Business 101: Principles of Management

An organization that is ISO 9000 certified believes in quality management systems that are focused on the needs of customers, employees, shareholders and suppliers while complying with statutory and regulatory guidelines for products and services.

What is ISO 9000 Certification?

ISO 9000 is a set of standards and quality management systems that ensure that the needs of customers are met while also meeting all statutory and regulatory requirements that organizations elect to adopt in order to better satisfy customers, provide a better product and improve efficiency. Why would an organization consider customer needs, employees and suppliers in their quality management system?

ISO 9000 is a set of standards and quality management systems.

The International Organization for Standardization (ISO) developed these standards and quality management systems to break down international trade barriers. This means that organizations that voluntarily gain certification (or accreditation) through ISO 9000 provide customers with better products and services by adhering to standards set globally for different industries. Organizations in countries like Europe and China adopted ISO 9000, and many require organizations that they deal with to hold the same certification.

The ISO developed the certification standards to break down international trade barriers.

Captain Jack of Captain Jack's Crab Company recently won a bid to be the new supplier to Cheung's Foods, Inc. He will ship tasty crab to be used for their line of gourmet crab rangoon. The crab rangoon are produced in China and sold in grocery stores throughout the world. Mr. Cheung requires that Captain Jack's organization be ISO 9000 certified. This meant that Captain Jack had to do some quick research to find out how to go about the process.

Captain Jack found out that in order to become certified, his organization must create quality management systems and adhere to the 8 principles of ISO 9000:

• Customer Focus
• Leadership
• Involvement of People
• Process Approach
• Systems Approach to Management
• Continual Improvement
• Factual Approach to Decision Making
• Mutually Beneficial Supplier Relations

The 8 Principles of ISO 9000

Principle 1: Customer focus means to understand current and future customer needs related to products and services, develop ways to meet and exceed expectations. This can be done through researching the customer's needs and linking objectives to the customer's expectations. It takes good relationship building and communication. However, there must be a balance between meeting customer needs and the needs of employees, shareholders and suppliers.

Captain Jack sampled the crab rangoon to determine the quality of the crab.

Captain Jack sampled Mr. Cheung's crab rangoon to determine the quality of the crab. With this information, he was able to narrow down a few different crab choices he could offer. He had to make several decisions before he chose the right type. He evaluated his crab decisions on the quality of the product, the impact of the employees' ability to process enough crab and whether bait and other crabbing supplies are readily available and affordable. Then he weighed his options against whether the crab sales would be profitable.

Principle 2: Leadership involves a unity of purpose and direction by management to develop a fully-involved staff. This can be done by communicating a clear vision and shared ethical beliefs and values, setting challenging goals, encouraging employees to be autonomous and rewarding their contributions.

Next, Captain Jack analyzed the leadership and employee relationship. By explaining the benefits of the new relationship he made with Mr. Cheung, employees felt inspired to work autonomously to catch the right quality crab. They were also handsomely rewarded for doing a good job.

Principle 3: Involvement of people is to utilize employees' best talents. People are essential to any organization. Management understands the importance of their employees and works with them to identify obstacles that can cause problems in the future. It also involves employees taking ownership for their work. This can be done through employee appraisal systems by comparing performance against set goals.

This approach utilizes the best talents of employees.

It is now time for Captain Jack to decide who will do what based on the fishermen's best talents. Skip was assigned the nets, Peg Leg was assigned to the bait and Rusty was assigned to crab steaming. Captain Jack would drive the boat. As obstacles arose, like running out of bait or undercooked crab, Captain Jack analyzed the reason and made several adjustments along the way. Once the obstacles were removed and the men were efficient, they were rewarded.

Principle 4: Process approach involves directing work as a process by defining work activities, assigning responsibility and accountability to employees and having a system to analyze and measure the process in terms of risk to customers and suppliers. This means that the product or service must be efficiently and effectively produced or provided, but there must be a balance between the use of resources and the benefits to customers and suppliers.

Once the crabbing process was defined, Captain Jack had to implement a process to be sure that resources were being used efficiently and the product was of the highest quality. He also had to make sure that the bait and other supplies were in ample quantity to maintain a good relationship with his suppliers. He set up a supply ordering process, a crabbing schedule and a shipping schedule.

