ISO 9000 Standards and Long-Term Business Productivity

Introduction: Productivity and Standardization

Productivity is important to every kind of business. This does not mean that every possible bit of work must be squeezed out of every single worker until they collapse from exhaustion on the assembly line. Indeed, this approach would certainly not be productive, because continually replacing workers who quit from exhaustion — not to mention settling disability suits — is hardly the goal of any business.

Productivity means getting the most out of one's machines and workers on a long-term basis. Sometimes this means that everyone has to put in overtime. Sometimes it means that people need to spend an afternoon staring out the window and thinking up new ideas. It all depends upon the business involved and the stage of a project that the business and its workers are at.

Something that every business can benefit from in terms of increased productivity is an adaptation of the ISO 9000 standards. However, these standards are most effective when adopted as part of an overall operations management strategy. Both points are discussed below.

Most people outside the world of industry have never heard of ISO 9000 certification, and yet this system — and similar systems of standardization — are integral to a number of activities we pursue each day and are central to the way business and industry will be conducted in the 21st century.

Much has been written about the process by which a business — whether in the high-tech field or in one of the more traditional heavy industries — can create a system of quality management. While each type of industry must determine the details of quality management for itself, and each individual business must fine-tune those requirements for its own particular needs, it is possible to make some general statements about quality control. All of these are tied, in more or less direct ways, to a systematic application of the concept of standardization by the company's executives.

Quality Management and the Five M's

The business leader who wishes to run his or her organization at anything approaching maximum efficiency must establish, document, implement, and maintain a quality management system, and thereafter continually improve its effectiveness by mapping, controlling, and analyzing processes; providing the necessary resources; and implementing and continually improving those processes.

One of the axioms of quality control for the production management of a company has traditionally been summarized as taking care of the "five M's": men, machines, methods, materials, and money. The first of these is now obviously no longer properly an "M," since it must include women (who have always performed at least half of the labor in human societies), but the uniformity of the acronym remains appealing. Since the vast majority of manufacturing personnel work in the physical production of goods, "people management" is one of the production manager's most important responsibilities and takes precedence over the other four in terms of quality management.

Although the five M's cover the range of the major tasks of production management, control summarizes its single most important issue. The production manager interested in quality management is, in fact, interested in quality control. That person must therefore plan and control the process of production so that it moves smoothly at the required level of output while meeting cost and quality objectives.

An essential part of this planning process in almost every case is the implementation of a standardization process like ISO 9000. This point cannot be overemphasized.

Quality process control has two major purposes, and these are the same regardless of the kind of industry or business involved. The first is to ensure that operations are performed according to plan. The second is the continuous monitoring and evaluation of the production plan to see whether modifications can be devised to better meet "cost, quality, delivery, flexibility, or other objectives."

This process of continually updating and checking for needed modifications is one of the greatest strengths of the ISO system. Moreover, it is the ongoing nature of this process that is most responsible for the connection between productivity and ISO 9000 use.

While the ISO standardization system is updated annually, good quality control must often be updated on a daily or even hourly basis. For example, when demand for a product is high enough to justify continuous production, the production level may need to be adjusted periodically to address fluctuating demand or changes in a company's market share.

This is called the "production-smoothing" problem. When more than one product is involved, complex industrial engineering or operations research procedures are often necessary, because without them it may not be possible to analyze in a sophisticated way the many factors contributing to a single — perhaps seemingly simple — problem.

An ISO 9000 quality system is "a set of documented procedures for carrying out a business process. A quality system, in other words, helps create order, rigor, and routines from chaotic or spontaneously evolved processes." Often companies do not implement quality control and standardization systems because the amount of work — and paperwork — involved in such implementation can be quite heavy. This creates a psychological barrier at the beginning of the project that many people find difficult to overcome, without understanding how greatly their productivity will be improved.

Quite often people do not want to work through the initial effort required in setting up such a system. However, this must be filed under the "pennywise and pound foolish" category, for the time invested in implementing quality control and standardization processes is well worth it, because "the introduction of quality systems frequently leads to improvements in quality and predictability of operations." The ISO 9000 is a particularly useful set of standards because it makes very explicit the issues that must be included in various kinds of systems.

