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Standardization and integrated management
    systems - A business-practitioner’s viewpoints

    Juhani Anttila
    Academician, International Academy for Quality (IAQ)
    Venture Knowledgist Quality Integration
    Helsinki, Finland
    juhani.anttila@telecon.fi , www.QualityIntegration.biz


    January 29, 2010 Ver. 1.2
                                                                      These pages are licensed
                                                             under the Creative Commons 3.0 License
1                                                            http://creativecommons.org/licenses/by/3.0
                                                                        (Mention the origin)
Standardization and integrated management
    systems - A business-practitioner’s viewpoints

               1. Rectifying conceptual problems
                       - Even experts should appreciate traditions and recognized practices of business
                       management.
               2. Applying standards with integration, responsiveness and innovation
                       - Organizations aim at competitiveness and sustained business success
               3. Considering business environments
                       - Organizations and their business management must adapt themselves to the
                       prevailing business realities.
               4. Appreciating information and knowledge in managing an organization
                       - Core of a management system consists of information and knowledge. Mainly
                       the system is a mental system.
               5. Performance of a management system as a fuzzy issue
                       - A management system must be always ready but never finished.


2                                        Integration covers all aspects and expertise subject matters
                                         needed for the management of an organization.
    xxxx/2.1.2010/jan
Major problems in ISO management standards

              1. System approach is unclear and not business-focused.
              2. There is confusion between the system management and system requirements.
              3. Process approach is unclear.
              4. Integration should be understood as business-integration.




             5. This spiral model is         6. PDCA is a business                 7. This diagram does not
             unpractical and naive for       management model not a process        support business-integration
             management purposes. It         model. This does not cover all        that is necessary in the
             does not follow Juran’s         necessary strategic and               system and process
             original business-based ideas   operational management needs.         approaches. The core should
             neither modern PDCA             All stakeholders should be            consists of general business
3            practices.                      considered. What is the quality (or   management elements.
                                             X) management system?
    3729/2.1.2010/jan
Juran’s quality spiral model, The “Big Q” approach

                                         The original spiral model covers
                                        the organizational business scope
                                           comprehensively including all
                                         necessary management aspects
                                        embedded in a natural and logical
                                        way within business activities. It is
                                        principally a descriptive model and
                                          does not yet give any practical
                                                      guidance.




4
    3730/2.1.2010/jan
Planning, controlling, and improving the performance
    of business (processes)
                             40
                        Problem                                         A P
                          cases                                                       Rectifying sporadic
                        (defects)                                       C D           problems

                                           (2) Performance control                        Prevention
                           Control
                            limits


    (1) Performance
        planning
                                                                                                      (3) Small step improvement
                            20                                                                        ”Kaizen”
                                                                                                                  A P
                                                                                     (4) Breakthrough             C D
                                                                                     improvement
    (5) New Performance                                                                  A P                Control with new limits
          planning                                                                       C D

                              0
                                  0                                           Time
5                                                            Feedback
    0376/2.1.2010/jan             (Ref. Dr. Juran: Trilogy Approach)
The PDCA Model is a recognized multipurpose
    methodology for business management.

             The PDCA Model (called also as Deming / Shewhart Cycle) has a long history and a great variety of
             different applications, possibilities, and uses in the field of general business management:
              – Original PDSA (Plan-Do-Study-Act) model was created by American Walter Shewhart in the
                  1920’s and used for production control.
              – The model became popular through American W. Edwards Deming’s lectures of managerial
                  quality during several decades (from 1950’s to 1990’s).
              – American Joseph Juran’s Trilogy Model (1964) contains the same elements as the PDCA
                  model. He especially emphasized differences between control and breakthrough. His spiral
                  model was presented in his well-known Quality Control Handbook (1975).
              – In the 1980’s Japanese Kaoru Ishikawa and Masaaki Imai emphasized problem solving and
                  continual improvement (“Kaizen”) according to the PDCA model.
              – Later Japanese Shoji Shiba has made remarkable work by combining the original PDCA model
                  with the ideas of managing knowledge and of Buddhist philosophy.
              – In late 1990’s and early 2000’s the SixSigma methodology for large scale business
                  performance improvements was developed by Motorola and became popular by its successful
                  application in General Electric. Also SixSigma is based on the PDCA approach.
              – The PDCA model has also consistent linkages with traditional systems theory and systems
                  dynamics.
              – To the international standardization the model was used at first in standards ISO 9000:2000 for
6                 quality management from where it came e.g. to information security management standards a
                  few years later.
    3119/2.1.2010/jan
A triple PDCA (*), a model for good management:
    Coordinated activities to direct and control an organization (**)