Principle 5: System approach to management stresses the importance of interdependencies between processes and systems. Systems can be considered the ways things are done in an organization. These systems must align with the specific processes used to perform a task. This can involve analyzing processes to better understand and eliminate barriers to efficiency.

The system approach to management stresses the importance of interdependencies between processes and systems.

Every process was in place for Captain Jack's crabbing endeavor. However, he needed to look into overall systems to be sure they aligned with the smaller, day-to-day processes. He looked at the shipping schedule and compared it to the crabbing process and the seasonality of crabbing. He had to be sure that he could harvest enough crab in a season to keep on hand for months when crabs are scarce. This required the development of a system of crabbing and packaging. This system had to work in perfect harmony with the process of crabbing.

Principle 6: Continual improvement focuses on improving products, services, processes and systems through training, tracking improvements and recognizing those employees responsible for improvements. This is done on a continual basis. This means products and services, processes and even systems are always analyzed for efficiency and effectiveness.

Captain Jack hired crab tasters and trainers to work with his employees at every level. Crab testers tasted crab as it went through the processing to ensure quality. Trainers worked with employees on how to better do their job.

Principle 7: Factual approach to decision making means to make accurate and reliable data and factual information available to decision makers and give decision makers autonomy to access and use data in their decision making. Decision makers are able to locate data easily and use the data to make improvements.

The factual approach uses accurate and reliable data for decision-making.

The employees were given access to databases of information on the complexities of crabbing and crab packaging and shipping. This information came from many sources, including the Food and Drug Administration and industry websites. He encouraged them to use the information to make decisions about their work.

Principle 8: Mutually beneficial supplier relationships ensures that relationships are beneficial to both the organization and the supplier by creating a mutual value. Combining resources and expertise through open communications about future plans sets short- and long-term goals. This means that the organization and the suppliers work together on improvements to products and services.

Captain Jack met with his bait supplier on a regular basis. They would have lunch together and discuss recent orders and long-term orders. He kept the supplier in the loop about Mr. Cheung's needs and expectations. They brainstormed about the best bait and supplies to catch enough crab to satisfy Cheung's crab rangoon production.

The ISO 9000 Certification Process

Once Captain Jack was prepared to adopt ISO 9000, he had to go through an audit process to become ISO 9000 certified. The process required him to:

• Prepare a quality management system and thoroughly train his employees
• Select and request a pre-assessment by ISO 9000 accreditation
• Schedule a document review (audit) of the organization's quality manual, policies and procedures and systems
• Analyze the audit results and address any issues outlined in the audit outcome
• Schedule a surveillance audit over a three-year period of time

Captain Jack kept detailed notes as he worked through the eight principles. Using the notes collected, he was able to develop a quality management system and a training plan for all employees. This prepared him for the actual audit. Once he received the data collected from the pre-assessment, he was able to tweak the systems and processes. Over the next three years, Captain Jack passed his audits successfully.

Captain Jack kept detailed notes from which he developed a quality management system.

Lesson Summary

In summary, ISO 9000 is a set of standards and quality management systems that ensure that the needs of customers are met while also meeting all statutory and regulatory requirements. ISO 9000 is based on eight guiding principles that work together to improve customer satisfaction, include more effective use of resources and employee talents and create efficient processes and systems to ensure overall quality standards.

The principles include:

1. Customer focus is done by exceeding customer expectations by linking organizational objectives to customer needs.
2. Leadership unifies the purpose and direction by management to develop a fully-involved staff.
3. Involvement of people utilizes employees' best talents, encouraging autonomy and holding employees accountable for their contribution.
4. Process approach is directing work as a process by defining work activities, assigning responsibility and accountability to employees and having a system to analyze and measure the process in terms of risk to customers and suppliers.
5. Systems approach to management aligns processes and systems inter-dependently to meet customer needs in an efficient and effective way.
6. Continual improvement produces products, services, processes and systems are evaluated through training, tracking improvements and recognizing those employees responsible for improvements.
7. Factual approach to decision making uses accurate and reliable data available to employees to use for decision making.
8. Mutually beneficial supplier relations fosters relationships with suppliers that are based on shared short- and long-term goals that benefit both parties.

The certification process involves adopting the principles, training employees on quality management systems, scheduling a pre-assessment, analyzing the outcomes, implementing improvements and cycling through an additional audit over a three-year period of time.