The ISO 9000 specifications are promulgated by the International Organization for Standardization (ISO). Founded in Geneva in 1947, the ISO is concerned with providing standardization in all areas of work and technology in all technical and non-technical fields except for electrical and electronic engineering, which fall under the purview of the International Electrotechnical Commission. Its membership extends to more than 100 countries, and each member is the national body "most representative of standardization in its country."

What Is a Standard? The ISO 9000 Framework

In Western industrial countries such as the United States or those of Western Europe, these national bodies are usually private organizations, such as the American National Standards Institute (ANSI) or the British Standards Institution (BSI). In other parts of the world — including Asia and parts of Africa — these organizations are generally a formal branch of the government.

Standardization affects a very wide range of processes and sub-processes. These include setting units of measurement; establishing systems for alphabetization and transliteration of different alphabets; setting specifications for parts and their components, as well as for the quality of materials, work surfaces, work processes, required and optional tools, all methods of testing, and machines. Even the exact form in which specifications are presented is standardized.

The ISO is often called upon by representatives of an industry, a government, or a national standards institution to establish bodies called "technical committees," which draw on an international group of experts to investigate and resolve specific concerns about standardization in a given field. These resolutions are then published under the title "International Standards." Because of the pace of technological change as well as evolving ideas about labor, ISO standards are reviewed — and, if necessary, revised — every five years.

While the ISO is a relatively new organization, the concept of standardization in industry is itself centuries old. The development and application of standards to allow for large production runs of component parts that can be readily fitted to other parts without adjustment — which is, in a nutshell, all that standardization is — has been with us since the beginnings of the Industrial Revolution. Such standardization allows, when well executed, for clear communication between an industry and all of its suppliers, for relatively low cost to both industry and the final consumer, and for the planning of manufacture on the basis of interchangeable parts.

A standard is simply that which has been selected as a model to which objects or actions may be compared. Standards for industry may be devices and instruments used to regulate color, size, weight, and other product attributes. Standards may also exist in the form of physical models, or as written mathematical or symbolic descriptions, drawings, or formulas setting forth the important features of objects to be produced or actions to be performed.

Standards applied in an industrial setting include engineering standards, which encompass the standardization of properties of materials, fits and tolerances, terminology for both materials and practices, and drafting practices. Common standards also include specifications for the description of the various attributes and ingredients of complex manufactured items. These may take the form of drawings, formulas, materials lists, descriptions, or models.

The ISO 9000 standards were finalized and published in 1987 by the International Organization for Standardization. The worldwide standards are divided into five subsets that establish the requirements for the management of quality, covering: definitions and concepts; guidance on selecting other standards for a given business; quality assurance in design, development, production, installation, and servicing; quality assurance in production and installation; quality assurance in test and inspection; and quality management and quality system elements.

The ISO standards are used by the European Economic Community to provide a universal framework for quality assurance, enforced through a system of internal and external audits to ensure that "a certified company has a quality system and processes in place to meet its published quality standards." In 1987, the United States adopted the ISO 9000 Series verbatim as the ANSI/ASQC Q-90 Series.

The ISO 9000 standards have since been updated to the ISO 14000 series, a set of generic environmental management standards "designed to manage environmental compliance with legislative and regulatory requirements and provide a worldwide focus on the environment," reflecting growing worldwide environmental concerns.

Standardization is, after all, meant to make life better for workers and business owners, who are citizens of the global community before they are anything else. The importance of standardization to productivity can perhaps be better understood if we remember that doing business is mathematics by other means — all a question of keeping equations in balance on both sides. Labor must be balanced with capital. Resources with allocation. Customers with services or goods. Workers with rewards.

At the heart of an ideal operation — usually a business, though a number of other multi-person organizations also qualify — is a sound theory of operations strategy. Part of that strategy must be a well-designed program of material requirements planning (MRP). MRP as an overall strategy is most effective when based on ISO 9000 standardization.

The Importance of Standardization in Operations Strategy

Taylor, an American industrial engineer, may be said to have invented the idea of scientific management in business, and in many ways was the first to understand that standardization could be applied to more than just parts. In 1878, he began working at the Midvale Steel Company and there applied himself — as head of steel production — to studies in the measurement of industrial productivity. Through his own hands-on industrial experience, Taylor developed a number of complex and detailed systems designed to gain maximum efficiency from both workers and machines in the factory. These systems relied on time and motion studies, which help determine the best methods for performing a task in the least amount of time (Moskowitz & Wright 119).