                            ACTING (A):              PLANNING (P):
                            • Preventing actions     • Business and
                            • Improving actions      management models
                            • Re-engineering         • Business plan                                 Applying a triple PDCA model
                            • Communicating          • Approaches and                                (“The Eyes of Buddha” (***)):
                            • Recognizing and        methodology                                     1. Rational control (operational)
                            rewarding           A   P                                                2. Continual rational small step
                                                C   D                                                   improvement (operational),
                           CHECKING (C):            DOING (D):                                          “Kaizen” approach
                           • Assessing the          • Deploying the approach                         3. Innovative breakthrough
                           performance              and achieving the results                           changes (strategic)
                           • Reviewing the          • Controlling operational
                           performance              performance
                                                    • Corrective actions

7
    2343x/15.12.2008/jan                              (*) Deming / Shewhart, (**) ISO 9000, (***) Shiba; Bodhnath Stupa, Kathmandu
Systemic management of business resources


                                                           Managing based on
                                                           system recognition and
                                                           feedback loops.
                        Stop to
                         think




                                         Plus ca change,
                                           plus c'est la
                                          même chose

8
    3077/2.9.2007/jan    (Ref.: Repenning & Sterman)
ISO 9000 quality management principles, QMP

             These principles can be used by senior management as a framework to guide their organizations
             towards improved performance. The principles are derived from the collective experience and
             knowledge of the international experts.
                          * Principle 1: Customer focus
                          * Principle 2: Leadership
                          * Principle 3: Involvement of people
                          * Principle 4: Process approach
                          * Principle 5: System approach to management
                          * Principle 6: Continual improvement
                          * Principle 7: Factual approach to decision making
                          * Principle 8: Mutually beneficial supplier relationships

                                                    These principles are relevant for all areas
                                                    organizational business management including
9                                                   also all expert disciplines.

    3746/2.1.2010/jan
ISO 9000 Quality management principle #5:
     System approach to management

               ”Identifying, understanding and managing interrelated processes as a system contributes
               to the organization's effectiveness and efficiency in achieving its objectives”
               Key benefits:
               • Integration and alignment of the processes that will best achieve the desired results.
               • Ability to focus effort on the key processes.
               • Providing confidence to interested parties as to the consistency, effectiveness and
               efficiency of the organization.
               Applying the principle of system approach to management typically leads to:
               • Structuring a system to achieve the organization's objectives in the most effective and
               efficient way.
               • Understanding the interdependencies between the processes of the system.
               • Structured approaches that harmonize and integrate processes.
               • Providing a better understanding of the roles and responsibilities necessary for
               achieving common objectives and thereby reducing cross-functional barriers.
               • Understanding organizational capabilities and establishing resource constraints prior to
               action.
               • Targeting and defining how specific activities within a system should operate.
               • Continually improving the system through measurement and evaluation.
10                                  This principle is relevant for all areas of organizational management.
     3728/2.1.2010/jan              An organization is managed as one single system.
System concept

           System (*) is a set of interrelated or interacting        A system’s           Management
           elements (processes).                                     creators and
                                                                     owners
           - A system is an entity that maintains its existence
           and functions as a whole through the interaction of
           its parts.                                                                    A system
           - A system has always an aim or purpose defined                           (and its elements)
           by the system’s creators or owners. The system is
           just created to accomplish its aim.
           - A system has interactions and transactions with
           its environment to get input from and to provide                    Inputs and outputs through
           output for system’s stakeholders. Stakeholders                     interactions and transactions
           may set requirements to the system.
           - A system is managed as a whole. Management is                       System environment
           based on knowledge and information and PDCA                  (Stakeholders and system-competitors)
           management model (feedback).

           An organization is a system.                    System management domain             System requirements

                                                                  Internal interest               External interest
11                                                         Effectiveness and efficiency            Effectiveness
                                                                               (Ref. Russell's paradox)
     3732/20.1.2010/jan   (*) Ref. ISO 9000 definition
Two principal domains, management and assurance,
     of the organizational management

                                                                       AA/B         Organization A

                                                                                          MA
                                          AB/C    Organization B1

                                                        MB1

                         Organization C                                       Aim of the approaches:
                                                  Organization B2             M  Excellence (internal interest)
                              MC                                              A  Confidence (external interest)
                                                        MB2

            Management disciplines:
              - MA, MB, MC:O rganization-internal (business) management (system)
              - AA/B, AB/C: Assurance between organizations (based on organization-internal management system)
            At all organizational levels there should be consistency among these disciplines. Both management
12          and assurance consist of many different expertises.
     3733/3.1.2010/jan
Quality management (QM) and quality assurance (QA)
     as consistent parts of an organization’s quality approach

                                    QM business system aspects               QM = Quality management
                                    (QMS = Quality Management System)        (focus on excellence of a business
                                                                             approach), ISO 9004
                                                                             QA = Quality assurance
                                                                             (focus on confidence for
                                                                             product conformity), ISO 9001
                               Tailoring case-by-case
                                                                             ISO 9000 standards cannot be
                 QA elements                                                 understood by ISO 9001 only.
                                                                             ISO 9001 is a part of ISO 9004:
                                                                             - in standard documents as a whole
                                                                             - in individual standard clauses

                                                                             A QMS covers the whole business
                                   QM principles                             management system (BMS).


