The Future of Quality in Business: A Continuation of the Dialog
Guest Post by James Kline (first posted on CERM ® RISK INSIGHTS – reposted here with permission)
The CERM Risk Insights article #262 by Tom Taormina and the comments by Paul Simpson and Greg Hutchins, open an important discussion on the future of the quality profession. This piece builds on that discussion. The discussion is important because the quality profession is being disrupted. Both the business approaches and professional organizations which have supported and advanced the quality profession are being affected by this disruption.
The Webster’s Collegiate Dictionary defines disrupt as to throw into disorder. The late Clayton M. Christensen, in the preface to his book, “The Innovator’s Solution” states: “It’s not just management’s mistakes which cause failure. Certain practices that are essential to a company’s success – like catering to the needs of your best customers and focusing investments where profitability is most attractive – can cause failure too.” (1)
Understanding the elements that are causing the disruption can help individual professionals and professional organizations figure out how to adapt. In order to further the dialogue and provide a general understanding of the disruptive elements, I am going to start with a broader perspective and then drill down.
The Quality Professional Elements
Initially the quality movement was focused on the Guru’s, Deming, Juran, Crosby and Harrington. Over time their approaches coalesced under the rubric of Total Quality Management (TQM). The quality movement was reinforced by the creation of the Baldrige National Quality Award and the issuance of ISO 9001. TQM faded with the promotion of Six Sigma by Welch and Lean Management by Womack. These two approaches were eventually combined in Lean Six Sigma. The evolution of these elements created three broad professional quality tracks. One focused on organizational certifications such as 9001. Another focused on obtaining professional certifications, such as a Lean Six Sigma Black Belt. The last is associated with Baldrige examinations. While they overlap, there are differences in emphasis.
Those involved with organizational certification are concerned with the ISO standards. Their focus is primarily on the quality management process. Those with professional certifications emphasize the skills associated those certifications and work within the organization or consult on quality management in general. Those focused on the Baldrige criteria examine how management is handling a broad range of activities, such as personnel, performance measurement and supply chain management. The focus is on the entire operation.
Because of the differences in emphasis, CEOs have difficulty determining which approach is best for ensuring company performance and profitability.
This broad outline sets the stage for delving into the heart of the discussion. Much of the discussion around Risk Insights #262 evolves around ISO 9001. So, let’s look at ISO 9001.
The ISO Problem
ISO 9001 is the dominant quality management certification worldwide. Annually, ISO publishes the number of certifications worldwide. The numbers can be seen as bell weather figures for how well the quality profession is doing. This is because ISO 9001 certifications reflect the extent of quality management system development and emphasis worldwide. This development also reflects, to a degree, the employment of quality professionals.
For the past couple of years, the ISO 9001 number worldwide have declined. I have reported on this decline in two prior Risk Insights articles. Milton Dentch is working on a book, entitled, “The Risk and Fall of ISO 9001”. The book will document this decline in detail.
Four Reasons for ISO 9001 Decline
From my perspective, there are at least four reasons for this decline. The first is deterioration of the certification process. Oxebridge Quality Resources has done a good job pointing out problems in this area.
The second is loss of quality-oriented positions. For instance, after Dr. Harrington made a presentation on innovation to my local ASQ chapter, I asked why he moved from quality to innovation. He said he moved because quality management has been commoditized. In short, quality management has been standardized. Standardization eventually leads to digitization. Digitization ultimately means the loss of jobs.
The identification of deficiencies in production processes leads to improvements. Many of these improvements were the result of automation. In their book, “The Future Is Faster Than You Think”, Peter H. Diamandis and Steven Kotler, talk about technological convergence. They note that the decade to come will see “radical break-throughs and world-changing surprises.” These breakthroughs will further the automation of production process and the loss of quality management related jobs.
The third is that increasingly companies recognize there is no adverse impact from not having a 9001 certification. Companies are using the ISO 9001 standard to ensure their quality management system meets international standards but have decided that receiving a paper certificate provides little added value.
Items one and three are interrelated. The extent to which the certification process is shoddy and perceived to lack value, the greater the desire to go forego certification.
The fourth is the addition of RBT. In a technologically oriented age, the loss of quality jobs is inevitable. But, the decision to make technological adaptation is primarily an internal management decision, based in part on input from quality professionals. The problems associated with RBT is that it was forced upon the quality profession by ISO. ISO then doubled down by adding risk management to certification revision. This decision has three significant impacts.
