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Striving for the business-integratedquality management - Quality Integration

Juhani Anttila

xxxx/25.2.2014/jan

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

(Mention the origin)

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Business-integrated quality management:

Quality management that consists of:• Coordinating activities embedded seamlessly in the organization's management

processes and• Professional quality practices within the organization’s normal business operations

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Striving for the business-integrated quality management

Answers to these questions may be differentin different practical organizational cases.Hence, also the solutions of the embeddedquality management may also differ greatlyamong different organizations.

Fundamental understanding of the topic:- Without a proper answer to the followingquestions, the business-integrated qualitymanagement is not possible:

How to understand organization?How to understand management?How to understand quality?How to understand quality management?

One cannot distinguish the business-integrated quality management from the businessmanagement of an organization.• The approach is a deliberate countermeasure to separate quality systems.The business-integrated quality management is to reinforce an organizational business identity.• The approach is to stand out amongst the crowd of look-likes of standard image with regard

to quality in striving for business competitiveness.

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Joseph Juran, Quality control handbook (1974):“Any widespread discipline must identify and clarify the universal concepts, which underlie itsvery existence as a discipline. In addition, it must evolve and standardize the key words andphrases through witch the practitioners of the discipline can communicate with each other. The quality function has taken some steps to identify and clarify these concepts to preparesome glossaries of terms. Because they have not been widely adopted (or even circulated), thereis great difficulty in reaching a meeting of the minds when practitioners convene to solveproblems.--- The reader is urged to keep in mind that differences in meanings of key words and phrases area frequent source of confusion. The question “Just what do you mean by this word” is especiallyimportant in those cases where someone else is drawing an “illogical” conclusion from theidentical set of facts. Such outward differences in conclusions are seldom the result of illogicalreasoning. More usually they are the result of logical reasoning from different concepts orpremises.”

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“In the beginning was the Word ...”(*)The ontological basis of integration

(*) Johannes 1:1

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organization: person or group of people that has its own functions with responsibilities,authorities and relationships to achieve its objectives (*)

management: coordinated activities to direct and control an organization (**)- Management takes place through managing processes.

quality: degree to which a set of inherent characteristics fulfils requirements (**)- Requirement: need or expectation that is stated, generally implied or obligatory (*)

- Interested party: person or organization that can affect, be affected by, or perceive themselves to be affected by a decision or activity (*)

quality management: coordinated activities to direct and control an organization with regardto quality (**)

- Quality management is an organization-internal engagement for ensuring business results fulfilling the needs and expectations of the organization’s interested parties.

quality assurance: part of quality management focused on providing confidence that qualityrequirements will be fulfilled (**)

- Quality assurance is a communication issue between the organization and its interested parties.

The key concepts of the business-integratedquality management - A pragmatic approach

4256/15.1.2014/jan (*) ISO Directives Annex SL, (**) ISO 9000

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1730/29.1.2014/jan

3...5years

1...3years

Realization means0,4...1year

Strategic plansPurposeof the

company

Typical managing infrastructure and elementsof an organization

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 quality (management) system within this typical business framework isvery artificial. All quality actions must be integrated with the management system.

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Division Directors

Unit / function managersand professionals

Process owners

Process team members

Portion of time spent on activity

Top managementBusiness establishmentsBreakthrough activities

Business area establishmentsImprovement activities

Routineoperationaland maintenanceactivities

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Managing activities and responsibilities cover the wholeorganization and different levels of the organization

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What is business management all about?

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Creators of the classicalschools of management theory:

F.W Taylor 1856 –1915Scientific management (productionoperations)

1. Replace rule-of-thumb workmethods with methods basedon a scientific study of thetasks

2. Scientifically select, train, anddevelop each employee ratherthan passively leaving them totrain themselves

3. Provide detailed instructionand supervision of each workerin the performance of thatworker's discrete task

4. Divide work between managersand workers; the managersapply scientific managementprinciples to plan the work andthe workers perform the tasks.