Essentially, Taylor propounded a new philosophy stating that the scientific method could and should be applied to all managerial problems, and that the methods by which work is accomplished should be determined by managers through scientific investigation. This emphasis on a scientific perspective translated directly into an emphasis on standardization.

Industrial management is a term used to describe the techniques and expertise of efficient organization, planning, direction, and control of business operations. In the theory of industrial management, organization has two principal aspects. One relates to the establishment of lines of responsibility, drawn usually in the form of an organization chart that designates executives from the president to the department head and specifies the functions for which they are responsible. The other relates to the development of a staff of qualified executives (Johnson, Newell & Vergin 19). Both of these aspects are far more easily established and maintained when a system of standardization is in place.

Planning in industrial management must also establish broad basic policies with respect to production; sales; the purchase of equipment, materials, and supplies; and accounting. All of these are more easily accomplished through standardization. Planning must further relate to the implementation of these policies by departments, as well as to the establishment of standards of work in all departments.

Put more simply, operations management is the process of obtaining and using resources to produce useful goods and services in a way that meets the goals of a particular organization. Those needs are best met when they are themselves standardized so that all supplies can be measured against an already established standard. This is true whether the organization is a manufacturer, a hospital, a department store, or a university. The goals of the organization might be to maximize profits, reduce morbidity, increase prestige, or provide the best possible service within a given budget. The resources can differ dramatically — carrots, wing nuts, or expertise in comparative literature — but can always be divided into labor and capital (Johnson, Newell & Vergin 37).

Efficiency is important to organizations and to society because efficiency in one area allows greater efforts in another. A business firm that reduces its inventories while maintaining its level of customer service has more funds available to invest in developing new products, which in turn leads to more jobs. A school board that reduces its transportation costs has more money to spend on special reading programs for elementary school children. A society that satisfies its housing and sustenance needs more efficiently has more resources — including time — to expend in improving quality of life. Thus, efficient utilization of resources is one major way for an operations manager to contribute to achieving the goals of the organization and of society.

In any ongoing operation, the operations manager must supervise the flow of inputs and outputs and manage the use of resources involved. It is far easier to assess both inputs and outputs when their measurement is standardized. To be effective, the manager must be able to pinpoint important problems and the most limited resources. An operations manager must plan the use of resources, predict the impact on goals, and coordinate the implementation of the plan. But before an operation is even begun, the operations manager must also design the physical facilities — including location and capacity — as well as the staffing and workflow system to be used.

This requires a constant balancing act among labor, machines, capital, and various components and subcomponents. An item has dependent demand whenever its demand depends on the demand for another item or product. For example, the demand for automobile engines or transmissions depends directly on the demand for the final product, automobiles. The MRP approach is particularly appropriate for manufacturing operations in which the demand for subassemblies, component parts, and raw materials is dependent upon an end product. These dependent-demand items have a demand pattern that is not smooth over time, but lumpy — occurring in discrete batches at different points in time.

Another important aspect of standardization is that it allows a company run along standardized lines internally to fit more easily into the industry as a whole. The systems approach to problem solving involves viewing the organization as a component of a larger environment with which it interacts, and the organization itself as a system with mutually dependent components. The behavior of any particular department influences — and is influenced by — the behavior of other departments. Before a problem can be solved to benefit the organization as a whole, it must be correctly identified and put in proper perspective. Problems are not necessarily thought of as being confined to a particular department or component; instead, with the symptoms of the problem clearly in mind, a broad analysis of the total organization and its environment is undertaken with the intent of identifying the problem in a systems context.

Conclusion: Balancing Standardization and Flexibility

However, the executive at a productive business also understands that even things that cannot be standardized can be rationalized. This joint course of standardization and rationalization is the route to the greatest productivity and is the one pursued by the Tribune Company.

Another arena of business productivity in which rationalization is more important than standardization per se is in the political elements that affect a business from outside. A political approach to MRP acknowledges that the system being managed is not a closed one, but one dependent — sometimes highly dependent — on factors outside the specific system itself. Peter Drucker has often emphasized the importance of looking beyond the specific requirements of a closed system of production.

