How to Use ISO 9001 to Increase Profitability

My background is finance and so profitability is a key focus for me. I firmly believe that the Quality Management System (QMS) in your company can and should be used to make the company more successful in building a brand that customers can trust and to create sustained growth.

Here I will explain why I believe that the new ISO 9001:2015 standard, more than any of the previous versions, has the potential to improve your company’s bottom line. This places an emphasis on top management accountability, the alignment of the QMS with the strategic direction of the organisation and replaces preventative action with risk-based thinking and improvement.

Here I give six reasons why the new standard can have a real impact on your organisation in terms of revenue and the achievement of business goals and strategy.

1. Leadership Engagement

As per the Standard:

Clause 5 on leadership is similar to ISO 9001:2008; however, now top management must show leadership of the QMS, rather than just demonstrating a commitment to it. This means that they must actively engage in and undertake key QMS activities, rather than just having to ensure that they occur.

The Benefit:

From my experience, when top management is committed to the QMS, it is taken far more seriously throughout the organisation. This means the difference between having a QMS to tick a box to gain external credibility and having one because you genuinely believe that it leads to overall improvement and consistent service offering.

Ultimately, if top management shows that the QMS is important to them, the culture of the organisation will gradually change to reflect that commitment to quality, and a quality-consciousness embedded into the organisational culture means improved customer service and more efficient processes, thus potentially increasing revenue and decreasing costs.

2. Responsibility for the QMS is Now Spread Throughout the Organisation

As per the Standard:

The term management representative is gone – ‘Similar responsibilities and authorities are assigned but no requirement for a single management representative’.

In the 2008 standard, the Quality Manual was the glue of the system, but now the requirement for a Quality Manual is replaced by ‘documented information’, which should come from understanding the risks and opportunities, and determining the methods to mitigate or maximise those as appropriate.

The Benefit:

Essentially, both the removal of the requirement for a Management Representative and a Quality Manual spreads the responsibility for the QMS across the organisation. This has the effect of embedding the QMS more fully through the various departments and processes. Quality is no longer something imposed but it becomes an integral part of everything done in the areas that fall within the QMS scope.

3. Understanding the Organisational Context & Stakeholder’s Interests

As per the Standard:

Clause 4.1 of the new standard requires the organisation to “determine external and internal issues that are relevant to its purpose and its strategic direction” and information about these issues is to be monitored. Clause 4.2 requires determining interested parties to the QMS and their requirements.

This means that external issues that affect your company such as competitive, technological, market and legal, and internal issues such as values, culture and performance of the organisation need to be evaluated.

Interested parties are stakeholders and include customers, suppliers, employees, investors, media, union representatives and the public; so you need to figure out who your interested parties are and how your QMS needs to satisfy their requirements. For example, the public might want your factory to keep noise to a minimum, the customer might want high quality and a fast, reliable service, and employees may want job security and a strong health and safety policy.

The Benefit:

This will cause most companies to have to take a more comprehensive look at themselves. In the typical planning process, SMEs often don’t have the time to take a helicopter view of all stakeholder needs and the relevant internal and external factors. This may sound like a time-consuming exercise but it means that senior management needs to establish what will be monitored, how to monitor it and when it will be reviewed. The benefit is that you are much more fully prepared for risks and opportunities, which I go into in more detail in the next section.

4. Action to Address Risks & Opportunities

As per the Standard:

Clause 6.1.1 states that with reference to internal and external issues and interested parties, risks and opportunities that may affect the QMS must be determined.

Clause 6.1.2 requires action to be put in place to address these and for these actions to be integrated into the QMS.

The Benefit:

Examples of external factors would include changes in legislation such as the General Data Protection Regulation (GDPR) law on the requirement for organisations and businesses to be fully transparent about how they are using and safeguarding personal data, which will be in force from May 2018.

Reviewing internal and external factors affecting your organisation on a regular basis gives you the opportunity to plan well ahead for any changes to be made. Scrambling to react to new legislation at the last minute can lead to high consultancy costs, or not being ready and being open to being penalised.

Brexit is an example of another external factor that must be considered by many businesses. Although the repercussions are still unknown, the sooner you start to prepare for the potential risks and opportunities, the better prepared you will be. Questions need to be asked such as how will you respond if the UK market slows down and how might it affect any suppliers you deal with in the UK.

Taking a systematic approach to understanding how Brexit could affect your business and stakeholder’s interests allows you to reduce risks; an example could be if you currently have key suppliers in the UK, identifying alternative suppliers within the EU. It also allows you to maximise opportunities arising; an example could be identifying potential customers who are now supplied by UK companies, but who may be ready to switch to another company within the EU if tariffs are introduced on UK-EU trade. The earlier you can identify new potential leads, the better chance you have of creating a strategy that turns them into prospects, and ultimately into customers.

5. Risk-Based Thinking

As per the Standard:

The requirement for “risk-based thinking” is mentioned a number of times throughout the standard.

Clause 5.1.1 requires management to demonstrate a commitment to the QMS by ‘promoting the use of the process approach and risk-based thinking’.

In Annex A, A.4, we are told that risk-based thinking has replaced ‘preventative action’ in the 2008 standard.

The Benefit:

The aim is to establish a systematic approach to how risk is considered in your organisation. There is risk in all systems and processes of your QMS and the idea is to consider and control this risk as much as possible. This involves a cultural shift from being reactive, which is the old idea of ‘preventative action’, to becoming proactive by early identification of potential risks and putting mitigating actions in place.

By systemising how your organisation thinks about risk, you take out the human element that may over or underestimate it, thus creating processes to get the work done as efficiently as possible, whilst fully considering all uncertainties.

6. Control of Externally Provided Processes, Products and Services

As per the Standard:

The 2008 standard mentioned requirements to ensure controls over outsourced processes, but was not specific about externally provided products and services.

Clause 8.4.1 requires that ‘the organization shall ensure that externally provided processes, products and services conform to requirements’.

Controls are required and ‘there should be criteria for the evaluation, selection, monitoring of performance, and re-evaluation of external providers, based on their ability to provide processes or products and services in accordance with requirements’.

The Benefit:

In my experience, SMEs don’t always have the time for systematic review of subcontractors and suppliers. However, if external providers are not meeting the required standards, they can cost you money, negatively affect your brand, and damage your relationships with customers, employees or the public. These days, it is common for key processes, including manufacturing, to be outsourced. It is critical that external providers are properly vetted and their outputs regularly reviewed. The ISO 2015 standard will ensure that this is happening in your organisation.

An example could be a staff canteen run by an external catering company which serves food that is perceived as below standard by employees. Management should consider the feedback of employees, work with the caterer to improve standards and be prepared to terminate the contract if improvement doesn’t happen. If management doesn’t proactively deal with the situation, it can negatively impact employee motivation, and ultimately your bottom line. Hertzberg identified working conditions as potential ‘hygiene factors’, which could create dissatisfaction at work. (See the diagram above that shows Hertzberg’s theory as described in his book ‘The Motivation to Work’).

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Please feel free to comment on your experience of quality management systems and how they have impacted your organisation.

I work with companies on ISO 9001 upgrades from the 2008 standard to 2015, and on new implementations. If you have any questions, feel free to get in touch with me at [email protected]

Note – originally posted on LinkedIn in Oct’17

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