Introduction:
We have received comments from some people who reject the relationship that may exist between the BSC and the ISO systems, be it Quality or Environment, despite the great possibility that exists of integrating both systems.
It must be understood that the BSC is a tool to manage a company based on the defined strategy and the ISO 9000: 2000 Quality Management System (it is the same for ISO 14000: 2004 in Environmental Management Systems) is an initiative that is coming to support the achievement of this strategy, specifically in the proposal made to the client and known as the Value Proposition. This implies that first there is the strategy and then the initiative or action plan, first the BSC and then ISO. When that logical sequence does not exist, we find companies that have been certified, but are still not clear about the tangible results, the result of this important effort.
In this article we will use the BSC methodology to establish a scorecard for the objectives and indicators of the Quality Management System, thereby seeking to clarify those people who still cannot find the relationship between both methodologies.
1. Company Vision:
The ISO 9004: 2000 standard In clause 5.1.1 Management Responsibility suggests that "Senior management should consider actions such as establishing a vision, policies and strategic objectives consistent with the purpose of the organization", this is made mandatory in the ISO 9001: 2000 in clause 5.3 Quality policy "Top management must ensure that the quality policy, a) is appropriate to the purpose of the organization"; this is to its Mission and its Vision, only that the certification norm does not explicitly state it.
Mission Example:
"Provide freight transportation service, providing added value and related services to importers and exporters in the Central American area."
Example of Vision
"At the end of this decade, 3YYYT aspires to become the provider of logistics and freight services, a model for the Central American area, characterized by the highest standards of reliability, continuous improvement, innovation and proactivity, a modern fleet, adequate infrastructure, and a highly qualified and motivated staff with the firm determination to fulfill the commitments acquired to satisfy the expectations of our clients ”.
In this vision, the future of shareholders is left out, which does not seem reasonable as a for-profit company. Some people consider that it is not convenient to raise the financial aspects, despite being a very important part of every investor when entering the business world.
2. Value proposition to your clients or Quality Policy:
In the BSC methodology, the value proposition is proposed as the way in which the company wants to differentiate itself from its clients, from the rest of the competitors, for which four possible alternatives are proposed:
- Cost leadership (or operational excellence) Product leadership (or innovation) Total satisfaction (or intimacy with the customer) Becoming an industry standard (lock in)
In our example, the company opts for operational excellence, through the highest "standards of reliability, continuous improvement, innovation and proactivity, a modern fleet, adequate infrastructure, and highly qualified and motivated personnel with a firm determination to meet commitments. acquired to satisfy the expectations of our clients ”. Very few organizations consider the perspectives of the BSC within their quality policy, despite what ISO 9004: 2000 establishes in 5.2 on the needs and expectations of stakeholders: “Every organization has stakeholders, each with needs and expectations". Stakeholders from organizations include:
- customers and end users, (Customer Perspective) organization staff, (Learning and Growth perspective) owner / investors, (such as shareholders, individuals or groups, including the public sector, who have a specific interest in the organization), suppliers and partners, (Financial perspective) and society in terms of the community and the public affected by the organization or its products. (Community perspective or social perspective)
The company's quality policy must be consistent with its value proposition, and make one of the ISO recommendations in clause 5.3 of the 9004 standard valid:
2000, when it says “Top management should use quality policy as a means of leading the organization towards improving its performance. The organization's quality policy should be considered equally, and be consistent with the organization's other global policies and strategies. In establishing the quality policy, senior management should consider:
- "The level and type of future improvements necessary for the success of the organization", (process perspective) "the expected or desired degree of customer satisfaction", (customer perspectives) "the development of people in the organization", (learning and growth perspective or human resource perspective) “the needs and expectations of other interested parties”, (financial perspective)
It also establishes that “the quality policy can be used for improvement provided that1:
- be consistent with the vision and strategy of senior management for the future of the organization, include continuous improvement in relation to meeting the needs and expectations of customers and other stakeholders, "which we insist, includes the financial perspective, It is not correct to assume that ISO does not consider the financial aspects.