H. Fayol 1841 –1925Industrial administration (strategic management)1. Division of work among individuals and groups to focus effort and

attention on special portions of the task2. Authority of managers to give orders.3. Discipline. Employees obey and respect the rules4. Unity of command. Every employee gets orders from only one

superior5. Unity of direction. Each group with the same objective is directed

by one manager using one plan6. Subordinate individual interests to the general interest of the

organization as a whole7. Remuneration. Workers must be paid a fair wage for their

services.8. Centralization to find the optimum degree of centralization for

each situation9. Scalar chain. The line of authority from top management to the

lowest ranks represents the scalar chain. Communications followthis chain

10. Order. People and materials should be in the right place at theright time.

11. Equity. Managers should be kind and fair to their subordinates12. Stability of tenure of personnel. High employee turnover is

inefficient. Management should provide orderly personnelplanning

13. Initiative. Employees who are allowed to originate and carry outplans will exert high levels of effort

14. Esprit de corps. Promoting team spirit will build harmony andunity within the organization

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The 2013 “Thinkers50” global ranking of management thinkers

4151/11.1.2014/jan http://www.thinkers50.com/t50-ranking/2013-2/

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Management methods / Management models/ Management theories

http://www.valuebasedmanagement.net/

STRATEGY - VALUE CREATION: 3C's model Ohmae 7 Ps Booms Bitner 7-S Framework McKinsey ADL Matrix Arthur D,Little, Ansoff product/market grid Acquisition Integration Approaches Haspeslagh Jemison BCG Matrix Blue Ocean Strategy Kim BPRBusiness Process Reengineering Bricks and Clicks Business Assessment Array Capability Maturity Model CMM Change Dimensions Pettigrew Whipp Clarkson Principles Competitive Advantage Nations Porter Competitive Advantage framework CoreCompetence Hamel Prahalad Core Groups Art Kleiner Cost-benefits analysis Cultural Dimensions Hofstede Delta Model Hax Deming cycle PDSA Dialectical Inquiry Diamond Model Porter Dimensions of Change Pettigrew Whipp Distinctive Capabilities KayERG Theory Alderfer Experience Curve Extended Marketing Mix 7P's Five Forces Porter Force Field Analysis Lewin Growth Phases Greiner Game Theory Nash GE / McKinsey matrix GE Business Screen Growth Share Matrix BCG Hierarchy of Needs MaslowHofstede National Differences Impact/value Hammer Industry Change McGahan Industry Life Cycle Instrumental Approach of Stakeholder Theory Intrinsic Stakeholder Commitment Kaizen philosophy Learning Organization, The M&A approaches Managementby Objectives Drucker Managing for Value MfV Insead Marketing Mix 4P's 5P's McCarthy Modeling business simulation Normative Approach of Stakeholder Theory OODA Loop Boyd Organizational Configurations Mintzberg Organizational LearningOutsourcing Parenting Advantage Goold Campbell Parenting Styles Goold Campbell PDSA Deming cycle Performance categories Baldrige Performance Prism PEST analysis Plausibility Theory Porter competitive advantage Porter Value Chain PortfolioAnalysis Product/market grid Ansoff Profit Pools Gadiesh, Gilbert Real Options Luehrman SDG Relative Value of Growth Mass Resource-Based View Barney Root Cause Analysis Scenario Planning Simulation modeling Six Thinking Hats de Bono SpiralDynamics Graves Strategic Alignment Venkatraman Strategic Intent Hamel Prahalad Strategic Stakeholder Management Strategic Triangle Ohmae Strategic Thrusts Wiseman Strategy