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Columnist Jack West

Photo:  Jack West


The Economics of Quality

The newly revised ISO 10014 offers help on achieving financial success.




Eight Quality Management Principles from ISO 9001 and ISO 9004

1. Customer focus. Organizations depend on their customers and therefore should understand current and future customer needs, meet customer requirements and strive to exceed customer expectations.

2. Leadership. Leaders establish unity of purpose and direction of the organization.

They should create and maintain the internal environment in which people can become fully involved in achieving the organization's objectives.

3. Involvement of people. People at all levels are the essence of an organization, and their full involvement enables their abilities to be used for the organization's benefit.

4. Process approach. A desired result is achieved more efficiently when activities and related resources are managed as a process.

5. System approach to management. Identifying, understanding and managing interrelated processes as a system contributes to the organization's effectiveness and efficiency in achieving its objectives.

6. Continual improvement. Continual improvement of the organization's overall performance should be a permanent objective.

7. Factual approach to decision making. Effective decisions are based on the analysis of data and information.

8. Mutually beneficial supplier relationships. An organization and its suppliers are interdependent, and a mutually beneficial relationship enhances the ability of both to create value.

For more, visit www.iso.org/iso/en/iso9000-14000/understand/qmp.html.

Some time ago, ISO/TR 10014:1998, "Guidelines for managing the economics of quality," came up for its five-year systematic review. The 1998 version was based on the conventional concepts of measuring and managing costs related to quality--often called cost of quality. Still valid, these techniques are one way to identify and track progress in Six Sigma programs, and they appear to be in greater use today than ever before. However, the techniques are more the stuff of handbooks and textbooks than standards. Many ISO/TR 10014 users thought that the 1998 version should be allowed to die a peaceful death. Others wanted to preserve the document as it was. Still others thought that the document would best serve industry if it could be transformed into a broader guide to achieving financial success through the application of quality principles. The latter concept won in the end.

The revised document was recently approved and is expected to be published by the end of this year as ISO 10014:2006, "Quality management systems ¾Guidelines for realizing financial and economic benefits." Although its predecessor was a technical report, the new ISO 10014 will be an international standard. It builds on the eight quality management principles (QMPs) found in ISO 9004 that are used as basic inputs for developing ISO 9001.

The user starts with a self-assessment, using a basic maturity model to define how well the organization has implemented each of the eight QMPs. A straightforward five-point maturity scale is used to score the organization's response to each question. The results are summarized by principle and any score less than three indicates that the organization may benefit from improvements to its activities related to that principle.

Users should focus on the principles they scored the lowest on, as well as those that are most important to the organization. For example, a service organization for which customer satisfaction is critical might have a low score in the "customer focus" principle and will recognize that better implementation of the "people" and "leadership" principles will also be critical. The organization's improvement plan might include activities to improve how all three of these principles are implemented.

I've successfully used the technique of self-assessment against principles with follow-up improvement projects. ISO 10014 is probably the best version of the concept I've seen. I recommend it to organizations that need performance improvements and greater economic benefit from their quality management systems.

Several different drafts of ISO 10014 were prepared, discussed and rejected before the current approach was developed. A great amount of credit goes to project leader Tommy Johansson of Sweden for his patience, and to Paul Palmes of the United States, who did much of the hard thinking to turn this project into a useful document.

About the author
From 1997 through 2005, John E. (Jack) West was chair of the U.S. TAG to ISO TC 176 and lead delegate for the United States to the International Organization for Standardization committee responsible for the ISO 9000 series of quality management standards. He remains active in TC 176 and is chair of the ASQ Standards Group.