                                                Situation is very analogous with all expertise areas of business
13                                              management, e.g. information security management.
     0290/15.12.2009/jan
Quality assurance (QA):
     - strengthening the confidence among the customers

                           Process (product realization)                     Output/Product

                                     Process
                                     management

              Input                                                          Product delivery    Customer
                                                                                 channel




                                       Quality assurance (*)
                                                                                           QA communication
                                                                                                channel
                              (*) Standard model ISO 9001 or tailored, and                   “e-Certificate”
                                  quality assurance plan / agreement
14
     0676/16.11.2006/jan
Managing activities and responsibilities (a management
     system) cover the whole organization.

                      Breakthrough                                                  Top management
                      activies
                                                                                    Division Directors



                                                   Improvement                      Unit / function managers
                                                   activities                       and professionals


                                                                  Routine           Process owners
                                                                  operational
                                                                  and maintenance
                                                                  activities
                                                                                    Process team members

15                           Portion of time spent on activity
     1365/12.1.2009/jan      (Ref.: The Itoh Model, Singh Soin)
Infrastructure and elements
     of an organizational management system


                                                                               Action             Development
                                                         Strategies            plans                projects,
                    Mission                                                                     ”Becoming Better”
                   (Purpose,
                  justification         Vision
                     of the
                   existence)                                                Resources,            Operational
                                                                              Procedure             processes,
                                                          Policies           documents,          ”Earning Money”
                                                                                Tools

                SHARED BUSINESS VALUES

                     Purpose                 Strategic plans              Realization means            Action
                      of the              3...5             1...3               0,4...1               just now
                    company              years             years                 year

16                                Separate X systems within this typical business framework are very artificial.
                                  All X actions must be integrated with the management system.
     3735/29.3.2009/jan
Integration is the main strategy for a professional
     expertise approach within an organization (system)

               Integration means:                                    Expertises may include:
               • Implementing effective and efficient expertise          –Finance
                   items embedded within normal business                 –Quality
                   management activities (especially in business
                   processes)                                            –Business risks
               • Acting against building distinct ”expertise             –Information security
                   systems” (i.e. lack of integration). Business-        –Human resources
                   separated expertise initiatives are artificial.       –Information and communications
                                                                         –Knowledge
               One must understand and take into account the             –Occupational health and safety
               nature of the organizational system, its business         –Environmental protection
               and its realities when implementing expertise             –Innovation
               initiatives of business management. Integration is
               always an organization-dedicated solution.                –Ethics
                                                                         –Social responsibility
               Cross-application of all expertise areas is needed.       –etc.
               E.g. information security is needed in quality
               management and quality in information security
17             management.
     3745/2.1.2010/jan
Business-integration
     of the standards ”systematicity”




               Business standards are established through
               orgnizations’ business structures and processes.
18             Separate management systems are illusions.
     3704/7.10.2009/jan
Management integration takes place at two levels

                • The strategic level, where one makes decisions and undertakes measures concerning
                the entire organization (business system of business processes) and considers
                especially the future competitiveness of the organization.

                • The operational level, where decisions and measures concerning daily management
                are made and undertaken. Emphasis is on operational questions of the individual
                business processes.

                          These two managerial areas are very different by their purpose and therefore
                          different methodology is needed for them.


                                                       Integration covers all aspects needed for the
                                                       management of an organization.


19
     3731/23.8.2009/jan
Conflicts of needs and expectations
     from specialized management areas

              Finance                             Quality                       Risk
            management                          management                   management
                                                                                              Human
                                                                                             resource
                                                                                            management


               Issue X
             management                                                                      Information/
                                                                                              knowledge
                                                                                             management

               Occupational                           Information              Environmental
             health and safety                          security                management
               management                             management
                                                                                        A consistent and balanced
                    Conflicts: - on strategic level: General manager’s commitment          integration is needed
20                             - on operational level: Business processes’ commitment     for avoiding conflicts!
     1059/20.3.2009/jan
Integrating specialized domains of management
     standardization and ensuring natural business diversity