Map Kaplan Norton STRATPORT Larreche SWOT analysis SystemsThinking / Dynamics TDC matrix Internet value Theory of Constraints Goldratt Twelve Principles of the Network Economy Kelly Value Chain Porter Value Disciplines Treacy Wiersema Value Mapping Jack Value Stream Mapping VRIN BarneyVALUATION - DECISION MAKING: Absorption Costing Activity Based Costing ABC ABM ARIMA Box and Jenkins Balanced Scorecard Kaplan Norton Baldrige categories of performance Benchmarking Brainstorming Break-even Point Capital Asset PricingModel CAPM CAPM Capital Asset Pricing Model Cash Flow from Operations Cash Flow Return on Investment Cash Ratio Cash Value Added CVA Anelda CFROI Contingency Theory Vroom Corporate Reputation Harris-Fombrun Cost-benefits analysisCurrent Ratio measuring liquidity Debt to Equity Ratio measuring solvency Direct Costing Discounted Cash Flow DCF Dividend Payout Ratio Dynamic Regression Earnings Per Share EPS Enronitis EBIT EBITDA Economic Margin EM Economic Value AddedEVA EFQM EFQM EPS Earnings Per Share EVA Economic Value Added EVM CPM Excess Return ER Suggest a theory Exponential Smoothing Fair Value accounting Free Cash Flow Full Costing Game Theory Nash Gross Profit Percentage Groupthink JanisHuman Capital Index HCI IAS Accounting Standards IC-Rating Intellectual Capital Impact/value Hammer ICT value Inclusive Value Measurement IVM Intangible Assets Monitor IAM Sveiby IRR (Internal Rate of Return) Leveraged Buy-Out Liquidation valueM&A approaches Management buy-out MAGIC QPR Marginal Costing Market Value Added MVA Net Present Value NPV NOPAT Operating Cash Flow Operating Profit Percentage Operations Research P/E ratio Payback Period Performance categoriesBaldrige Performance Prism Plausibility Theory Portfolio Analysis PRVit Quick Ratio RAROC Risk-Adjusted Return on Capital Real Options Luehrman SDG Real Ratio Regression Analysis Relative Value of Growth Mass Reputation Quotient Harris FornbrunReturn on Capital Employed ROCE Return on Equity ROE Return on Invested Capital ROIC Return on Investment ROI Return on Net Assets RONA Risk Management Simulation business modeling Six Sigma GE Six Thinking Hats de Bono Skandia NavigatorLeif Edvinsson Strategic Thrusts Wiseman TDC matrix Internet value Time-Based Activity Based Costing Kaplan Total Business Return TBR BCG Total Shareholder Return TSR US GAAP Accounting Principles ValueReporting Framework PWC Value CreationIndex CGE&Y CBI Variable Costing VRIN Barney WACC Z-Score AltmanORGANIZATION  - CHANGE  - CULTURE: 7-S Framework McKinsey Acquisition Integration Approaches Haspeslagh Jemison Attributes of Management Excellence Peters Balanced Scorecard Kaplan Norton Baldrige categories of performance Bases ofSocial Power French Raven BPR Hammer Champy Business Process Reengineering BPR Capability Maturity Model CMM Change Approaches Kotter Change Behavior Ajzen Change Dimensions Pettigrew Whipp Change Management Iceberg Change ModelBeckhard Change Phases Kotter Changing Organization Cultures Trice Beyer Cultural Intelligence Early Clarkson Principles Competing Values Framework Quinn Core Groups Kleiner Corporate Governance OECD Crisis Management tips Cultural DimensionsHofstede Culture Change Trice Beyer Culture Levels Schein Deming cycle PDSA Dialectical Inquiry Dimensions of Change Pettigrew Whipp Eight Attributes of Management Excellence Peters Entrepreneurial Government Osborne EVM CPM EFQM EFQMExpectancy Theory Vroom Industry Change McGahan Five Disciplines Senge Force Field Analysis Lewin Fourteen Points of Management Deming Gestalt theory Growth Phases Greiner Hierarchy of Needs Maslow Implementation Management KrügerInnovation Adoption Curve Rogers Intrinsic Stakeholder Commitment