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Show Me the Money!

The real reason any company should implement a system --
and then register to a standard -- is to make money.

by James Mroz

Did you know that dogs and bees can smell fear?" The most charming character I've seen in a movie this year is the little boy in Jerry Maguire, the comedy about a sports agent (Tom Cruise) who decides to apply quality principles in providing services to a customer (Cuba Gooding Jr.). The little boy tells Cruise many notable "facts," including the previous one.

However, the smell of fear is not the right motivation for implementing and registering your management systems to ISO 9001, QS-9000 and/or ISO 14001. Fear, whether that a customer is going to drop your company as a supplier or that your competition is going to gain an advantage, is the wrong motivation for implementing a management system to obtain registration. They are valid strategic concerns, but not the reason you invest in a system.

The best motivation for implementation and registration is summed up by what Gooding forces Cruise to scream into the phone: "Show me the money!" As many experts have told me, the real reason any company should implement a system -- and then register to a standard -- is to make money.

To make money means the system must be effective, must improve the production and/or service processes, and must be taken seriously. Under these circumstances, the management system will reduce waste, rework, redundant work and nonconforming product; it will increase productivity, innovation and employee involvement; and it will improve efficiency and capacity, utilize employee capabilities and enhance the company's reputation. These results add up to profitability. The system will show you the money. Let's look at the facts.

An Automotive Industry Action Group/American Society for Quality Automotive Division Quality Survey was completed in February. Of 613 respondents, 95 percent were automotive suppliers. Of those, 29 percent had achieved QS-9000 registration, 50 percent were pursuing QS-9000 and 18 percent ISO 9001/2/3. The survey produced several notable averages. Among 280 respondents, the average total estimated registration cost was $120,500 (10 respondents had actual average costs of $121,400). More important, 113 respondents estimated average registration benefits of $423,100 annually (5 respondents reported actual average benefits of $266,000).

What about implementation barriers? Four noteworthy barriers were: lack of time (51%), resources (43%), management commitment (27%) and employee buy-in (27%). Removing any of these requires a serious commitment by senior management to the implementation effort. So the top advice respondents would give someone pursuing implementation was not surprising: Companies need to manage the project, plan carefully, benchmark and network with others pursuing QS-9000 (42%); full commitment and involvement is required by top management as well as the entire company (41%); and do it yourself, and be patient and persistent (24.5%).

    Plante & Moran, an accounting and management consulting firm, announced in June the results of the first QS-9000 registrar customer satisfaction survey. The key message to emerge is that a company that takes registration and registrar selection seriously will most often be very satisfied by the registrar it selects. Sent to all QS-9000-registered companies as of October 1996, 54 percent of those responding were very satisfied with the overall level of registrar services received.

In a recent case study of Philips Electronics, I looked at Philips' plans to implement environmental management systems and register them to ISO 14001 at all operating facilities by 2000. Henk de Bruin, director of the corporate environmental and energy office, tells me Philips has made implementing and using management systems a key corporate strategy, with ISO 14001 as an efficiency and productivity improvement strategy.

Philips has already registered 24 sites to ISO 14001 and is seeing a positive return on investment within about two years, much of which is initially a result of reducing energy and packaging materials usage through its EMS corporate policy. "Senior management has to be committed to the program by providing their time, the required money and other resources," advises de Bruin. "If upper management isn't on board, it will create an enormous burden on key personnel, and the implementation effort is bound to be uneven."

Two years for a positive return on investment is outstanding. Management should be very motivated because they'll have something great to show when stockholders shout: "Show me the money!"

About the author

James G. Mroz is senior editor of The Informed Outlook, a twice-monthly newsletter providing information and guidance on ISO 9000, QS-9000 and ISO 14000, published by INFORM (International Forum for Management Systems Inc.), 15913 Edgewood Drive, Montclair, VA  22026; telephone (703) 680-1436, fax (703) 680-1356 and e-mail jmroz@qualitydigest.com.


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