Example of Quality policy:
«Provide the most reliable product transport service on the market, offering superior service through: fast response and security. And continually improve beyond customer expectations. ”
There is nothing to prevent the establishment of a quality policy related to each of the perspectives suggested in the Balanced Scorecard. It can also include the importance of providing economic benefits to the owners of the company.
The quality policy can be developed using the valuable contribution of the cause-effect relationship between the different perspectives, which would give a logical, harmonious and coherent meaning to its definition.
The questions proposed by the BSC by perspective are valid when defining the policy:
- How should we appear before our shareholders to be financially successful, with our quality system? The result of every effort by a for-profit organization must have an impact on a better financial position. How should we appear to our clients to achieve our vision and financial goals? The only way to improve an organization's income is to improve customer satisfaction through a value proposition, supported by a commitment or quality policy. In what processes should we be excellent to satisfy our shareholders and customers and make Is our quality policy valid? Both economic value and quality are generated in a few critical processes that every company must masterfully identify and manage.How will we maintain and sustain our ability to change and improve to achieve our vision? The continuous improvement of any organization is only achieved with a change in the behavior of its personnel, in the development of new competencies and the change in the organizational culture.
3. Strategic Objectives and Quality System Objectives
In the quality systems, as in many strategic plans after the Mission and The Vision are established, they proceed to establish objectives, which many of them have no relation to the Mission, the Vision, or even its quality policy.. It is not correct that when implementing ISO, BSC and the previous Administration by Objective (MBO), they are considered as isolated events, without there being any relationship between them.
From the Mission and the vision, come the strategic issues, (if not, how he hopes to fulfill his mission and achieve his vision), from the strategic issues, in a cause-effect relationship between the different perspectives, the goals come out, whether they are strategic or well the objectives of the quality system.
Example:
| Perspective | Politics | goals |
| customers | Provide the most reliable product transportation service on the market, | Increase the level of reliability of our clients |
| Processes | Offering a superior service through: fast response and security. | Reduce customer response time. Reduce the level of accident rate in clients |
| Processes | And continually improve beyond, customer expectations | Increase the level of performance of processes that impact the customer. |
| Financial | Not stated in the example | Not established |
| Learning and
Growth ( Human Resource) |
Not established | Not established |
By leaving out the financial and human resource perspective, it deviates from what is recommended in ISO 9004: 2000 section 5.2.2 which says: “The organization should identify the needs and expectations of personnel in aspects such as recognition, satisfaction in work and personal development. Such care helps ensure that staff commitment and motivation are as strong as possible. The organization should define financial and other results that meet the identified needs and expectations of owners and investors. "
4. Indicators by objective:
A quality management system must have the purpose of controlling the variation of its processes, if it wants to achieve its objectives. In ISO 9004: 2000 the word variation is only mentioned twice and in ISO 9001: 2000, it is not mentioned, however, clause 5.4.1 states that quality objectives must be measurable. In the latest version of ISO 10017 "Guidance on Statistical Techniques", the word variation appears more than 30 times. For a correct measurement of these objectives, a system must first be considered in which the variables that affect the achievement of the objective are identified:
| goals | Clear out | Variable | Indicator |
| Increase the level
of reliability of our clients |
Clarify what is the objective sought (What do we really want to achieve?) | Find the critical variables of the objective sought (FCE) (How do we realize that we are achieving it?). | Define the
appropriate indicators for each variable. |
Example:
| goals | Indicators | Goals |
| Increase the level of reliability of our clients | Reliability level according to the customer perception survey «Walet share» | 90% of very
satisfied customers for 2004 35% in 2005 |
| Reduce customer response time. Reduce the level of accident rate in clients | Response time
Accident rate |
Maximum 24 hours to
December 2004 0.5 accidents per client per year |
| Increase the level of performance of processes that impact the customer | Capacity index of each process with respect to customer specifications. | Cpk greater than 1.33 |
It is not convenient to start from an indicator to define an objective
5. Processes related to objectives
Both ISO 9001: 2000 and ISO 9004: 2000 establish "For an organization to function effectively and efficiently, it has to identify and manage numerous interrelated activities" and adds in other paragraphs "The application of a process system within the organization, together with the identification and interactions between these processes, as well as their management, can be called a «process-based approach». It is advisable not to limit yourself to identifying the processes on a map, without making it clear how interactions are managed.