These are: 1. It created confusion as to what RBT meant, 2. It opens the door for the involvement of other actors, and 3. It shifts priorities from quality management to organizational risk management.
I watched as the private sector members of my local ASQ chapter struggled with RBT. Changing from RBT to risk management in new revisions does not change the fact that organizational risk management is relatively new to the quality management profession. ISO could have eased the situation by referencing its Enterprise Risk Management (ERM) guide (31000). It did not. Consequently, the reputation of ISO 9001 tanked.
With the introduction of RBT and risk management, ISO invited other than the quality management professionals into the barn. For instance, the Institute of Internal Auditors (IIA) recently released its first Risk Management survey. In the discussion of the results, it recommended the implementation of a holistic approach to risk management. The IIA would not be recommending the adoption of a holistic approach if it did not see risk management as having a benefit to its membership. Moreover, Greg Hutchins and I have an article, in the Winter 2020 Journal of Government Financial Management, which discusses how accountants and auditors, in the public sector, are facilitating the adoption of ERM. While the article stresses government, the IIA survey of American companies finds that 64% of the Manufacturing and Industrial respondents have a systematic approach to identifying, managing and monitoring risk. In January 2020, COSO issued a new ERM guidance “Creating and Protecting Value: Understanding and Implementing Enterprise Risk Management”. The guidance is geared towards members of the C Suite. (COSO ERM is the model supported by the accounting and auditing profession.) In short, ERM implementation is being aggressively pushed. This creates a competition between the ERM models.
There are two ERM models. These are ISO 31000 and COSO ERM. While there are differences in terminology and approach both have the same ultimate objective. That is to help management identify and prioritize all the risks an organization faces. Poor quality management or the cost of not having an ISO 9001 certification are only two of the risks an organization faces. Other risks may include damage to reputation, supply chain failures, environmental risks and fraud. When the risks are prioritized the cost of not having a 9001 certification may be lower than supply chain issues. The result is the companies forgo the ISO 9001 certification. Anecdotal reports indicate companies are doing exactly that. This does not bode well for those dependent on the ISO 9001 certification process or the quality profession in general.
Without sounding like a Debbie Downer, the quality profession is being disrupted. That means some changes must occur. The question is what kind and how much? Ultimately that is an individual decision. There are several options.
One approach is to make a shift like the Baldrige Award. It first change from Quality to Performance Excellence. It then added to its criteria Innovation and ERM. In the public sector the City of Oshawa Canada has an integrated approach which include LSS, ERM and performance audits. LSS approaches are used to improve organizational performance and can be used to help mitigate risk. There is the opportunity to assist in the development of this combination in public and the private sector.
The spread of the Coronavirus and the quarantine of major cities in China, is causing those in the C-Suite to reconsider their supply chain. Supply chain risk management is going to be a major professional growth field.
Another option is to just hunker down and wait it out. By waiting it out, I mean waiting for companies to relocate manufacturing plants out of China to countries like the United States. When that happens, some quality management jobs will be created.
For the quality professional, this decision could be made easier, if quality professional organizations, like ASQ, provided guidance and adjusted their focus. Unfortunately, ASQ, has gone in another direction. It split its emphasis. One half is focusing on large companies. The other is the membership. This has created the problems which were the focus of the articles which started this dialogue.
On the chapter side, for instance, my local ASQ chapter has not held a meeting for the first three months of 2020. For 2019, it held a meeting in November, nothing in December and nothing in June, July, August, September and October. For all intent and purposes, my local ASQ Chapter is not functional. Under ASQ’s current approach, local chapters are heading to nonexistence.
ASQ’s emphasis on big business is not likely to provide enough revenue to support the organization. Nor is it likely to succeed as ERM takes firm hold of the organizational psyche. In the end, without a thriving membership, ASQ is likely to enter a death spiral.
The history of disruption shows it is difficult for those, whether companies or individuals, to adapt to the disruption. Most people have trouble adapting to radical change. That change can be assisted and encouraged by professional organizations like ASQ. Otherwise, the burden falls on the individual.
- Christensen, Clayton M. and Michael E. Raynor, 2003, “The Innovator’s Solution”, Harvard Business School Press, Harvard MA, page vii.
James J. Kline, Ph.D., CERM, is the author of numerous articles on quality in government and risk analysis. He is a senior member of the American Society for Quality and Six Sigma Green Belt with experience consulting for the private sector and local governments. His recent book, Enterprise Risk Management in Government: Implementing ISO 31000:2018, is available on Amazon. He can be reached at email@example.com.