.

• Through industrialization processes became an everyday concept in so called processindustry.

• From 1980’s process approach has been used for computers’ internal activities according tostructured analysis and design technique (SADT).

• In a large scale business process approach has been used comprehensively for the benefits ofbusiness management only for less than twenty years, and during that time a lot of practicalmeans have been developed for that purpose.

• Process management thinking got learning from system theory and system dynamics.• To the quality management standards ISO 9000, process concept was introduced in the 1990’s

and just in very recent years the methodology came to the other international managementstandards, e.g. information security management standards.

• BPR (Business Process Reengineering) is a concept for process improvements according tothe ideas of PDCA model. It was particularly promoted by Michael Hammer, James A. Champyand Tom Peters in the 1990’s.

• BPM (Business Process Management) has become during the recent years a popular conceptwithin IT experts in automating business processes according to SOA (Service OrientedArchitecture) principles.

• Today organizations’ all business processes are “complex responsive processes of relating”.

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A business is a system of processes

(Ref. Dr. Deming, 1950)

A business system consists of processes:

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What is a (business) process?

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Process means a continuous(*) activity by organized resources for fulfilling organization’sbasic duties:

– Processes put into practice organization’s business / action plan.– Operational every day work is done in processes.– Processes produce outputs (results) to the stakeholders.

There are always processes in all organizations.Structure (e.g. organizational structure) is acontradictory dimension to the processes.The both are needed – in fact they are also alwaysexisting in organizations. They cannot be replaced byeach other. Process is the primary one, The structureshould serve it.

Modern organizational processes are “complex responsive processes of relating”.

The key business management from the quality point of view is: How to managebusiness processes?

Process(acting)

Structure(existing)

(*) A project is a singular or unique process.

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The process/structure dilemma:Managing for balance

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Structure-stiffness

Functionality

Process(doing, acting):

Real time ActiveSkilled

EmergentAgile

AdaptiveFlexible

OpenFree Living

Structure (being, existing):Planned, Built, Passive, Past, Prescribed, Stagnant

Structure #1

Structure #2

Balance issues:- Freedom / control- Awareness / instructions- People / systems- Proactive /reactive

33Modern Times (1936): A story of industry, of individual enterprise - humanity crusading in the pursuit of happiness.3625/7.2.2009/jan

Enterprice identity is based onits business structures and processes

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A comprehensive process management model

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Business performance assessment and review

Process performance assessments (audits)

Inputs• require- ments• needs• requisites

People Otherresources Procedures

Work activity

Preventive action,improvement

Outputdata

Measurement

Process outputs

Analysis

Conformitycheck

Correctiveaction

A PC D

Re-design andre-engineering

Internaldata

A business process

Performance control

Other processes

Businessoutcomes

Otherprocesses

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New foundations for business infrastructure

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Uncertainty and ambiguity Emergence and self-organizing networks of actors Many heterigeneous global actors in virtual networks All linked with everything else, all linkages not known Customers and other stakeholders differentiating with singular needs Pradoxal freedom of the actors (”both-and” instead of ”either-or”) Signifigance of immaterial issues (information, knowledge, services) Informal learning and serendipity Increased speed of activities and change Signifigance of transaction phenomena Complex responsive processes of relating Simultaneous agility and maturity requirements Immense pressure / stress of business leaders

(Refs.:D Zohar, R D Stacey)

Certainty and predictability

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Crises in business expertises:To adapt to the needs of modern society

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Time

SpeedChangesAgilityComplexityDiversityImmaterialnessVariety

Businessenvironmentsand society

Problem

Marshall McLuhan:” Today each of us liveshundred years in a decade.”

Are the experts not able to follow the general development of organizations' businessdevelopment and trends of the society at large?Are they providing only "Plus ca change, plus c'est la même chose “?

Established business expertises

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Customer’s differentiation andorganization’s capabilities

2377/20.9.2002/jan

Cus

tom

er’s

val

ue

Uniform

Differentiated

Customer’s needsUniform Differentiated

Customer differentiation

lll lV

l ll Com

mun

icat

ions

flexi

bilit

y

Low

High

Production andlogisticsflexibility

Low High

Organization’s capabilities

lll lV

l ll

(Ref.: D Peppers, M Rogers)

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Activities within complex responsive processesof relating

High Certainty Low

High

Low

Agr

eem

ent

StandardsGuidanceMonitoring

Politicalcontrol -compromise

Experimenting

Chaos

Anarchy

Innovation

Creativity

Debate

“Zone of Complexity”

Serendipity

Trial & Error

3430/15.1.2008/jan (Ref.: Stacey: http://www.plexusinstitute.org/edgeware/archive/think/main_aides3.htm l)

All kinds of activitiesmay exist in networkingprocesses.

