The International Organization for Standardization (ISO) released ISO 10014:2006 – Quality management – Guidelines for realizing financial and economic benefits, which is based on a “bottom line” that unites top management and the quality manager, and provides guidelines on how to achieve greater profits from this cooperation.
These principles are subsequently referred to as “Management principle” within the body of this standard. The intent of this document is to provide top management with information to facilitate effective application of management principles and selection of methods and tools that enable the sustainable success of an organization.
According to ISO, a lack of appreciation for each other’s perspectives and the absence of a common “language” often separated top management and quality professionals. Top management’s view of operations is usually expressed in financial terms. Quality expresses itself using data and details that support reduction of variation or improvement, but often only implies the resulting financial gains. It defines a common language between top management and quality professionals.
ISO 10014 is based on the process approach and “Plan-Do-Check-Act” model of the ISO 9000 series. It examines the eight quality management principles underlying the series and describes how implementing them can achieve financial and economic benefits. Designed to be as practical as its subject, the standard includes a self-assessment as a gap analysis tool.
Quite simply, effective quality management is also profitable, and with the release of ISO 10014, user-friendly guidance to demonstrate this connection is now available to both the quality practitioner and top management.
The management principles are:
- a) Customer focus,
- b) Leadership,
- c) Involvement of people,
- d) Process approach,
- e) System approach to management,
- f) Continual improvement,
- g) Factual approach to decision making, and
- h) Mutually beneficial supplier relationships.
Economic benefit is generally attained through effective management of resources and implementation of applicable processes for improving the overall worth and health of the organization. Financial benefit is the result of organizational improvement expressed in monetary form, and realized by cost-effective management practices within the organization.
Successful integration of the management principles relies on the application of the process approach and the Plan-Do-Check-Act (PDCA) methodology. This approach enables top management to assess requirements, plan activities, allocate appropriate resources, implement continual improvement actions and measure results in order to determine effectiveness. It allows top management to make informed decisions, whether they relate to the definition of commercial strategies, the development of a new product or the execution of financial agreements.
- Financial and economic benefits that can result from the application of the management principles include:
- Improved profitability,
- Improved budgetary performance,
- Reduced costs,
- Improved cash flow,
- Improved return on investment,
- Increased competitiveness,
- Improved customer retention and loyalty,
- Improved effectiveness of decision making,
- Optimized use of available resources,
Structure of this standard
The ISO 10014:2006 is designed to assist top management identify and realize benefits by the application of the management principles. To achieve financial and economic benefits, relevant processes have been identified for each principle, and examples of methods and tools have been provided to assist in the application of the principles.
The added value from the expected benefits should reflect the interrelationships between principles, processes and a holistic view of the organization and its interested parties.
The key selection tool to determine the most appropriate sub clause for priority improvement action is self-assessment.
Application of the management principles
By applying an extensive checklist, an organization can evaluate the maturity level of its management system from 1 to 5 based on each of the following management principles. The success of ISO 10014 will be measured by how far they succeed in communicating and working together toward a common goal.
- a) Customer focus
The organization can demonstrate, it has identified the appropriate customer groups or markets, Customer needs, expectations and requirements are fully understood, Objectives are effectively communicated to all affected employees, Customer satisfaction information is solicited, measured and evaluated and etc.
- b) Leadership
Leaders establish unity or 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 Objectives.
The organization’s leadership Consider and effectively address the organization’s strategy, policy and business plans to meet the needs of its customers to enable achievement of financial and economic benefits, Establish shared values, fairness, openness and ethical role models in its dealings with suppliers, Provide people with required resources, training and freedom to act with responsibility and accountability, Encourage feedback and act appropriately on suggestions, including the strength and depth of feedback and etc.
- c) Involvement of people
It is demonstrated that employees apply their competence to achieve financial and economic benefit for the organization, effectively contribute to the development and achievement of the organization’s objectives, seek opportunities to enhance their competence, accept ownership and responsibility to solve problems and etc.
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.
- d) Process approach
Processes are employed effectively by defining activities necessary to achieve desired financial and economic benefits within any process, fully recognizing and managing the interrelated and interdependent activities, resources, inputs and outputs of the process, understanding capabilities of key activities or processes through measurement and analysis and etc.
- e) System approach to management
Systems are employed effectively by defining processes necessary to achieve desired financial and economic benefits within the organization’s overall system, Identifying, understanding and managing the interdependent processes involved in the organization’s overall system, understanding the roles and responsibilities necessary to achieve overall success while avoiding interface barriers, continual improvement of the overall system through appropriate measurement and evaluation, avoiding improvements in one area that might cause deterioration in another and etc.
- f) Continual improvement
Continual improvement of the organization’s overall performance should be a permanent objective of the organization.
Continual improvement is achieved by consistent, company-wide philosophy that encourages and supports continual improvement for financial and economic benefits to the organization, providing people with training in methods and tools to enabling them to achieve improvement of products and/or processes, selecting and evaluating appropriate improvement ideas for implementation suitable to achieve financial and economic benefits and etc.
- g) Factual approach to decision making
Effective decisions are based on the analysis of data and information.
Decisions reached Are by making available necessary data and information in order to enable achievement of financial and economic benefits, providing access to data, information and tools that enable key analysis to be performed effectively, making decisions and taking actions based on factual analysis, balanced with experience and intuition when necessary and etc.
- h) Mutually beneficial supplier relationships
An organization and its suppliers are interdependent and a mutuality beneficial relationship enhances the ability of both to create value.
they Are achieved by an effective process for evaluation, selection and monitoring of suppliers and supply chain partners to ensure overall financial and economic benefits, effective communication between its supply chain partners, recognizing the interdependence between them, the organization and their customers, receiving regular feedback on the organization’s own performance from their suppliers and supply chain partners, the organization working with suppliers and supply chain partners to reduce costs and provide additional financial and economic benefits to customers and other interested parties and etc.