Intangible Assets Monitor Sveiby Kaizen change philosophy Learning Organization Senge Levels of Culture Schein Levers of Control Simons Management by Objectives Managing for ValueMfV Insead Organic Organization Burns Organizational Configurations Mintzberg Organizational Learning Outsourcing Parenting Advantage Goold Campbell Parenting Styles Goold Campbell Path-Goal Theory House PDSA Deming cycle People CMM CM-SEIPerformance categories Baldrige Performance Prism Planned Behavior Theory Ajzen Points of Management Deming RACI (RASCI) Result Oriented Management Seven Habits Covey Seven Surprises Porter Six Change Approaches Kotter Six Sigma GESkandia Navigator Leif Edvinsson SMART Drucker Stakeholder Management Strategic Alignment Venkatraman Strategic Stakeholder Management Strategy Map Kaplan Norton System Dynamics / Thinking Forrester Ten Principles of Reinvention OsborneTheory of Planned Behavior Ajzen Theory of Reasoned Action Ajzen Fishbein TQM Total Quality Management Two Factor Theory Hertzberg ValueReporting Framework PWCCOMMUNICATION - MARKETING: 7 Ps Booms Bitner ADL Matrix Arthur D. Little Ansoff product/market grid ARIMA Time Series Analysis Balanced Scorecard Kaplan Norton Bass Diffusion model Bass BCG Matrix Brand Asset Valuator Brand PersonalityAaker Bricks and Clicks Business Assessment Array Business Process Reengineering BPR Change Behavior Ajzen Change Management Iceberg Change Phases Kotter Core Groups Kleiner Corporate Reputation Harris-Fombrun Crisis Management tipsDistinctive Capabilities Kay Enterprise Architecture Zachman Extended Marketing Mix 7P's Missing a method? <../opinion.html> Framing Tversky Gestalt theory Groupthink Janis Implementation Management Krüger Industry Life Cycle Innovation AdoptionCurve Rogers Intrinsic Stakeholder Commitment Kaizen change philosophy Leadership Styles Goleman Learning Organization, The Levers of Control Simons Marketing Mix 4P's 5P's McCarthy Organizational Learning PEST analysis Planned Behavior TheoryAjzen Positioning Trout Product/market grid Ansoff Product Life Cycle Profit Pools Gadiesh, Gilbert Reputation Quotient Harris Fornbrun Strategy Map Kaplan Norton STRATPORT Larreche Theory of Planned Behavior Ajzen Theory of Reasoned Action AjzenFishbein Twelve Principles of the Network Economy Kelly Value Disciplines Treacy WiersemaLEADERSHIP - MANAGEMENT: 4 Dimensions of Relational Work Butler Activity Based Costing ABC ABM Bases of Social Power French Raven Benchmarking Brainstorming Business Process Reengineering BPR Change Management Iceberg CompetingValues Framework Quinn Contingency Theory Fiedler Cost-benefits analysis Crisis Management tips Cultural Intelligence Early Deming cycle PDSA Emotional Intelligence Goleman Enterprise Architecture Zachman ERG Theory Alderfer Expectancy TheoryVroom Five Disciplines Senge Framing Tversky Groupthink Janis Growth Phases Greiner Hierarchic Organization Burns Hofstede National Differences Human Capital Index HCI Just-in-time JIT Kepner-Tregoe Matrix Leadership Continuum Leadership StylesGoleman Levels of Culture Schein M&A approaches Management by Objectives Modeling business simulation Organic Organization Burns PAEI management roles Parenting Styles Goold Campbell Path-Goal Theory House PDSA Deming cycle PDCA PowerBases French Raven Results-Based Leadership Ulrich Result Oriented Management Risk Management Root Cause Analysis Seven Habits Covey Seven Surprises Porter Simulation modeling Six Sigma GE SMART Drucker Social Intelligence SWOT analysisTDC matrix Internet value Theory of Constraints Goldratt Theory X Theory Y McGregor Theory Z Ouchi TQM Total Quality Management Two Factor Theory Hertzberg Value Chain Michael Porter