When identifying the processes, other points established by the standard must be considered:
- the need to consider the processes in terms of the value they provide, obtaining results of the performance and effectiveness of the processes, and the continuous improvement of the processes based on objective measurements.
Example:
| goals | Indicators | Process
1 |
Process
2 |
Process
3 |
Process
4 |
| Increase the level of reliability of our clients | Reliability level according to the customer perception survey «Walet share» | X | X | ||
| Reduce customer response time.
Reduce the level of accident rate in customers |
Response time
Accident rate |
X | X | X | X |
| Increase the level of performance of processes that impact the customer | Capacity index of each process with respect to customer specifications. | X | X |
Process indicators is what in BSC terminology is known as lead measures, key performance indicators (KPIs), or management indicators.
Measurement by itself of a series of processes contributes little value to the achievement of planned objectives and to the best performance of the organization. It is not recommended that the process map become an identification of the certification standard, but rather show how the processes interact to achieve the planned results. It is important to remember that two of the basic principles of management systems must be applied:
- Process-based approach: A desired result is achieved more efficiently when activities and related resources are managed as a process. System approach to management: Identifying, understanding, and managing interrelated processes as a system contributes to effectiveness and efficiency of an organization in achieving its goals.
The processes that are identified must be related to the objectives set out from the quality policy, since they will hardly be achieved without the synchronization of those processes where they will become a reality.
6. Objectives by process:
The BSC methodology recommends synchronizing each objective with the processes that add value to obtain results. Once these processes have been identified, the sub objectives (second level objectives) are defined for each one of them according to the contribution they provide to the objective of the higher or strategic level. Subsequently, the indicators for each objective are defined, which are the inductors or performance indicators. At this point a cause-effect relationship is established both between objectives and between indicators. When the indicator of the upper objective does not reach its result, it is verified what the performance has been in the process or second level objectives. If the first level objective does not achieve its result and the second level objectives or processes show an adequate level,It can be due to several causes: that there is no relationship between the objectives of the first and second level or that other processes or different variables affect the performance of the superior objective. For the purposes of the BSC, this stage is known as the deployment or cascade effect where the strategy is actually operationalized.
In ISO 9001: 2000 - Quality Management Systems - Requirements 5.4 Planning 5.4.1 Quality objectives, it is established that “Top management must ensure that the quality objectives, including those necessary to meet the product requirements, they are established in the relevant functions and levels within the organization ”. This in terms of BSC implies that once the processes related to the achievement of the planned objectives have been identified, objectives, indicators, goals are established, only for those processes. There is no point in setting objectives and indicators in unrelated (relevant) processes, including those that the standard identifies as processes.
7. Action plans for continuous improvement or initiatives
ISO 9004: 2000 states in 5.4.2 Quality planning “Management should take responsibility for the organization's quality planning. This planning should focus on defining the processes necessary to effectively and efficiently meet the organization's quality objectives and requirements consistent with the organization's strategy. ”
The previous paragraph reinforces the need to identify the necessary processes, not all, but only those that affect the objectives and strategy and adds: “The
results of the organization's quality planning should define the processes for product realization and necessary support in terms of:
- the skills and knowledge needed by the organization, (competencies) the responsibility and authority for the implementation of process improvement plans, (initiatives) the necessary resources, such as financial and infrastructure, (budgets) the improvement needs, including methods and tools, (initiatives)
The previous points are part of the BSC in what is known as the Learning and Growth perspective, specifically in terms of human capital (skills), information capital (methods and tools).
Methodologically, the scorecard matrix presents an excellent format to complete the definition of objectives, relating it to the action plans or initiatives and the necessary budgets or resources.
Dashboard matrix
| goals | Indicators | Goals | Initiatives | Budgets |
| Increase the level of reliability of our clients | Reliability level according to the customer perception survey «Walet share» | 90% of very satisfied customers for 2004
35% in 2005 |
||
| Reduce customer response time.