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Power law of the scale-freenetworks:

Many knots withfew links

Few knots withmany links

Knots with k links

Number of links (k)

Performance of business networks is influenced byindividual actors’ power and communication abilities

Real networks are unplanned and emergentsystems. Their growth is sporadic and self-organizing. An actor’s impact in a network:• Access = Actor’s easiness getting to theresources of the network• Reach = Actor’s potential wielding influencein the network• Control = Actor’s ability to control over theresources of the network

Business network is not any business system.

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Modes of operation in business processes

1. Mechanisticserialautomaticaccuracydue order

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2. Organiccomplex, organizedinteracting actorsnetworksconcurrentcommunion

3. DynamicComplex, chaoticspontaneusresponsiveinnovativevirtualvariativevariable rulespersonifiedquantum leap

(Ref.: Legat)

All business processes and activities consist of actionswith three concurrent dimensions comprising differentdegrees of freedom and variety:

Operational and structural complexity

VarietyDiversityDegrees of freedom

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Management of an organization is particularly relatedto managing organizational information / knowledge

Procedure document, standard,operational model, recorded operation,factual knowledge, etc. (explicit issue)

2645/9.1.2007/jan

Reality of the issue in the minds of theindividuals and in the practical operations(implicit / tacit contents of the issue)

– This part is the most significantregarding to the actions for theissue realization.

– The contents may change due totime and situation and depending oninfluences and learning.

Conscious

Sub-conscious

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Empirical fact-based information and inherentknowledge are needed for successful management

Measuring

Data

Analysing

Information

Reflecting and decidingIntervention

Plan / Act

Effects

0609/25.3.2008/jan

Knowledge- explicit records- tacit knowledge(know-how, competence)

The performance reality of the company business processes

A P

DC

...

Wisdom- myths- values

”Ba”

Environments

Facts

You get whatyou measure

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Business performance or X managementis not any on/off concept!

3741/3.1.2010/jan

YES

NONO YES

(1)

(0)

Specific actions (strokes or tricks)

XM

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Enhancing an organization’s business performance(from early stage to maturity) – X Integration

0 3010 6040 70 90 100%

0 = good-for- nothing

1 = perfect

Assessed overall business performance

Anecdotal

Competitive-ness

Beginnings

Excellence

Leadership

3742/2.1.2010/jan

Effectiveness

Need of change?How to get the change happen?

Organizations with a third party certificate (*)

(*) Third party certifications do not define any particular level of performance.Organizations cannot differ from the others on the basis of third party certificates

Gra

de o

f bus

ines

s pe

rfor

man

ce

Business performance is a fuzzy concept:

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Theses of the new approachfor applying X management and related standards

Striving for competitive X integration by:• Recognizing performance excellence instead of a narrow X conformity thinking• Striving for flexible realization of X in management and leadership instead of distinct X

management by using effective managerial methodology• Applying innovative “systematicity” (systematic approach) of the X in management instead of

formal and distinct X management systems• Using business-related X management principles and actions instead of fulfilling formal and

general X assurance requirements only• Setting stretched business objectives instead of minimum standard requirements• Aiming at innovative and unique solutions instead of stereotyped systems• Relying on internal business performance self-assessments and advanced X assurance

communication instead of third party audits and certifications of “artificial” X systems• Getting advantage of tacit knowledge instead of only records of explicit data and information• Networking with partners and recognized world-wide communities of multifarious expertise• Supporting various ways of collaborative learning instead of narrow-minded continual

improvement• Reinforcing and using company’s own internal awareness and expertise instead of passive use

of external consultants

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Epilog

There will be also in future standards-experts who don’t understand ordon’t want to understand business realities of real organizations.

Consensus process of standardization has a detrimental influence onthe clarity and ambiguity of general standards: “Stupidity

condenses in the masses - The mob has many heads but no brains”

However, standards must not hinder creative applications of thestandards by responsible organizations.

Juhani Anttila

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