Effective Operations Management

EFFECTIVE OPERATIONS MANAGEMENT

The Organizational and Functional Integration of Quality, Productivity, Safety and Environmental Responsibility With Clauses From ISO 9001:2015, ISO 14001:2015, ISO 45001:2018

Copyright (c) 2018

Systems Thinking Works

First Edition

December 2018

This publication is protected by Copyright Law with all rights reserved. No part of this publication may be stored in a retrieval system, transmitted, or reproduced in any way, including but not limited to photocopy, photograph, magnetic or other record, without the prior agreement and written permission of the author at systems thinking works.

Table of Contents

Introduction

Phase 1 (Part A): Management’s Role in System Development

Phase 2 (Part B) All Process Owners’ Role in System Development, Implementation

Phase 2 (Parts C to N) Specific Process Owners’ Roles

Phase 3: Implementation

Phase 4 (Part O to R) Monitoring

Phase 5 (Part S) Management Review

Management Systems Clause Reference Chart

INTRODUCTION

The recent introduction of the new ISO 45001 Health and Safety Management Standard has provided two distinctly different possibilities. On one hand, organizations can do what they have traditionally done, which is to modify, edit, bandage and paperclip their current Health and Safety management system so that it can be accepted by an outside auditor and a new certificate can be gained. This process usually requires the Health and Safety coordinator to work more or less alone to read and interpret the new standard, edit documentation to include the new wording, get the appropriate auditor training and manage the external auditor. In other words, go through the motions. On the other hand, this new standard could provide an important opportunity for an organization that aims to gain a competitive advantage. There is a truly significant opportunity here to rethink the whole ISO systems approach and develop one, all encompassing, efficient and effective business system based on internationally recognized best practices.

I am strongly advocating here that business owners, senior management, and shareholders interested in outperforming their competition and maximizing the benefits of this new standard as well as all of the previously implemented standards look more closely at the opportunities and benefits of a fully integrated, streamlined, Productivity, Quality, Environmental and Health and Safety based business system.

Benefits to be gained from one integrated system include:

– Reduced documentation,

– Quicker and easier communications both up through the organization and top down,

– More focused organizational direction,

– Better customer satisfaction,

– Faster decision making,

– More innovation,

– Better overall performance.

This book is the end result of over 40 years of observing, assessing, teaching, and consulting to both big and small organizations. It is intended to provide an organization step-by-step explanation about the process for creating an efficient and effective, fully integrated, performance- and responsibility-based management system. This book includes all of the requirements of ISO 9001, ISO 14001 and ISO 45001 because, if they are properly interpreted and understood, they represent the best practices in management today. The format of this book, the order of requirements, or even the wording of the requirements is not a regurgitation of the standards by all means.

This book covers subjects effectively in a rational order for development of workable systems and not in the order the requirements are listed in the various standards. I’ve used this rational approach to system development because systems must make sense. They have to work. They have to be efficient and effective, and they have to be easily understood. Otherwise, organizations will not use them effectively. In addition, as the book progresses through the various stages of systems development, you will see that I have questioned current common methods where inefficiency, ineffectiveness and dogma have long been stapled.

In these situations, I have attempted to provide ideas for effective alternatives. It is, of course, always left up to you and your organization to accept or reject the content provided.

You will find that many of the requirements of the standards are covered in more than one process, and specific standard requirements may be only partially fulfilled at a given point with other requirements of the same clause found in a different process. Once the system is complete, ALL requirements of the standards will have been incorporated into the systems in a logical, rational, effective, efficient and value-added manner.

If your system has other standards that apply such as IATF 16949, AS 9100, etc., this book can still be valuable. You can easily insert additional standard specific requirements directly in with the corresponding clauses identified here. The discussions and ideas given in this book apply universally.

One other point! In the interest of full disclosure, where the requirements have been identified in this book, the verbatim language of the standards HAS NOT been used. Rather than simplifying or paraphrasing the requirements as listed, I have used more direct (best practices) language. The objective here is for you to end up with the best, most effective systems, not the minimum for an audit pass. Use of this book does not, therefore, replace understanding of the actual words of the standards. Implementers should always reference the standards directly.

FIVE PHASES

This book covers five phases. For each stage, it describes what needs to happen, how it needs to happen, but more importantly, why it needs to happen.

The text will provide references back to the specific requirements of the various standards so that there is a clear understanding of how the methods and activities described contribute to compliance to the international standards requirements. The requirements of the three standards included in the book are grouped by common intent and potentially common process and methods. At the back of the book, there is a complete cross reference that shows where in the book each and every clause of the three standards is covered. Many clauses are covered several times.

