ISO 10014 - Guidelines for Managing the Economics of Quality

Helmut Jilling

Auditor / Consultant
#21
Raphael said:
Paul,

I love the idea that the ISO-10014 is getting all these improvements, but I'm still skeptical that this would enforce management to take quality seriously. According to what you said at the beginning of this thread, the ISO-10014 is going to be a guide, not a standard against a company can get certified. Do you perceive that these Quality-ROI ideas are going to be mandatory in some way? For example, as "Sidney Vianna" said, are we going to see any of these ideas in the ISO-9001:2008?

By the way, I feel privileged to have you in this thread. :agree1: I bet none of my more senior collegues know this stuff about the ISO-10014.

In my opinion, you can't force management to take quality seriously. Customer have tried to force it through punitive means.

In my opinion, the most successful way to bring them in is to show them the money. That is their language, and it is supposed to be. So, show them how process control, quality improvement, better training, internal audits, etc. adds money to the bottom line. Many of them see it as a cost. You must show them that it is free.

However, that means we in quality need to learn how to do quality stuff well enough to make sure it's free. That is where the process optimization available in ISO's process approach can be such a powerful tool. But I see many clients who stop at flowcharts and never gets to the process optimization that is available.

There is much power in the tool, but it is much more than ISO 9001:1994 with flowcharts.
 
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scbiswas

#22
Iso Tr 10014

I have seen the DIS version of the standard. It is now a FDIS standard and due for release any time in 2006.

---------------------------
Quality management systems — Guidelines for realizing financial and economic benefits

This International standard is addressed to top management. It provides guidelines for realizing financial and economic benefits through the application
of the quality management principles derived from ISO 9000:2000.

These eight principles are subsequently referred to as ‘management principles’ within the body of this standard.


This standard builds upon these interrelated management principles to develop processes that facilitate the realization of the organization’s objectives.

The management principles are:

Customer focus;
Leadership;
Involvement of people;
Process approach;
System approach to management;
Continual improvement;
Factual approach to decision making; and
Mutually beneficial supplier relationships[/B]


Adoption of these principles is a strategic top management decision. It affirms the relationship between effective management and realization of financial and economic benefits. Tactical deployment of appropriate tools fosters the development of a consistent systematic approach for addressing financial and economic objectives. A self-assessment is included in this standard as a gap analysis tool (see annex A).

Successful integration of the management principles relies on the application of the process approach and the PDCA (Plan-Do-Check-Act) model. This approach enables top management to assess requirements, plan activities, allocate appropriate resources, implement continual improvement actions and measure results in order to determine effectiveness. It allows top managers to make informed decisions, whether they relate to the definition of commercial strategies, the development of a new product or the execution of financial agreements.

Financial and economic benefits that can result from the application of the management principles include:
improved profitability and/or improved budgetary performance
improved return on investment;
increased competitiveness;
improved revenues;
reduced costs;
optimization of available resources;
improved customer retention and loyalty.

This standard applies equally to organizations with products including tangible goods, services, software and processes. It is relevant in both the public and private sector and can provide useful guidance regardless of the number of employees, diversity of product offerings, revenues, complexity of processes or number of locations.

The intent of this document is to provide top management with the information they need to facilitate effective application of principles and selection of tools that enable success and sustainability of an organization.


1 Scope
This International Standard provides guidelines for realizing financial and economic benefits from the application of management principles developed from the ISO 9000:2000 quality management principles.

These are subsequently referred to as ‘management principles’ within the body of the standard.

This standard is directed to top management of the organization and complements ISO 9004:2000 for performance improvements. It provides examples of achievable benefits and identifies management methods
and tools that are available to assist with the achievement of those benefits.

This International Standard consists of guidelines and recommendations, and is not intended for certification, regulatory or contractual use.

2 Normative reference

ISO 9000:2000, Quality management systems — Fundamentals and vocabulary.

3 Terms and definitions
For the purposes of this International Standard, the terms and definitions given in ISO 9000:2000 apply.