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The business-integrated quality management:• Is applicable in all and any kind of organizations• Is a natural and professional way to improve an organization’s business competitiveness

with regard to quality• Is based on organizations’ existing practices of management and quality, which factually

means that every organization always has a certain level of quality management• May always be improved according an organization’s business needs and business

decisions. A foundation for recognizing and developing an organization’s business-integrated quality management is to identify the organization’s business system andmanaging processes (The “organizational profile”)

• Is always ready but may never get finished• Is flexible to make creatively use of all concepts, principles and methodologies of the whole

recognized quality discipline• Is able to cover, in addition to quality management, also all other managerial disciplines,

e.g. according to the corresponding management system standards

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The challenge of the integration

The business-integrated approach is in principle and in practicedifferent from the integrated management systems where severalseparated management systems based on different managementsystem standards are realized as one single management system.

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Business-integrated quality management embeds well-known quality management methodologies

BusinessSystem

ISO 9004

PEM

Six Sigma

BSCISO 9001

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PEM = PerformanceExcellence Model(Quality award criteria)

BSC = BusinessStrategy-Card(e.g. BalancedScorecard)

Kaizen

Lean

Operational direction

Stra

tegi

c di

rect

ion

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All organizations have• Different business needs• Different interested parties• Different business management approaches• Different emphases, selections, and applications in quality policies, principles,

practices, and methodologies

Hence, the business-integration is an organization-specific solution.

Particularly startups and small organizations need a special reflection but in thesecases quality, quality management and business integration are more important.

The business-integration is alwaysan organization-specific solution

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Business-quality trade-off

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Genuine quality management awareness

and engagement

Strength andeffectiveness

of the business management

StrongWeak

High

Low “Laissez-faire”

Authoritativepower

Low integration

Successfulintegration

“Geek activity”Low integration

Articulation

Quality Business

Balance

Implementation policy Business driven development

Quality solutions

Bus

ines

s so

lutio

ns

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Effective dialogue and cooperation is neededbetween business leaders and experts

Business leaders know the right things and experts know the best means todo things right:

• Business leaders are generalists and strongly acting individuals withstrong organizational positions. Normally they don’t have a deepknowledge of quality management.

• Experts are specialists and deeply knowing individuals with low position-based authority.

Clear responsibility / authority roles should be established between businessleaders and experts, and an effective dialogue and cooperation betweenthem made possible.

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Promoting business-integrated quality managementas a regional approach

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Geographical regions, e.g. a country, are networked communities of various organizationaland individual actors. Organizations, which may be private business companies, public civilservice organizations, and the third sector voluntary organizations, are independent but inmany complicated ways interlinked with each other. Business-integrated quality managementapproach is applicable in all types of organizations, but each organization makes its owndecisions and selections by itself.

Business-integrated quality management may be promoted region-widely by:• Shared experiences of the pioneer companies• Organizations educating, training, coaching, and supporting professional quality and

quality management practices• Collaboration among organizations• Related research activities

In all cases the approaches of business-integrated quality management should berealized in accordance of the business situations and needs of the particularorganizations.

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The Quality Integration approach:

- The integration covers all the subject areas considered within the ISO 9000standards and performance excellence models (quality awards criteria).- Also the topics of many other specialized management areas, e.g. environmentalmanagement, safety management, risk management, and information securitymanagement, etc., are typical sub-domains of Quality Integration.- One can also find significant ideas of Quality Integration from teachings ofrecognized gurus of quality profession and through benchmarking from the practicesof world class organizations.- Quality management equals quality of management.

We call this Quality Integration. It was invented as a concept and introduced to practicalbusiness solutions at Sonera Corporation in the 1990's.

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An instantiation of the business-integrated qualitymanagement: Quality Integration

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Our approach - Quality Integration

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(1) Sound management principles

Innovatory managementInfrastructure (3)

(2) Effective methodsand tools

CompetitivenessSustained success

An organization with QualityIntegration

Quality Integration makes use of the principles of learning organization (*).

