The Imperative of Improvement
Charles Darwin, the famous 19th Century Naturalist and author of ‘On the Origin of Species’ is often credited with saying ‘it is not the strongest of the species that survive, nor the most intelligent, but the ones most responsive to change’.
Whilst there is no direct evidence to support that he ever made this statement, few would argue with the wisdom of these words. Any organization which fails to evolve is living on borrowed time. And whilst you would be hard pushed to find a member of top management who claimed to not appreciate this, history is littered with examples of once great brands that have either disappeared altogether, or which are now simply a shadow of their former selves.
Nokia, Kodak, Motorola, Compaq, Pan-Am; Blockbuster Video, Toys R Us; all had their moment in the spotlight, but all are now either dead and gone or struggling to re-capture their greatness. Contrast their fate with that of organizations such as Apple, Amazon, Starbuck’s and Nike, all of whom possess an unrelenting thirst to win coupled with the determination to do whatever it takes to constantly dominate their opposition.
This desire to be the ‘best of the best’ is commonly referred to as the ‘Patton Principle,’ after the uncompromising American general George S. Patton who was renowned for his relentless pursuit of improvement.
The organizational benefits of improvement
The Oxford English Dictionary defines improvement as ‘The act or process of making something better’. But what exactly are we seeking to make better from an organizational perspective?
Certainly, organizations will be seeking to improve customer satisfaction. Happy customers become repeat customers and brand promoters. The organization will also be seeking to improve its ability to fulfil current and projected demand in a society which is increasingly impatient for its products and services to be delivered. The organization will additionally be focussed on improving its competitiveness.
Few businesses have the luxury of operating in a monopoly situation. Most operate in environments where rivals are more than happy to gobble up their competitors’ market shares. As is the case in Darwin’s natural world, the weakest are singled out and consumed.
In order for a business to survive, the challenge to improve needs to be met head on. By eliminating waste, reducing defects and optimising processes, organizations are able to drive down operational costs resulting in increased profitability, whilst providing scope to undercut the prices of the opposition. Similarly, technical innovation allows organizations to open up new markets and bring their brands to global attention.
And what is a typically undervalued but critical important resource in respect of driving through organizational improvement? The internal auditor of course!
Continuous vs Continual improvement
As a novice quality manager in a manufacturing company in the UK I can recall quite clearly being instructed by my top management to deliver ‘continuous’ improvement. I struggled with this concept as continuous implies getting better and better, each and every day. In my world that was simply unrealistic. Some days we would achieve a breakthrough whilst on others we would not. Through time our ability to meet requirements was increasing, but not in the linear way continuous implies.
ISO also recognize that continuous improvement is not the norm. Their standards talk in terms of ‘continual’ improvement instead of continuous.
Annex SL, appendix 2 defines continual improvement as ‘recurring activity to enhance performance’, noting that performance can relate to the management of activities, processes, products (including services), systems or organizations’. There is nothing in this definition that requires this activity to be constantly undertaken. It is perfectly acceptable for improvement to be delivered non linearly as long as the overall trend in performance is rising.
Figure 1 – Continuous Improvement vs Continual Improvement
The first lesson for auditors assessing whether an organization is demonstrating improvement therefore is that they must be prepared to take a longer-term view. Just because an organization is not able to evidence increased performance today when compared to yesterday, this does not necessarily mean that it is not committed to making itself better. Whilst some improvement methodologies yield quick results, others take far longer to generate their benefits.
There are literally hundreds of organizational improvement tools and techniques ranging from the very simple Plan-Do-Check-Act (Deming) cycle through to through to those that are more complex, such as Kaizen, Lean Six Sigma and Total Quality Management (TQM). Whilst the auditor is not required to understand each and every one of these in detail it is important that we know enough about them to be able to identify whether the particular methodology the organization has selected is working.