4 Structure of this standard
As a strategic objective, organizations focus on the identification of achievable financial and economic benefits.

This International Standard is designed to assist top management to identify and realize increased benefits by the application of the management principles. To achieve financial and economic benefits, relevant processes
have been identified for each principle and examples of methods and tools have been provided to assist in the application of the principles.

The added value from the expected benefits should reflect the systemic interrelationships between processes and a holistic view of the organization and its interested parties.

Clause 5 utilizes the combination of the management principles and the P-D-C-A (plan – do – check – act) approach. This is reflected in the flowcharts found in sub-clauses 5.1 to 5.8 inclusive. Each sub-clause
describes some key benefits (under "Act" in the last column of the flowcharts) that can be achieved by taking prioritized action to apply the principles through the use of selected methods and tools. Examples of applicable methods and tools are presented under the P-D-C columns. The sub-clause on “Continual improvement” (5.6) illustrates how the P-D-C-A approach can be effectively applied to top management’s strategic planning and review process in order to realize and further improve financial and economic benefits.

Annex A provides top management with a self-assessment tool for identification of financial and economic benefits, particularly when used in conjunction with clause 5 and Annex B, that provides a broad overview of
achievable benefits cross-referenced to the management principles. The self-assessment helps to establish the organization’s strengths and weaknesses in management principles implementation and enables effective
application, prioritization and progress evaluation of the developed principles described in this standard. It can be utilized for initial assessment as well as periodic reviews.

Some of the common methods and tools are briefly described in Annex C. Those listed are not intended to be exhaustive or all-inclusive. It is recommended that top management should further investigate the methods
and tools available and implement those that reflect the specific needs of the organization.
-------------------------

For further details, ask for specific requirements.
 
P

Paul Palmes

#23
Excellent Summary

Your summary is excellent. The FDIS is now in final vote and it's hoped that ISO will release the document in the fall. That may be late fall, but we're all hoping that final comments will be both helpful and straightforward. The FDIS stage only allows for "editorial" coments from member countries (things such as grammar, spelling and punctuation), and these are not expected to slow down original release date estimates.
 

Sidney Vianna

Post Responsibly
Staff member
Admin
#24
Re: ISO TR 10014 - Guidelines for Managing the Economics of Quality

http://www.iso.org/iso/en/commcentre/pressreleases/2006/Ref1018.html

PS. Note that Paul Palmes is a Cover and contributor to this thread.

Ref.: 1018 6 July 2006
New ISO 10014 standard explains how to achieve financial and economic benefits with ISO 9001:2000

Because the new ISO 10014 standard gives clear guidelines on achieving financial and economic benefits via ISO 9001:2000-based quality management systems, it could well become bedside reading both for top managers and for those quality professionals who may need to convince them.
Until now, a lack of appreciation for each other’s perspectives and the absence of a common “language” often separated top management and quality professionals. Top management’s view of operations is usually expressed in financial terms. Quality expresses itself using data and details that support reduction of variation or improvement, but often only implies the resulting financial gains.
A solution is now available. ISO 10014:2006, Quality management – Guidelines for realizing financial and economic benefits, is based on a “bottom line” that unites top management and the quality manager: profits should increase with investment in quality management – and provides guidelines on how to achieve them.
“ISO 10014 was written to define the common ground and a common language between top management and quality professionals,” commented Tommie J. Johansson, who led the ISO working group that developed the standard. “The success of ISO 10014 will be measured by how far they succeed in communicating and working together towards a common goal.”
The standard is based on the process approach and Plan-Do-Check-Act model of the ISO 9000:2000 series. It examines the eight quality management principles underlying the series and describes how implementing them can achieve financial and economic benefits. Designed to be as practical as its subject, the standard includes a self-assessment as a gap analysis tool.
Paul C. Palmes, the ISO 10014 project secretary, explained: “ISO 10014 was designed to identify growth opportunities and then suggests tools to plan their implementation and measurement in financial terms. Quite simply, effective quality management is also profitable, and with the release of ISO 10014, user-friendly guidance to demonstrate this connection is now available to both the quality practitioner and top management.
“This project included experts in finance and quality from around the world. Throughout the entire process, it was clear that we were creating a new and important tool to bridge the often confusing gaps in language and measurement between top managers and quality professionals. If our efforts were successful, they will be better able to work together, speak in terms both understand, and, using common tools, measure results from a financial perspective.”
ISO 10014:2006, Quality management – Guidelines for realizing financial and economic benefits, costs 108 Swiss francs and is available from ISO national member institutes (see complete list with contact) and from ISO Central Secretariat (see below). It has been developed by a working group WG 11 of ISO technical committee ISO/176, Quality management and quality assurance, subcommittee SC 3, Supporting technologies, and replaces the previous technical report, ISO/TR 10014:1998, Guidelines for managing the economics of quality.
ISO Store: to order ISO 10014:2006, Quality management – Guidelines for realizing financial and economic benefits