(*) P. Senge

Domain of action of the organization with Quality Integration:

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The managerial foundation of all organizationsand basis for Quality Integration

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All organizations strive for competitiveness and sustained success with certain (*):

Principles• propositions that serve as the foundation for the organization’s business and

belief or behavior; guiding ideas that drive the whole business Methodology

• methods used for managing the organization; practical soft and hardinstrumental means for the organizational operations

Infrastructure• basic physical and organizational structures and facilities needed for the

operation and management of the organization; the means through which theorganization makes available resources to support operations

that are selected and decided by the organizations themselves.

The domain of action (*) that defines the identity of the organization’s management approach.

(*) P. Senge

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Cornerstones of Quality Integration

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Principles• ISO 9000 quality concepts and quality

management principles (QMPs)• Fundamental concepts, core values, and

principles of the recognized performanceexcellence models

• Principles of the quality related otherdisciplines

• Integration, focus and alignment,consistency, responsiveness, innovation,and collaboration

• Organization-specific articulation of theguiding principles

Infrastructure• System / process structure• Structure of the ISO Directives Annex SL• Strategic and operational management

Elements of the Quality Integration for an organization’s domain of action:

Methodology• Process management model• “3-in-1” self-assessment model• Process performance assessment

methodology (auditing)• Benchmarking• Business strategy card, BSC (tailored

with Balanced Scorecard, Hoshin Kanriand MIDO)

• Problem solving and improvementmethodology (“ProbEl”)

• Project management model• Other tools for financial management,

human resource management,technology management, riskmanagement, purchase and logistics,marketing, etc.

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Understanding the benefits from Quality Integrationcontributions (EEM - Enabler-Effect Map)

Enhancingcustomerperceived

value

Businessbottom

lineresults

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Drivinginnovative

opportunitiesand realoptionvalues

Increasingoperationalefficiency ordecreasing

cost

E1E4

E3

E2

E6

E5

Beneficial features and phenomena inprocesses, procedures, activities, etc.and their results:

(Ref.: Lillrank, Laulajainen)

Behavior of the

markets &customers

Actions of the

businessmanagement

E = Enabler / Effect

Operationalbenefits

Riskfactors

Strategicresults

Enabler / effect map

A QualityIntegration

contribution,investment,

etc.

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Flexibility of the business integration: Organization’scapabilities tailored to customer’s individuality

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Cus

tom

er’s

val

uecr

eatio

n

Uniform

Differentiated

Customer’s needsUniform Differentiated

Customer’ individuality

lll lV

l ll

Com

mun

icat

ions

flexi

bilit

y

Low

High

Flexibility in productionand deliveryLow High

Organization’s capabilities

lll lV

l ll

(Ref.: D Peppers, M Rogers)

The tailored (121) 1 to 1 business relationships.

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Quality Integration (QI) process,QI expert process in an organization

Clarifying theneeds,

Defining theissue

Creating thesolution

Establishingthe solutioninto practice

Customerneeds

• Customer’s businessdevelops

• Customer’ssatisfactionincreases

Following-up

Maintaining QI knowledge foundation

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Customers’ activity (internal & external QI product:

• Added valueoutcome to thecustomer

Organization-internal

QI expertserviceprocess

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Conceptual / theoreticalTHINKING

MethodologicalDOING

EVENTS OR OBJECTSOrganization, performance development,

quality integration implementation, business performance

Observing the facts and recording data fromthe examined events or objects

Evaluating the examination andthe achieved results

FOCUS QUESTIONIntroducing and developing

quality integration in anyorganization for enhancing

competitiveness andbusiness success

Ontology:-The nature of reality of qualityintegration, existence andrelationships of the key entities-Principles that govern the propertiesof quality integration-Basic concepts for consideringquality integration in events andobjects-Validity of and motivation for solvingthe focus questions

Conclusions that answer the focusquestions

Epistemology:-Theories, methodology, and models, toget and process knowledge of qualityintegration

Creating information and knowledge fromobservation data with analyses and

discussion

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Bridging the chasm between theory and practicein Quality Integration (Vee heuristics)

(Ref. Gowin, Novak, Åhlberg)