Financial & Economic Benefits of a Quality Management System

S

sayyaswami

#1
Often I come across the comment of the management “We have not realized any bottom line improvement because of QMS implementation”. They are correct!!. Every entrepreneur expects his bottom line to grow on each investment. Tools like six sigma focus on the financial implication straightaway. We start calculating the financial gain when we take up a project.

The new version of ISO 9001 ( ISO 9001-2000 & 2008) has introduced eight management techniques, the eight step to achieve the financial & Economic benefits. Based on this eight management principle the ISO 10014 standard ( ISO 10014-2006) provides the guideline to the top management to achieve the financial & economic benefits.

It provides guidelines for realizing financial and economic benefits through the effective application of eight quality management principles derived from ISO 9000:2005. These principles are subsequently referred to as “management principles” within the body of this standard. The intent of this document is to provide top management with information to facilitate effective application of management principles and selection of methods and tools that enable the sustainable success of an organization.

Adoption of these eight management principles is a strategic top management decision. It affirms the relationship between effective management and realization of financial and economic benefits. Deployment of appropriate methods and tools fosters the development of a consistent systematic approach for addressing financial and economic objectives. Economic benefit is generally attained through effective management of resources and implementation of applicable processes for improving the overall worth and health of the organization. Financial benefit is the result of organizational improvement expressed in monetary form, and realized by cost-effective management practices within the organization.

What the management is always look for

- improved profitability,
- improved revenues,
- improved budgetary performance
- reduced costs,
- improved cash flow,
- improved return on investment,
- enhanced organizational performance, credibility and sustainability

The standard explains about the application of the tools and techniques in each of the management principle in the form of flow chart and in known method of PDCA. The maturity level assessment tool provided in the standard in one of the unique method to have self assessment. The comprehensive self-assessment should be recognized as an important value-added milestone for the organization, worthy of the extra investment in time needed to complete it. Following the completion of a self-assessment questionnaire, a RADAR chart should be prepared that provides a pictorial view of the organization’s maturity status. Continuing generation of RADAR charts provides an ongoing illustration of the organization’s progress.

Application of tools like Activity Based Costing ( ABC), Activity Based Management ( ABM), Balance Score card, Bottle Neck management ( Based on theory of constraints), Business continuity planning, Customer Relationship Management (CRM), Economic Value Added ( EVA), Life Cycle Costing ( LCC) are well explained.

This international standard (ISO 10014) is treat to the top management. Implementing the tools & techniques given in the standard will definitely fetch the organization financial & economic benefit.
 
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Paul Simpson

Trusted Information Resource
#3
IRCA INform article

Here is a link to an article in the latest edition of IRCA's INform about the economic benefits of ISO 9001 certification. Anyone think we've found a 'smoking gun?' :)
 
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