              The Finnish model                           Finance
              for integration (MSS)        Product                                          General management
                                                                   Environment
                                            quality                                        system based on PDCA
                                                    General
                                                                        Occupational
                                                 management
                                      Ethics    responsibilities       health and safety
                                                 and business                                  Organizational
                                                     system                                  identity & privacy
                                                                Social
                                            Security        responsibility
                                                            Risks
                                                                                   Organizational diversity




21
     3342/20.8..2009/jan   (Ref.: ISO Management systems standardization, MSS)
From a business
     establishment                                                                                            Promotion
                                                                                                            and support:
     to satisfying                           AN ORGANIZATION
                                                                                                      * Standardization
                                                                                                      * Political impact
     requirements                                                                                         * Consultancy
                                                                                                                    * etc.
                                              Business activities:
                                              -Operational duties-
                                            -Strategic development-

                                           Action plans Infrastructure


                 Management
                           +
           Management system
                                 
                                Owner,
                                            Strategies

                                                     Vision

                                                    Mission
                                                    Values
                                                      and
                                                              Policies




                                                                                      Stakeholders
                                                                         + Needs and expectations:
                                                                                     * Performance
                                                                                                          Competitors




                                (Business creator) apprecia-                       * Price and cost
                                +                    tions
                                Purpose

22                         Profound knowledge: Business management sciences and experiences +
                           Expertises in quality, information security, environmental protection, etc.
     3749/25.1.2010.2009/jan
Defining a business-integrated
     expertise management, “X management”

              X management: Coordinated activities to direct     X:
              and control an organization with regard to X            –Finance
                                                                      –Quality
              Note: X management is not management of X but
                                                                      –Business risks
              management of an organization.
                                                                      –Information security
              X management is a responsibility of the business        –Human resources
              management, and it is taking place through the          –Information and communications
              managing actions of business leaders.                   –Knowledge
                                                                      –Occupational health and safety
              Experts have assisting roles both in X
                                                                      –Environmental protection
              management. Cooperation of different experts is
              strongly recommended.                                   –Innovation
                                                                      –Ethics
                                                                      –Social responsibility
                                                                      –etc.


23
     3736/3.1.2010/jan   (Ref. e.g. ISO 9000)
X management system, a core concept
     in X management standardization

               There are two elements in the concept X management system, XMS:
                         1. Management System (of an organization), MS:
                               - System to establish policy and objectives (of an organization) and to achieve
                               those objectives
                         2. X:
                               - A qualifier (attribute) characterizing a management system (MS)
                               characterizing how X is taken into account in the management system
                         XMS = X of/in/for MS
               XMS is a concept for systematic approach, “systematicity”, for X in an organization’s
               management.
               XMS is principally aimed for organization’s own internal business management needs
               and purposes.
               In fact, the concept XMS is not at all needed for practical quality approaches in
               organizations. It has caused a lot of confusions, especially when translated into
               different languages.
24
     3739/2.1.2010/jan
Necessary emphases in modern X management?

               1.         Integration:
                         –     Implementing effective / efficient and business-   X management 
                               relevant X principles and methodology              X of/in/for management
                               embedded within organization’s normal activities
                               of strategic and operational management
               2.         Responsiveness:
                         –     Being able to adjust quickly to suddenly altered   Dynamic and flexible
                               external conditions, and to resume stable          business management
                               operation without undue delay
               3.         Innovation:
                                                                                  Standard approach 
                         –     Striving continuously for new organization-
                               dedicated innovative and unique solutions and      An organization’s unique
                               encouraging various choices for X management       approach
                               in different organizations.




25
     3737/2.1.2010/jan
A problem among management standards users:
     Standards crumble organizations’ identity

                          There are still organizations that build and maintain separate
                           systems for specialized management areas including quality,
                           information security, environmental protection, OH&S, etc.
                           Even that is promoted by consultation and training.
                          Organizations’ specialized systems - e.g. based on different
                           standards - are distinct from the business systems.
                          Still the usage of different standards is promoted by different
                           certifications.
                          Standards users have different (and even strange) opinions about
                           standards.
                          There are very little evidence on innovative standards applications.




26
     3734/2.1.2010/jan
Standardization and users’ business reality

                                            Standardization Y: Issue Y / Standard element Y / Consensus process Y

                                        Standardization X: Issue X / Standard element X / Consensus process X




                          Standardization
                          subject area



             Practical realization of
             the subject area


                    Organization A: Realization elements A: Innovation process A
27                         Organization B: Realization elements B: Innovation process B
     3516/27.8.2008/jan
ISO 9000 Quality management principle #4:
     Process approach