Reduce the level of accident rate in customers |
Response time Accident rate | Maximum 24 hours to December 2004
0.5 accidents per client per year |
Implement “lean manufacturin g” Implement OSHAS 18001 | |
| Increase the level of performance of processes that impact the customer | Capacity index of each process with respect to the specification is of the client. | Cpk greater than 1.33 | Implement Six Sigma |
So far, we have developed a logic for establishing a policy, quality, objectives and indicators, using what the BSC methodology recommends.
The steps followed are:
- Validate the Mission and Vision. Establish a value proposition to clients. Formulate a quality policy that supports the value proposition (it is recommended to consider the four basic perspectives of the BSC). Formulate objectives, indicators, goals as well as action plans (initiatives) to achieve those objectives Synchronize the established objectives with the processes necessary to achieve the objectives Establish objectives and indicators for each process, with their respective goals and initiatives at a lower level Link the resources (budgets) with each initiative (action plans)
8. Dashboards for ISO or control panels
If the process outlined here is followed, the implementation of a Scorecard is facilitated, as well as the identification of the causes of the problems, in what ISO establishes as root cause analysis. Beyond looking for the root cause of why a document does not have the coding or signature established in the procedure, it allows us to focus on failures both in the interaction of processes, and in their cause-effect relationship, in those aspects that generate value for business. A dashboard developed with a logical relationship between perspectives allows at a glance to know where the cause of the problems is.
The Spanish standard "Guide for the implementation of indicator systems. UNE 66175 ”, presents the dashboards in the form of bar graphs, trends, etc., With the BSC the process approach is considered, since it allows identifying how the different processes interact to achieve a result. Analyzing a variable separately, indicates absolutely nothing, if we do not relate it to others that could also affect the result.
The following figure is a sample of a Dashboard of the example that we have been building. We prefer to leave the example as it was developed by the analyzed company, unfortunately its defects, it prevents showing the correct relationship between the perspective of clients, both with the financial perspective that is absent as well as with the perspective of learning and growth where they are contemplated. staff competencies. (6.2.2 Competence, awareness and training ISO 9001: 2000).
Conclusion:
One of the concerns of many managers who have implemented a Quality Management System is the absence of concrete results, both in the continuous improvement of their processes and in obtaining tangible results, measured in terms of satisfied customers and a return on the investment.
The first failure of the quality systems is due to the fact that more emphasis has been given to the form than to the background, compliance with the ISO 9001: 2000 standard has been the important thing to achieve the conformity of your system. Unfortunately, it fails to establish the purpose of the system, (the aim of the system, Deming insisted), both in its relationship with the generation of economic value for the company and in the definition of its own objectives. There is a lot of clarity in how to document the processes, do audits, corrective actions, etc., but not in how to correctly establish objectives that really satisfy the interested parties (including shareholders), identify the processes that add value and measure the performance of the organization. in creating value.
Instead of seeing rivalry between different tools, more a product of the rivalry between consultants and gurus, it is feasible to recognize that the different methodologies can complement each other, taking what is valuable from each of them, and thus understand their true purpose, make our organizations more competitive every day.
In this way, we hope to provide the parties to the conflict with an integrative vision of both tools. As consultants in the implementation for more than 12 years of both processes: ISO and BSC, we have found more virtues than defects in both tools.
Bibliography:
- Seminar with Robert Kaplan- Costa Rica June 2003Seminar with David Norton- Costa Rica August 2005Implementing and managing the Balanced Scorecard: Nils-Gorän Olve and others.The Balanced Scorecard: R. Kaplan, D. Norton.Strategy Maps, R. Kaplan, D. NortonHow to get out of the crisis William E. Deming.Understanding & Implementing ISO 9001: 2000 Standard: HJ Steudel Ass., ISO 9001: 2000 - Quality management systems. Requirements ISO 9004: 2000, Recommendations for performance improvement, ISO-Inteco. Guidelines for achieving Financial Benefits, ISO 10014: 98 How to use the Balanced Scorecard, R. Kaplan, D. Norton. Guide for the implementation of indicator systems. UNE 66175ISO 10017, guidance on statistical techniques for ISO 9001: 2000