For example, Drucker argues that businesses in the 21st century must attend to five social and political certainties now shaping business strategy: the collapsing birthrate in the developed world; shifts in the distribution of disposable income; a redefinition of what constitutes acceptable corporate performance; global competitiveness; and the growing incongruities between economic and political reality (Drucker 19).

The impact of pollution, natural resource depletion, population growth, and humanity's changing values at the dawn of this new millennium seem destined to change industrialized society. Predicting their exact effect would require a crystal ball, but it is clear that such factors must be taken into account in determining how to run a business in the most productive fashion. This is the most important aspect of a political operations strategy because it requires managers to look as clearly as possible into the future and to predict not only how an individual company will use resources, but what resources will be available given national and worldwide limitations. A large part of using those resources productively, of course, entails their standardization.

As we become increasingly aware of the physical limitations of our environment, there will be ever greater emphasis on better-managed institutions to use available resources as responsibly and equitably as possible. Such environmental limitations may well create opportunities to master new technologies and create new jobs that use both mechanical and human labor efficiently. It may also be that a fundamental breakdown in industrial production will occur, requiring a realignment of current resources. However, no company can expect to escape dramatic change in the coming century or be sheltered from international political change (Johnson et al. 148). Standardization will remain essential to many specific industrial processes, but flexibility in others will be just as essential to productivity.

It would be misleading to imply that political concerns and a political approach to operations strategy are new concerns, although companies may be newly sensitive to them. The world around an organization has always had a great impact on that organization's operations. For example, a chemical firm must meet air and water pollution standards set by law. A hospital must explain cost increases to health insurance firms and customers, and must also meet quality standards required by governments and the physicians who practice there. A trucking firm must be aware of the myriad regulations that federal and state governments place on them. Laws, regulations, and other environmental factors all place limitations on the operations manager.

Many organizational policies are indirectly connected to external influences that cannot be directly addressed by careful adherence to standardization. For example, a firm may choose to maintain a high-quality image for its products and to compete on that basis. Another firm may choose to develop a low-price image and compete on price. Such policy decisions must be made by top management on the basis of subjective judgments, and each of these decisions has implications for daily operations strategies and the overall role of standardization.

One company that has taken such a model to heart is the Belo Corporation, a mass media company based in Dallas that publishes the Dallas Morning News. The company has been pursuing a joint strategy of maintaining older technologies — with the same standardization strategy that newspapers have followed since the institution of cold type — while also pursuing Internet and other high-tech ventures, which allow in some cases for a high degree of standardization and in others for rationalization.

The reasons for this joint strategy are that the company is viewing its operations strategy and productivity needs within a political context. The rising costs of newsprint — costs likely to increase as less wood pulp is available from trees, and possibly less from recycling as more consumers seek recycled paper — has made the company wary of depending too heavily on its traditional newspaper base (Rodrigue 2002).

Adding to the company's reluctance to rely heavily on newspapers is the fact that its customers themselves are relying less on newspapers than before, increasingly turning to mass media for their news. Given that newspapers will become progressively more expensive to produce due to global political and environmental pressures on paper costs, and given that changing social and cultural mores make non-paper media more attractive, the company has shifted some of its resources into new media.

And yet the Belo Corporation is disinclined to shift the majority of its resources because changes in the economy may make the resources required to use new media — such as the Internet — too expensive. If the world economy stalls, people may return to cheaper technologies like newspapers rather than expensive DSL connections.

Moreover, the future of newspaper readership is hard to predict because it depends in large measure on demographics — people are more likely to read newspapers as they age. Until the eventual size of the baby boomlet is known, any predictions about the future need for newspapers are impossible to make, and this is even setting aside the question of how a generation of unknown size raised on the Internet will take to the printed page as they grow older (Rodrigue 2002).

This balancing of complex factors in a business's overall pursuit of high productivity requires careful consideration of when strict adherence to standardization is required and when it should be set aside. Standardization, as embodied in systems such as ISO 9000, provides the structural backbone of efficient operations management — enabling quality control, clear communication across supply chains, and the kind of predictable performance that long-term productivity demands. Yet as the examples of the Tribune Company and the Belo Corporation illustrate, the most productive businesses are those that understand both the power and the limits of standardization, combining rigorous standards where they apply with rationalization and flexibility where they do not.