               ”A desired result is achieved more efficiently when activities and related resources are
               managed as a process.”
               Key benefits:
                 * Lower costs and shorter cycle times through effective use of resources.
                 * Improved, consistent and predictable results.
                 * Focused and prioritized improvement opportunities.
               Applying the principle of process approach typically leads to:
                 * Systematically defining the activities necessary to obtain a desired result.
                 * Establishing clear responsibility and accountability for managing key activities.
                 * Analysing and measuring of the capability of key activities.
                 * Identifying the interfaces of key activities within and between the functions of the
               organization.
                 * Focusing on the factors such as resources, methods, and materials that will improve key
               activities of the organization.
                 * Evaluating risks, consequences and impacts of activities on customers, suppliers and
               other interested parties.
28                                  This principle is relevant for all areas of organizational management.
     3738/2.1.2010/jan              An organization is managed as one single system of processes.
Historical notes for the process approach

             •     Process approach was used already in ancient plant and construction activities. The concept
                   is often referred to in cases of natural development.
             •     Through industrialization processes became an everyday concept in so called process
                   industry.
             •     From 1980’s process approach has been used for computers’ internal activities according to
                   structured analysis and design technique (SADT).
             •     In a large scale business process approach has been used comprehensively for the benefits of
                   business management only for less than twenty years, and during that time a lot of practical
                   means have been developed for that purpose.
             •     Process management thinking got learning from system theory and system dynamics.
             •     To the quality management standards ISO 9000, process concept was introduced in the 1990’s
                   and just in very recent years the methodology came to the other international management
                   standards, e.g. information security management standards.
             •     BPR (Business Process Reengineering) is a concept for process improvements according to
                   the ideas of PDCA model. It was particularly promoted by Michael Hammer, James A. Champy
                   and Tom Peters in the 1990’s.
             •     BPM (Business Process Management) has become during the recent years a popular concept
                   within IT experts in automating business processes according to SOA (Service Oriented
                   Architecture) principles.
             •     Today organizations’ all business processes are “complex responsive processes of relating”.
29
     3122/20.3.2009/jan
A business is a system of processes

               A business system consists of processes:




30
     3740/2.1.2010/jan   (Ref. Dr. Deming, 1950)
What is a (business) process?

              Process means a continuous(*) activity by organized resources for fulfilling organization’s
              basic duties:
               – Processes put into practice organization’s business / action plan.
               – Operational every day work is done in processes.                  Process
               – Processes produce outputs (results) to the stakeholders.           (acting)
              There are always processes in all organizations.
              Structure (e.g. organizational structure) is a
              contradictory dimension to the processes.
              The both are needed – in fact they are also always
              existing in organizations. They cannot be replaced by
              each other. Process is the primary one, The structure                                      Structure
              should serve it.
                                                                                                         (existing)
              Modern organizational processes are “complex responsive processes of relating”.
              The key business management from the quality point of view is: How to manage
              business processes?

31
     3041/20.8.2005/jan    (*) A project is a singular or unique process.
The process/structure dilemma:
     Managing for balance

                           Functionality           Structure #1

                                                                            Structure #2
              Process
          (doing, acting):
            Real time
               Active                                                                      Balance issues:
              Skilled                                                                      - Freedom / control
             Emergent
               Agile                                                                       - Awareness / instructions
             Adaptive                                                                      - People / systems
              Flexible                                                                     - Proactive /reactive
               Open
               Free
               Living
                                                                               Structure-
                                                                               stiffness
                                           Structure (being, existing):
                                Planned, Built, Passive, Past, Prescribed, Stagnant

32
     3723x/3.11.2009/jan
Enterprice identity is based on
     its business structures and processes




33
Modern Times (1936): A story of industry, of individual enterprise - humanity crusading in the pursuit of happiness.
      3625/7.2.2009/jan
A P
     A comprehensive process management model                                                      C D



                           Business performance assessment and review

                                                      Process performance assessments (audits)

                                Re-design and                 Corrective       Conformity
                                re-engineering                 action            check
                                                                                              M
                                                                  Performance control         e
                                                                                              a             Business
                                                                                                            outcomes
                                            A business process                    Output      s   Process
                 Inputs                                                            data       u
                 • require-                                                                       outputs
                                                 Work activity                                r
                   ments                                                         Internal
                 • needs                                                           data       e       Other
                 • requisites                       Other                                     m     processes
                                      People      resources      Procedures                   e
                                                                                              n
                                                                                              t
34                        Other processes                 Preventive action,
                                                            improvement            Analysis
     0588/28.3.2004/jan
New foundations for business infrastructure

                                Uncertainty and ambiguity
                                       Emergence and self-organizing networks of actors
                                       Many heterigeneous global actors in virtual networks
                                       All linked with everything else, all linkages not known
                                       Customers and other stakeholders differentiating with singular needs
                                       Pradoxal freedom of the actors (”both-and” instead of ”either-or”)
                                       Signifigance of immaterial issues (information, knowledge, services)
                                       Informal learning and serendipity
                                       Increased speed of activities and change
                                       Signifigance of transaction phenomena
                                       Complex responsive processes of relating
                                       Simultaneous agility and maturity requirements
                                       Immense pressure / stress of business leaders