PHASE 1 – MANAGEMENT’S ROLE IN SYSTEM DEVELOPMENT

The first phase covers the critically important ground work. The first question answered in Phase one is who is Top Management and what is their role in the success of the management system? Phase one goes on to provide the rationale for why any organization’s management would support implementing these standards into their management system. Compliance to a bunch of arbitrary requirements isn’t a concern here. Our rationale is that a management system should achieve the goals and objectives as determined by top management. More so, it should meet those requirements effectively and efficiently. The foundation of this book is that if the system meets those expectations, then by default that system will also meet the requirements of the various standards. This is simply because the achievement of those ends is the stated objective of the standards.

Top Management knows what the organization must accomplish. The more they see the requirements of three international standards as valuable tools put at their disposal, the better they can apply them. If Top Management has a good idea of how they want to use the requirements of the standards to help them achieve their objectives, the better they can communicate to their organization how they want those tools applied.

The better people understand requirements of Top Management, the more effective the resulting system becomes. The first phase of the process covers what Top Management needs to know about what the standards cover, and their role in the effectiveness of the systems. Phase one gives Top Management an understanding of the intent of the requirements and how those requirements can best be utilized by their organization.

PHASE 2 – PROCESS OWNER’S ROLE IN SYSTEM DEVELOPMENT

Once Top management has determined what they want to be done and their role, it is up to middle management (the process owners of the various processes) to apply effectively Top management’s directions to their particular processes. This phase is essentially the detailed design criteria for each process in the system and prepares the organization for implementation. This phase includes consultation with those who will ultimately make the systems work. It also includes determination of what performance will be expected, how performance will be monitored, when performance will be monitored and what acceptable performance is, as applied to the specific processes.

PHASE 3 – IMPLEMENTATION

Implementation includes documentation, training, workplace layouts and rollout, and provides a step-by-step process that relies on information, concepts, and ideas posed in the first two phases.

PHASE 4 – MONITORING

Monitoring has two major components:

1) The introduction of an effective assessment process, application of effective audit compliance assessments and the role and value of external assessments

2) The performance assessment cycle and the associated performance reporting, verification, analysis, and remedial action processes

PHASE 5 – MANAGEMENT REVIEW AND IMPROVEMENT

The fifth and last phase returns to Top management and their review of how well the system is performing in the achievement of the original goals and objectives. Which processes are effective, and which need modification? Which have sufficient resources, and which do not? And importantly, where is the room for improvement? This phase covers the management review process and its effective implementation.

REFERENCE

Short forms used to denote specific International Standards:

9K = ISO 9001: 2015

14K = ISO 14001: 2015

45K = ISO 45001: 2018

IATF = IATF 16949: 2016

Definition of Product as used in this book:

Product – Physical products (wholesale and retail), hardware, software, product-based services, commercial services, personal and professional services, retail services.

PHASE 1 (PART A): MANAGEMENT’S ROLE IN SYSTEM DEVELOPMENT

All three international standards referred to in this book start off with a significant section devoted to top management. Clause 4 in its entirety talks about the context of the organization. In the short version, context of the organization is the Top Management understanding of what the organization is, what it does and why it does this. Only the senior person or few senior people are equipped or qualified to clearly answer these questions. Clause 5 then goes into detail on the roles and responsibilities of those senior people. It is the position of the author that these two clauses are backwards.

First, an organization needs to understand the expectations of ‘Top’ management as described in the standards and then the ‘Top’ management has to address context. If the right ‘Top’ management has not been identified, then the rest of the process is bound to be less than ideal. If we use the analogy of building a bridge, clauses 5 and then 4 define and build the footings and piers. On the detail and accuracy of the information from clauses 5 and 4, rest the viability and success of every component of the system built upon it.

MANAGEMENT UNDERSTANDING AND COMMUNICATION

Top Management

First, we should clarify who Top Management is. The standards are rather unclear as to who exactly is Top Management. Clause 3.12 in Terms and Definitions states that Top management can be a person or a group of people at the highest level of the organization.

It goes on in notes to add that Top Management:

– Has the (Ultimate) power to:

1) Delegate authority

2) Provide resources

– Has direct control over the Management System

So, is it one person or some number of people? Here is my interpretation…

If there is in fact a ‘General Manager, Plant Manager or President,’ or a person with a similar title and responsibility that runs the show, then by the definition above that person is top management. There may, however, be exceptions to this rule. For instance, we may have ‘Smith and Jones LLC’ with Ms. Smith and Mr. Jones as equal partners. Or we could have an NGO that has a group of directors who manage the organization. Rationally speaking, though, even these exceptions cannot be managed by committee. There is an old management maxim that says that if several people are responsible, then no one is responsible.