Enquiries about orders:
Ms. Sonia Rosas Friot
Marketing Services
Tel. +41 22 749 03 36
Fax +41 22 749 09 47
E-mail [email protected]

Press contact:
Roger Frost
Press and Communication Manager
Public Relations
Tel. +41 22 749 01 11
Fax +41 22 733 34 30
E-mail [email protected]

 
Last edited:

Antonio Vieira

Involved - Posts
Trusted Information Resource
#25
Re: ISO TR 10014 - Guidelines for Managing the Economics of Quality

Let’s hope this new version can be of some really benefit for managing economics related to the quality system.
I have the other ISO/TR 10014:1998 “Guidelines for managing the economics of quality” and, for a Technical Report, I find it very poor and completely redundant.
At least the new title –“ISO 10014:2006, Quality management – Guidelines for realizing financial and economic benefits”, seems to give me some hope.:confused:
 

Helmut Jilling

Auditor / Consultant
#26
Re: ISO TR 10014 - Guidelines for Managing the Economics of Quality

António Vieira said:
Let’s hope this new version can be of some really benefit for managing economics related to the quality system.
I have the other ISO/TR 10014:1998 “Guidelines for managing the economics of quality” and, for a Technical Report, I find it very poor and completely redundant.
At least the new title –“ISO 10014:2006, Quality management – Guidelines for realizing financial and economic benefits”, seems to give me some hope.:confused:

I wouldn't expect too much. But, no worry, there are some very good books discussing the benefits of quality and good management.
 

Sidney Vianna

Post Responsibly
Staff member
Admin
#27
Re: ISO TR 10014 - Guidelines for Managing the Economics of Quality

Jack West's column in the August 2006 issue of Quality Digest covers the ISO 10014 document.

The Economics of Quality.

The newly revised ISO 10014 offers help on achieving financial success.
Some time ago, ISO/TR 10014:1998, "Guidelines for managing the economics of quality," came up for its five-year systematic review. The 1998 version was based on the conventional concepts of measuring and managing costs related to quality--often called cost of quality. Still valid, these techniques are one way to identify and track progress in Six Sigma programs, and they appear to be in greater use today than ever before. However, the techniques are more the stuff of handbooks and textbooks than standards. Many ISO/TR 10014 users thought that the 1998 version should be allowed to die a peaceful death. Others wanted to preserve the document as it was. Still others thought that the document would best serve industry if it could be transformed into a broader guide to achieving financial success through the application of quality principles. The latter concept won in the end.

The revised document was recently approved and is expected to be published by the end of this year as ISO 10014:2006, "Quality management systems "Guidelines for realizing financial and economic benefits." Although its predecessor was a technical report, the new ISO 10014 will be an international standard. It builds on the eight quality management principles (QMPs) found in ISO 9004 that are used as basic inputs for developing ISO 9001.