              Certainty and predictability


35
     1544/2.9.2009/jan        (Refs.:D Zohar, R D Stacey)
Crises in business expertises:
     To adapt to the needs of modern society

                 Speed                                                 Marshall McLuhan:
                 Changes              Business                         ” Today each of us lives
                 Agility              environments                     hundred years in a decade.”
                 Complexity           and society
                 Diversity
                 Immaterialness
                 Variety                                Problem

                                                         Established business expertises


                                                           Time

               Are the experts not able to follow the general development of organizations' business
               development and trends of the society at large?
               Are they providing only "Plus ca change, plus c'est la même chose “?

36
     3724/2.12.2009/jan
Customer’s differentiation and
     organization’s capabilities

                                                 Customer differentiation                           Organization’s capabilities
               Differentiated                                                      High
                                                 lll                          lV                     lll                    lV
                          Customer’s value




                                                                                   Communications
                                                                                      flexibility
                                                 l                            ll                     l                      ll
               Uniform                                                             Low
                                                    Customer’s needs                                       Production and
                                             Uniform              Differentiated              Low             logistics     High
                                                                                                              flexibility




37
     2377/20.9.2002/jan                         (Ref.: D Peppers, M Rogers)
Activities within complex responsive processes
     of relating

                                                                                                                      All kinds of activities
             Low                           Innovation                                                                 may exist in networking
                                                                                    Chaos
                                                Creativity                                                            processes.
                                                                                           Anarchy
                           Political                    Debate
               Agreement




                           control -                               “Zone of
                           compromise                                Complexity”
                                                                            Serendipity
                                                                                         Trial & Error
                            Standards
                            Guidance
                                                        Experimenting
            High            Monitoring

                           High                      Certainty                                             Low

38
     3430/15.1.2008/jan            (Ref.: Stacey: http://www.plexusinstitute.org/edgeware/archive/think/main_aides3.htm l)
Performance of business networks is influenced by
         individual actors’ power and communication abilities

                                                                 Real networks are unplanned and emergent
                                                                 systems. Their growth is sporadic and self-
                                                                 organizing. An actor’s impact in a network:
                                                                 • Access = Actor’s easiness getting to the
                                                                 resources of the network
                                                                 • Reach = Actor’s potential wielding influence
                                                                 in the network
                                                                 • Control = Actor’s ability to control over the
                                                                 resources of the network

                                                                                       Power law of the scale-free




                                                                  Knots with k links
                                                                                       networks:
                                                                                            Many knots with
                                                                                            few links

                                                                                             Few knots with
                                                                                                 many links
                  Business network is not any business system.
39
     3721x/16.11.2009/jan                                                              Number of links (k)
Modes of operation in business processes

              All business processes and activities consist of actions
              with three concurrent dimensions comprising different
              degrees of freedom and variety:
                                                                                 3. Dynamic
                                                                                 Complex, chaotic
                                                                                 spontaneus
                                                            2. Organic           responsive
               Variety              1. Mechanistic          complex, organized   innovative
               Diversity                                                         virtual
               Degrees of           serial                  interacting actors
               freedom              automatic               networks             variative
                                    accuracy                concurrent           variable rules
                                    due order               communion            personified
                                                                                 quantum leap

                                       Operational and structural complexity


40
     1754x/27.1.2005/jan   (Ref.: Legat)
Management of an organization is particularly related
     to managing organizational information / knowledge

                               Procedure document, standard,
                               operational model, recorded operation,
                               factual knowledge, etc. (explicit issue)


             Conscious                         Reality of the issue in the minds of the
                                               individuals and in the practical operations
                                               (implicit / tacit contents of the issue)
             Sub-conscious                       – This part is the most significant
                                                     regarding to the actions for the
                                                     issue realization.
                                                 – The contents may change due to
                                                     time and situation and depending on
                                                     influences and learning.




41
     2645/9.1.2007/jan
Empirical fact-based information and inherent
     knowledge are needed for successful management

                          Wisdom
                          - myths
                          - values
                 Knowledge                                                            Intervention
                 - explicit records                     Reflecting and deciding
                 - tacit knowledge                                                     Plan / Act
                 (know-how, competence)
                                                         Information
                          ”Ba”                      Analysing
                                                                                                     You get what
                                                                             A    P                  you measure
                                                   Data
                                                                             C    D

               Environments                 Measuring           ...


                                                Facts                                     Effects

42                            The performance reality of the company business processes
     0609/25.3.2008/jan
Business performance or X management
     is not any on/off concept!