If there are a number of people with nominally equal authority, then it would be rational for them to divide up the various roles in order to run the organization effectively. Logically, one person would become responsible for the management of the systems. Therefore, we are back to Top Management as being one person. ‘The General Manager’, ‘The Supreme Potentate’, ‘The Top Muckamuck’, ‘The Boss’. If an organization attempts to define their whole management team as Top Management, then you have management that doesn’t understand the purpose or value of an effective management system.

MANAGEMENT UNDERSTANDING

In my experience, systems implementation discussions with management inevitably revolved around the need for efficient, value adding systems without over-bureaucratizing the organization. Implementation discussion with internal auditors or implementers always boiled down virtually to management commitment or management understanding.

Managers who don’t understand the potential benefit or the intent of the international standards often implement these systems under duress treating them as the cost of doing business rather than as a business opportunity. Major customers haven’t really helped. By making registration to various standards a condition for quoting or obtaining new work, they give the impression that the requirements are for the customer’s benefit alone, while the costs are borne by the supplier’s organization. This gives the impression that managers must succumb to these imposed requirements whether they like them or not. If they are forced to implement these standards and they have no option, then there is little reason for them to look closely at them.

If managers feel that they must implement these standards because they are imposed on them, they will most likely spend as little in time, money and resources as possible in order to achieve that end. They will also likely want to delegate everything that they can in order to waste as little of their own time as possible on what they see as unimportant. This thinking then cascades down to managers of departments and supervisors. When discussing the implementation of management systems with internal auditors and designated implementers, they always identify getting management support virtually as their primary obstacle.

So, there is an obvious connection here. Management does not see value in the development, implementation, and operation of these internationally recognized management standards; so they do not provide the support or the resources necessary to make the systems work effectively. The systems then don’t work, management sees little or no benefit from the systems, which only reinforces their mindset and the systems eventually have no value at all.

The problem here is twofold. The standards have been sold to large customers as a strategy for getting them to force their suppliers to improve by mandating implementation of these systems, thereby, expanding the sales of the standards. Since the large customer supposedly gets improved performance from their suppliers with little or no risk and no cost, this seems to be a good approach. But this leads to the supplier’s interpretation of the imposition of these systems as a cost-free benefit to the large customer and an added cost of doing business for them. This isn’t the objective of any of these standards.

Without full management understanding of what the standards are and what they can and should achieve, these systems will never achieve their potential. Management needs much more than a one or two hour overview of the standards and they must have it presented as the opportunity for significant performance increases that they actually are. Only then can management be effectively involved in the creation of an effective initial design, clear intent, and a clear scope and purpose for the systems. Without a clear management vision of the potential that is available for the implementation of these systems, they will simply fail.

Simply put:

– Poor systems result from poor understanding

– Planning starts at the top

– Poor planning results from poor definition of expectations

– Poor definition of expectations comes from poor understanding of the potential

Management must take the time to fully understand the requirements and purpose of the standards and then they must fully determine and communicate their expectations. If management is not clear in their understanding of what is possible, they cannot communicate meaningful expectations. Employees cannot predict management’s expectations, management must tell them. In order to achieve full understanding and effectively develop and communicate their expectations, managers must:

1. Spend the time necessary to understand the requirements of the standards. This does not mean obligatory 2 hour overview that auditing and consulting companies like to promote. If 2 hours is all that top management can commit to the effective understanding of standards that will have a significant impact on every function of the business, then the delays, conflicts, bureaucracy, wasted time, added costs, duplication of work and all of the other inefficiencies that will consequently sit squarely on their shoulders. There are three questions that management must answer with regard to each management standard and each specific requirement that they want or need to apply. And it is important that the answers are very specific to the goals, objectives and culture of the organization.

The questions are:

a. What is the intent of each requirement in the standard? What value is the requirement supposed to provide to my organization, to my customer or to other interested parties who have expectations of the organization? How could we use each requirement to contribute to the success of our organization?

b. To what extent are the actions necessary for compliance to the requirements prescriptive in nature and to what extent are methods available for addressing them open to innovation and the unique needs of my organization?

c. If I do not implement a specific requirement at all, what would be the negative effect or risk to my organization? The answer must identify negative effects or risks that, if not addressed, will cause an identifiable negative effect to your organization’s