Performance Excellence & ISO 9001:2000 ISO 9001:2000 Performance Excellence Models Financial Financial Performance 123 ©Hammer Quality Solutions 2004 Model

Performance ExcellencePerformance Excellence& ISO 9001:2000& ISO 9001:2000

ISO ISO 9001:2009001:200

00

PerformancPerformance Excellence e Excellence

ModelsModels

FinancialFinancial Performance

11 22 33

©Hammer Quality Solutions 2004

Model for Organizational Model for Organizational EffectivenessEffectiveness


PerformancPerformance Excellence e Excellence

ModelsModels

11

Performance Excellence ModelsPerformance Excellence Models

Examples

• European Quality Award

• Kenyan Quality Award (KQA)

• Baldrige National Quality Program (US)

• California Governor’s Golden State Quality Award

• New York Governor’s Excelsior Award

Core Values of Excellence Models

• Visionary Leadership

• Customer-Driven Excellence

• Organizational and Personal Learning

• Valuing Employees and Partners

• Agility

• Focus on the Future

• Managing for Innovation

• Management by Fact

• Public Responsibility and Citizenship

• Focus on Results and Creating Value

• Systems Perspective


– Focus on Results

• Customer-Focused Results– Satisfaction, Retention, Customer-Perceived Value

– Key Product and Service Performance Measures

• Financial and Market Results– Key Financial Indicators, Return, Economic Value

– Marketplace Performance, Market Share, Growth

• Human Resource Results– Employee Well-Being, Satisfaction and Development

– System Performance and Effectiveness

• Organizational Effectiveness Results– Operational Performance, Productivity, Supplier Performance

– Regulatory/Legal Compliance and Citizenship



FinancialFinancial Performance

22

Quality Management & Financial Performance

• 5-year study*

• 608 award winners from 51 industries

• 77% from the manufacturing sector

• 140 award givers

• Customer & independent awards

• Award winners represent “effective implementation”

Financial PerformanceFinancial Performance

* Impact of Total Quality Management on Financial Performance: Evidence from Quality Award Winners by Dr. Vinod R. Singhal, Georgia Institute of Technology and Dr. Kevin B. Hendricks, University of Western

Ontario, March, 2000

1988 1998'93

6 yearsbefore

'92'89 '90 '91 '94 '95 '96 '97

1 yearbefore

Award

4 yearsafter

ImplementationPeriod

Post-ImplementationPeriod

Determining the implementation and post-implementation periods for a firm thatwon its 1st quality award in 1994.


Time Period Measurement for Award Winners (Example)

Financial Performance Results

• Implementation Period = No significant differences

• Post-Implementation Period = Significant differences


20%

17%

12% 12%

21%

16%

21%

14%

25%

13%

0%

5%

10%

15%

20%

25%

First Year Second Year Third Year Fourth Year Fifth Year

Stock Return

Stock Price PerformancePost-Implementation Period

Award Winners

S & P 500


Award

9%6% 8%

0%

23%

7%

79%

37%

69%

32%

91%

43%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Return onAssets

Return onSales

Employees Total Assets Sales OperatingIncome

Performance Measures

Percent Change in Performance Measures5-Year Post-Implementation Period

Award Winners

Benchmark Firms


10%6%

17%

9%

25%

11%

49%

24%

33%

23%

73%

33%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Return on Assets Return on Sales Employees Total Assets Sales OperatingIncome


Percent Change in Performance MeasuresAward Winners

5-Year Post Implementation Period

Independent

Customer


10%

4%

17%

7%

21%

9%

42%

18%

39%

20%

63%

22%

0%

10%

20%

30%

40%

50%

60%

70%

Return onAssets

Return onSales

Employees Total Assets Sales OperatingIncome


Percent Change in Performance MeasuresAward Winners

5-Year Post Implementation Period

Smaller Firms

Larger Firms


(<$600m)

(>$600m)

Conclusions from Financial Study

• Significant positive financial impact

• Greater impact on smaller firms

• Core value focus is more important than customer criteria

• Patience is required and rewarded



ISO ISO 9001:2009001:200

00

33

Core Values & Principles

• ISO 9001:2000 is based on core values of Excellence Models

• Core values incorporated as 8 principles of ISO 9001:2000

• 8 principles are mandated to emphasize importance

ISO 9001:2000ISO 9001:2000

Visionary Leadership

Customer-Driven Excellence

Organizational & PersonalLearning

Valuing Employees & Partners

Agility

Focus on the Future

Managing for Innovation

Management by Fact

Public Responsibility &Citizenship

Focus on Results & Creating Value

Systems Perspective

Visionary Leadership

Customer-Driven Excellence

Organizational & PersonalLearning

Valuing Employees & Partners

Agility

Focus on the Future

Managing for Innovation

Management by Fact

Public Responsibility &Citizenship

Focus on Results & Creating Value

Systems Perspective

Customer Focus

Leadership

Involvement of People

Process Approach

System Approach to Management

Continual Improvement

Factual Approach to DecisionMaking

Mutually Beneficial SupplierRelationships

Customer Focus

Leadership

Involvement of People

Process Approach

System Approach to Management


Factual Approach to DecisionMaking

Mutually Beneficial SupplierRelationships

ISO 9001:2000ISO 9001:2000 Core Values from

Excellence Models

Principles from

ISO 9001:2000

Principles to Requirements

The 8 principles are woven into 5 main elements of ISO 9001:2000

» Documentation

» Management

» Resources

» Product/Service Processes

» Improvement

ISO 9001:2000ISO 9001:2000

ISO 9001:2000

• Documentation Requirements

• Document Control

• Records Control

• Management Commitment

• Management Review

• Resource Management

• Training

• Infrastructure / Work Environment

• Customer Processes• Design & Development• Purchasing• Production & Service Processes• Calibration