                     YES                                               (1)


               XM



                     NO                                                 (0)
                           NO                         YES
                                Specific actions (strokes or tricks)




43
     3741/3.1.2010/jan
Enhancing an organization’s business performance
     (from early stage to maturity) – X Integration

                  Business performance is a fuzzy concept:
                                              Excellence                                                          1 = perfect
              Grade of business performance




                                              Leadership
                                                                      Organizations
                                                                      with a third party
                                              Competitive-
                                                                      certificate (*)
                                              ness                                             Need of change?
                                                                                               How to get the change happen?
                                              Effectiveness

                                              Beginnings
                                                                                                                  0 = good-for-
                                              Anecdotal                                                               nothing
                                                             0   10         30 40           60 70           90   100
                                                                      Assessed overall business performance       %

                  (*) Third party certifications do not define any particular level of performance.
                  Organizations cannot differ from the others on the basis of third party certificates
44
     3742/2.1.2010/jan
Theses of the new approach
     for applying X management and related standards

               Striving for competitive X integration by:
               • Recognizing performance excellence instead of a narrow X conformity thinking
               • Striving for flexible realization of X in management and leadership instead of distinct X
                   management by using effective managerial methodology
               • Applying innovative “systematicity” (systematic approach) of the X in management instead of
                   formal and distinct X management systems
               • Using business-related X management principles and actions instead of fulfilling formal and
                   general X assurance requirements only
               • Setting stretched business objectives instead of minimum standard requirements
               • Aiming at innovative and unique solutions instead of stereotyped systems
               • Relying on internal business performance self-assessments and advanced X assurance
                   communication instead of third party audits and certifications of “artificial” X systems
               • Getting advantage of tacit knowledge instead of only records of explicit data and information
               • Networking with partners and recognized world-wide communities of multifarious expertise
               • Supporting various ways of collaborative learning instead of narrow-minded continual
                   improvement
               • Reinforcing and using company’s own internal awareness and expertise instead of passive use
                   of external consultants
45
     3743/2.1.2010/jan
Epilog

              There will be also in future standards-experts who don’t understand or
                  don’t want to understand business realities of real organizations.
              Consensus process of standardization has a detrimental influence on
                     the clarity and ambiguity of general standards: “Stupidity
                condenses in the masses - The mob has many heads but no brains”
                    However, standards must not hinder creative applications of the
                                standards by responsible organizations.

                                                                        Juhani Anttila




46
     xxxx/2.1.2010/jan

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Integrated Management Systems