The Deming cycle is of particular significance to auditors as it underpins the core ISO management system standards in circulation today. The origins of the Cycle can be traced all the way back to the early 17th Century and the employment of ‘scientific method’ to problem solving. Scientific method called for a hypothesis to be set, an experiment to be undertaken, and the results of the experiment to be evaluated. (P-D-C).
During the 1930’s Shewhart translated this approach to ‘specification’, ‘production’, ‘inspection’, and noted an additional requirement to take action based on the results of the inspection. In the 1950’s, Dr W Edwards Deming developed this further to P-D-C-A, which is an approach to improvement most of us in the quality profession will still recognize today.
Both Scientific Method and P-D-C-A share the key characteristic that they are iterative approaches. They are cycles, not linear processes, with the results of the evaluation stage being fed back into a further experiment or planning activity. By repeating the cycle over and over, the organization becomes ‘intelligent’ and is able to move itself forward on the basis of its continued learning.
The role of the auditor in improvement
Previously we have considered the role auditors play in providing an organization’s stakeholders with the necessary assurance that the business is meeting its legal requirements and other requirements. Whilst this is a key function of audit, there is arguably a more important role for the management system auditor. Whether acting as a first, second or third-party assessor, auditors are ideally placed to identify and drive through organizational improvement.
For third party (certification body) auditors this ability is somewhat restricted as a result of not being able to directly offer their clients consultancy. Nevertheless, by ensuring that the organization is fully meeting the improvement requirements contained within clause 10 of the latest annex SL based management system standards, the third-party auditor is still be able to make an important contribution.
There is also scope for third-party auditors to convey good practice without compromising client confidentiality.
For first and second party auditors there are no such constraints. These individuals should, indeed must, actively seek out opportunities to improve their own organization’s policies, processes and people, and in the case of second party assessors, the performance of their external providers.
Figure 2 – the CQI Competence Framework
The CQI Competence Framework (figure 2) identifies an understanding of improvement as a core competence requirement for all quality professionals, including auditors. The framework goes on to propose two high level improvement questions for auditors to consider in respect of any organization they may assess. These questions are ‘Is there a commitment to continual improvement and redefining management intent?’ and ‘is there a culture of objective evaluation?’
Is there a commitment to continual improvement?
Continual improvement is mandated in Annex SL based standards, it is not something that the organization can chose to undertake or not undertake. As auditors, we should therefore be seeking objective evidence, (by means of observation, measurement, test or other means), that not only are the organization’s products and services improving through time but so too are the means by which these are created and delivered.
In order to determine this, we need to review the results of internal audits and management reviews, the organization’s response to non-conformity and corrective actions, its management of risk and opportunities, its handling of internal and external issues and the result of its analysis and evaluation activities, in order to satisfy ourselves that the organization continues to learn and develop.
We must also confirm that management intent, as set out in the organization’s policies, strategies, objectives and plans, is being periodically revisited. The rationale behind this is that the Context of the Organization is a principal input into these documents and context is subject to change over time; whilst an organization may have been satisfying its stakeholders previously, this does not necessarily guarantee that it still is.
Is there a culture of objective evaluation?
Simply being committed to continual improvement is not sufficient. For an organization to survive it needs to translate this commitment into something more tangible. It needs to combine its desire to improve with insight as to how to improve in order to lift its performance. This insight is gained by means of objective evaluation.
Let’s start by considering the characteristics that an organization with a culture of objective evaluation is likely to display. We would expect the organization to evidence that it is using appropriate methods to understand its stakeholder needs and in order to identify any changes to the organization’s context, including changes to the market, customer requirements and other factors impacting on the organization.
We would expect to see a range of techniques being employed across all departments in order to gather information on each department’s stakeholders. Such techniques could include brainstorming, interviews, focus groups or internet searches, anything in fact which provides this insight. The various stakeholder groups will be formally defined, as will their relevant requirements and their respective importance will be understood. The organization will also understand what each of these groups’ needs and concerns are, what factors affect or influence them, what motivates them and what potential threats or opportunities each group may present.