The user starts with a self-assessment, using a basic maturity model to define how well the organization has implemented each of the eight QMPs. A straightforward five-point maturity scale is used to score the organization's response to each question. The results are summarized by principle and any score less than three indicates that the organization may benefit from improvements to its activities related to that principle.

Users should focus on the principles they scored the lowest on, as well as those that are most important to the organization. For example, a service organization for which customer satisfaction is critical might have a low score in the "customer focus" principle and will recognize that better implementation of the "people" and "leadership" principles will also be critical. The organization's improvement plan might include activities to improve how all three of these principles are implemented.

I've successfully used the technique of self-assessment against principles with follow-up improvement projects. ISO 10014 is probably the best version of the concept I've seen. I recommend it to organizations that need performance improvements and greater economic benefit from their quality management systems.

Several different drafts of ISO 10014 were prepared, discussed and rejected before the current approach was developed. A great amount of credit goes to project leader Tommy Johansson of Sweden for his patience, and to Paul Palmes of the United States, who did much of the hard thinking to turn this project into a useful document.

About the author
From 1997 through 2005, John E. (Jack) West was chair of the U.S. TAG to ISO TC 176 and lead delegate for the United States to the International Organization for Standardization committee responsible for the ISO 9000 series of quality management standards. He remains active in TC 176 and is chair of the ASQ Standards Group.
I have no doubt that a lot of effort was put on developing the document, but my initial reaction when I read the 10014 document was one of disappointment. I don't think that the concept of a "maturity model" is easily comprehended. I am interested to know what others think about the ISO 10014 document.
 

Al Rosen

Staff member
Super Moderator
#28
Re: ISO TR 10014 - Guidelines for Managing the Economics of Quality

Sidney Vianna said:
Jack West's column in the August 2006 issue of Quality Digest covers the ISO 10014 document.



I have no doubt that a lot of effort was put on developing the document, but my initial reaction when I read the 10014 document was one of disappointment. I don't think that the concept of a "maturity model" is easily comprehended. I am interested to know what others think about the ISO 10014 document.
I wasn't aware of its existence.
 

howste

Thaumaturge
Super Moderator
#29
Re: ISO TR 10014 - Guidelines for Managing the Economics of Quality

Sidney Vianna said:
I have no doubt that a lot of effort was put on developing the document, but my initial reaction when I read the 10014 document was one of disappointment. I don't think that the concept of a "maturity model" is easily comprehended. I am interested to know what others think about the ISO 10014 document.
I've been reviewing ISO 10014 for the last week or so in my spare time. Overall, I think it's pretty good. It starts with basically a gap analysis - where are we vs. where should we be? It then points the organization to various tools that may be used to improve areas of weakness.

I think that for organizations that look at it (which will probably be relatively few, as we've seen with ISO 9004) it provides emphasis on good management principles, and direction to ensure that their quality management system is achieving the results that the business needs. It's probably not a bad idea for system implementers, consultants, and auditors to look at it also. They should all understand methods to measure and achieve results and how to determine if the system in place is effective.
 

Sidney Vianna

Post Responsibly
Staff member
Admin
#30
Re: ISO TR 10014 - Guidelines for Managing the Economics of Quality

I think that for organizations that look at it (which will probably be relatively few, as we've seen with ISO 9004) it provides emphasis on good management principles, and direction to ensure that their quality management system is achieving the results that the business needs. It's probably not a bad idea for system implementers, consultants, and auditors to look at it also. They should all understand methods to measure and achieve results and how to determine if the system in place is effective.
I believe that one of the measures of success for any international standard should be the level of deployment, such as number of users. I suspect that ISO 10014 will be relegated to that category of obscure documents that a handful of people know about and even less people use it. I think it is a shame because most enlightened quality professionals know that correlating the cost of non-quality with the business performance is one way to grab top management's attention. I think SC3 missed an opportunity to make an impact in the Q World. I know that the TC 176 does not want to rock the boat, but had they developed a useful 10014 document, it could become (unlikely as it seems) a normative reference in an ISO 9001 future Edition.
 
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