• Customer Satisfaction• Internal Audits• Nonconforming Product• Analysis of Data• Continual Improvement• Corrective & Preventive Action

ISO 9001:2000ISO 9001:2000

Customer Satisfaction & Improvement

• Requirements of ISO 9001:2000 are integrated with organizational capabilities to improve customer satisfaction

• Improving the effectiveness of quality processes increases customer satisfaction

ISO 9001:2000ISO 9001:2000

CustomerWants

CustomerWants

ISO 9001:2000 & Customer Satisfaction

OrganizationHas

OrganizationHas

ISO 9001:2000Provides

ISO 9001:2000Provides

On-Time Delivery


Ability to Grow

Lower Costs

Zero Defects

Responsiveness

Control Systems

Trust Relationship

Communication

Corrective Action

Process Control System

Efficiency / Yield

Metrics

Inventory Control

Capacity

Quality System

Control of Suppliers

(7.2) Customer Processes

Communication(7.2.3)

Design / Development(7.3)

Purchasing(7.4)

Operations Control(7.5.1)

Customer Satisfaction(8.2.1)

Analysis of Data(8.4)

Continual Improvement(8.5.1)

Corrective Action(8.5.2)(8.5.3)

Communication

Cu

sto

mer

Per

cep

tio

n

Str

eng

th o

f P

roce

sses

ISO 9001:2000ISO 9001:2000

Effective Measurements = Effective Management

• ISO 9001:2000 provides effective measurements for management action

• Based on effective measurements, products and processes are improved to directly impact customer satisfaction

ISO 9001:2000ISO 9001:2000

ManagementReview

Quality Objectives(QMS-04)

Follow-up From PreviousManagement Reviews

(QMS-05)

Quality Policy(QMS-04)

Internal Audits(QMS-14)

All Processes

CustomerReturnsIndex

(QMS-13)

CustomerSatisfaction

(QMS-13)

Corrective &Preventive Action

(QMS-15)

ComplaintTrends

(QMS-16)

IndividualCustomer

Complaints(QMS-16)

ProductNonconformanceTrends (QMS-15)

Individual ProductNonconformances

(QMS-15)

ProposedCorrective orPreventive

Actions(QMS-16)

ProductReturns(QMS-15)

SupplierPerformance

(QMS-10)

ReceivingInspection

Performance(QMS-10)

BusinessChanges that

Impact the QMS(QMS-05)

New Processes &Major Changes

(QMS-01 & QMS-10)FutureBusinessChanges

= Recommendations for Improvement

ProductConformity

(QMS-11)

Resource Needs?

Recommendations to Improvethe Effectiveness of the QMS?

Recommendations to ImproveProducts?

Outputs

John

Steve

John

John

John

Steve

Eva

John

John

John

John

Paul

Dave

Dave

Paul

All

Dave

Paul

InternalAuditors

RelationshipIndex

(QMS-13)

On-timeIndex

(QMS-13)

ProcessPerformance

(QMS-11)

Rick

Opportunities forPreventive Action

(QMS-05)

ISO 9001:2000 & Performance Excellence

• Core values & principles provide focus for performance excellence

• Effective quality management impacts financial performance

• ISO 9001:2000 is a significant step toward performance excellence

ISO 9001:2000ISO 9001:2000

No formalsystems

Someformal

procedures

ISO9001:1994

ISO9001:2000

ExcellenceCriteria

EntrepreneurLeader is the

System

LeadershipRecognizesthe Need for

Structure

FormalDocumented

Structure

Principle-Based

Structure

Core ValuesGovern the

Organization

ISO 9001:2000ISO 9001:2000Steps to Performance Excellence

• Leadership is not committed• Leadership is not involved• Executive management does not function as a team• Poor implementation strategy• Poor internal or external consulting advice• Focus on certificate / not on effectiveness

ISO 9001:2000ISO 9001:2000

Why Do Organizations Lack Performance Improvement With

ISO 9001:2000?

ISO 9001:2000ISO 9001:2000

Absence of

Trust

I nattention

to Results

Fear of

Confl ict

Lack of

Commitment

Avoidance of

Accountability

2) Develop team purpose &identif y values

4) “Rope-Square”exercise

5) Describe roles &responsibilities

6) Myers BriggsSurvey

7) Power to ChangePowerPoint

8) Lif e maps (leaderfi rst)

9) Thomas KillmanSurvey

I nvulnerabilityUnwillingness to be

vulnerable — not openabout mistakes &

weaknesses

Artifi cial HarmonyTeams that lack trust areincapable of engaging inpassionate & unfi ltered

debate

AmbiguityWithout passionate debate team

members rarely buy-in and commit

Low StandardsWithout commitment team members avoidaccountability — hesitating to call their

peers on negative behaviors

Status & EgoFailure to hold one another accountable creates an

environment where team members put theirindividual needs above the goals of the team

Becoming a Team

Humility — Level 5 Leader

J ohari Window

Cognitive Maps

Ladder of I nf erence

Filtering Our Dialogue

Advocacy & I nquiry

Four Fatal Fears

Four Fatal Fears

Aut

hent

icit

y

Authenticity

Filtering Our Dialogue

Team DysfunctionsPersonal Development I ssues

Building Trust3) Five Dysfunctions

Survey1) Explain teams & high

perf ormance teams

Documents

Performance Excellence & ISO 9001:2000 ISO 9001:2000 Performance Excellence Models Financial Financial Performance 123 ©Hammer Quality Solutions 2004 Model