Once assembled, this stakeholder insight should then be being utilised to develop strategies for action; should our products and services be tailored to specific groups? How can we co-operate better with our external providers? How can we improve employee morale?
We should also expect to see stakeholder insight informing the creation of appropriate measures of performance and of product/service quality across the organization. Analysis and evaluation of the results of these measures will then be utilised to inform fact-based decision-making and to help with establishing priorities for change, the nature and magnitude of change required as well as to how best to achieve the required changes through the development of the organization’s people, processes, tools, technologies and/or infrastructure.
As auditors, we recognize that sub clauses 9.1, 9.2 and 9.3 of annex SL based management systems all relate to the gathering of insight, the ‘check’ element of the Deming Cycle. This accumulated learning then forms an input into Clause 10, Improvement, the ‘act’ part of the cycle.
Sub clause 9.1 requires the organization to determine what needs to be monitored and measured in order to ensure that the intended outcomes of their management system are achieved, and that the performance and effectiveness of the management system as a whole can be identified. The organization must additionally determine methods and timings for its monitoring, measurement, analysis and evaluation activities.
Sub clause 9.2 requires the organization to gain insight on the operation of its management system by means of conducting planned audits. The audit results must be reported to relevant management and any necessary corrections or corrective actions implemented without undue delay.
Sub Clause 9.3 requires the organization’s top management to consider an overview of the management system based on the bringing together of performance information spanning the entire system.
As all three of these sub clauses require the organization to retain documented information it should be relatively straightforward for the auditor to determine whether objective evaluation is taking place. The more difficult part of our question to answer is ‘is there a culture of such evaluation?’ To the extent that a common definition of culture is simply ‘the way we do things around here’ then the answer is going to be yes if the organization is able to evidence they meet the requirements of Clause 9.
But to truly appreciate whether there is a culture of objective evaluation requires an understanding as to why the organization is choosing to behave in this manner. Is it complying with Clause 9 because it has to or because it wants to? For me a culture of objective evaluation only exists if the latter is true.
Whilst the provision of assurance that an organization is meeting its legal and other requirements will forever be central to the audit role, there is so much more that an auditor should be contributing to the organization than to simply confirm compliance and conformance to its stakeholders.
Irrespective of whether the auditor is a first, second or third-party assessor, they also have a vital part to play in ensuring sound governance and in driving through improvement.
Whilst external auditors are necessarily limited to confirming continual improvement is taking place, internal auditors can, indeed must, be much more proactive in identifying opportunities for improvement as a matter of course and for then reporting these as widely as possible.
For too long internal auditors have been perceived as poor relations to certification body auditors. Whilst their technical knowledge may not always be to the same level as their external counterparts, and whilst they may not possess the same extent and depth of audit experience, an internal auditor’s potential to add value to their organization by championing improvement is far greater as a result of them permanently operating within the business. No external auditor can ever know the organization as well as an internal auditor who works there every day of their lives.
So why are internal auditors so often undervalued? I believe this is in part down to a collective inability to translate the potential for improvement into actual improvement. If the auditor is to effect real and lasting change, leadership skills are essential in order to convince those in positions of authority that it is time to alter the status quo.
The fact that ‘Leadership’ lies at the very heart of the CQI competence framework reinforces this message, the message that all quality professional, including management system auditors, must be capable of forcing improvement through. For those who can demonstrate this ability to top management, the fact they are making a material difference to the business and its outcomes, the recognition and rewards will follow. For those who cannot, the future will be less certain.
Whilst not everyone is a natural leader there are steps each and every one of us can take to improve the leadership abilities we have. What can audit professionals do on a practical basis to enable them to get their messages across more effectively? How can they engage with top management and colleagues in such a way that they achieve the buy-in they need to get things done?
Next time we will consider the Imperative of Leadership.