  • 1. Standardization and integrated management systems - A business-practitioner’s viewpoints Juhani Anttila Academician, International Academy for Quality (IAQ) Venture Knowledgist Quality Integration Helsinki, Finland juhani.anttila@telecon.fi , www.QualityIntegration.biz January 29, 2010 Ver. 1.2 These pages are licensed under the Creative Commons 3.0 License 1 http://creativecommons.org/licenses/by/3.0 (Mention the origin)
  • 2. Standardization and integrated management systems - A business-practitioner’s viewpoints 1. Rectifying conceptual problems - Even experts should appreciate traditions and recognized practices of business management. 2. Applying standards with integration, responsiveness and innovation - Organizations aim at competitiveness and sustained business success 3. Considering business environments - Organizations and their business management must adapt themselves to the prevailing business realities. 4. Appreciating information and knowledge in managing an organization - Core of a management system consists of information and knowledge. Mainly the system is a mental system. 5. Performance of a management system as a fuzzy issue - A management system must be always ready but never finished. 2 Integration covers all aspects and expertise subject matters needed for the management of an organization. xxxx/2.1.2010/jan
  • 3. Major problems in ISO management standards 1. System approach is unclear and not business-focused. 2. There is confusion between the system management and system requirements. 3. Process approach is unclear. 4. Integration should be understood as business-integration. 5. This spiral model is 6. PDCA is a business 7. This diagram does not unpractical and naive for management model not a process support business-integration management purposes. It model. This does not cover all that is necessary in the does not follow Juran’s necessary strategic and system and process original business-based ideas operational management needs. approaches. The core should neither modern PDCA All stakeholders should be consists of general business 3 practices. considered. What is the quality (or management elements. X) management system? 3729/2.1.2010/jan
  • 4. Juran’s quality spiral model, The “Big Q” approach The original spiral model covers the organizational business scope comprehensively including all necessary management aspects embedded in a natural and logical way within business activities. It is principally a descriptive model and does not yet give any practical guidance. 4 3730/2.1.2010/jan
  • 5. Planning, controlling, and improving the performance of business (processes) 40 Problem A P cases Rectifying sporadic (defects) C D problems (2) Performance control Prevention Control limits (1) Performance planning (3) Small step improvement 20 ”Kaizen” A P (4) Breakthrough C D improvement (5) New Performance A P Control with new limits planning C D 0 0 Time 5 Feedback 0376/2.1.2010/jan (Ref. Dr. Juran: Trilogy Approach)
  • 6. The PDCA Model is a recognized multipurpose methodology for business management. The PDCA Model (called also as Deming / Shewhart Cycle) has a long history and a great variety of different applications, possibilities, and uses in the field of general business management: – Original PDSA (Plan-Do-Study-Act) model was created by American Walter Shewhart in the 1920’s and used for production control. – The model became popular through American W. Edwards Deming’s lectures of managerial quality during several decades (from 1950’s to 1990’s). – American Joseph Juran’s Trilogy Model (1964) contains the same elements as the PDCA model. He especially emphasized differences between control and breakthrough. His spiral model was presented in his well-known Quality Control Handbook (1975). – In the 1980’s Japanese Kaoru Ishikawa and Masaaki Imai emphasized problem solving and continual improvement (“Kaizen”) according to the PDCA model. – Later Japanese Shoji Shiba has made remarkable work by combining the original PDCA model with the ideas of managing knowledge and of Buddhist philosophy. – In late 1990’s and early 2000’s the SixSigma methodology for large scale business performance improvements was developed by Motorola and became popular by its successful application in General Electric. Also SixSigma is based on the PDCA approach. – The PDCA model has also consistent linkages with traditional systems theory and systems dynamics. – To the international standardization the model was used at first in standards ISO 9000:2000 for 6 quality management from where it came e.g. to information security management standards a few years later. 3119/2.1.2010/jan
  • 7. A triple PDCA (*), a model for good management: Coordinated activities to direct and control an organization (**) ACTING (A): PLANNING (P): • Preventing actions • Business and • Improving actions management models • Re-engineering • Business plan Applying a triple PDCA model • Communicating • Approaches and (“The Eyes of Buddha” (***)): • Recognizing and methodology 1. Rational control (operational) rewarding A P 2. Continual rational small step C D improvement (operational), CHECKING (C): DOING (D): “Kaizen” approach • Assessing the • Deploying the approach 3. Innovative breakthrough performance and achieving the results changes (strategic) • Reviewing the • Controlling operational performance performance • Corrective actions 7 2343x/15.12.2008/jan (*) Deming / Shewhart, (**) ISO 9000, (***) Shiba; Bodhnath Stupa, Kathmandu
  • 8. Systemic management of business resources Managing based on system recognition and feedback loops. Stop to think Plus ca change, plus c'est la même chose 8 3077/2.9.2007/jan (Ref.: Repenning & Sterman)
  • 9. ISO 9000 quality management principles, QMP These principles can be used by senior management as a framework to guide their organizations towards improved performance. The principles are derived from the collective experience and knowledge of the international experts. * Principle 1: Customer focus * Principle 2: Leadership * Principle 3: Involvement of people * Principle 4: Process approach * Principle 5: System approach to management * Principle 6: Continual improvement * Principle 7: Factual approach to decision making * Principle 8: Mutually beneficial supplier relationships These principles are relevant for all areas organizational business management including 9 also all expert disciplines. 3746/2.1.2010/jan
  • 10. ISO 9000 Quality management principle #5: System approach to management ”Identifying, understanding and managing interrelated processes as a system contributes to the organization's effectiveness and efficiency in achieving its objectives” Key benefits: • Integration and alignment of the processes that will best achieve the desired results. • Ability to focus effort on the key processes. • Providing confidence to interested parties as to the consistency, effectiveness and efficiency of the organization. Applying the principle of system approach to management typically leads to: • Structuring a system to achieve the organization's objectives in the most effective and efficient way. • Understanding the interdependencies between the processes of the system. • Structured approaches that harmonize and integrate processes. • Providing a better understanding of the roles and responsibilities necessary for achieving common objectives and thereby reducing cross-functional barriers. • Understanding organizational capabilities and establishing resource constraints prior to action. • Targeting and defining how specific activities within a system should operate. • Continually improving the system through measurement and evaluation. 10 This principle is relevant for all areas of organizational management. 3728/2.1.2010/jan An organization is managed as one single system.
  • 11. System concept System (*) is a set of interrelated or interacting A system’s Management elements (processes). creators and owners - A system is an entity that maintains its existence and functions as a whole through the interaction of its parts. A system - A system has always an aim or purpose defined (and its elements) by the system’s creators or owners. The system is just created to accomplish its aim. - A system has interactions and transactions with its environment to get input from and to provide Inputs and outputs through output for system’s stakeholders. Stakeholders interactions and transactions may set requirements to the system. - A system is managed as a whole. Management is System environment based on knowledge and information and PDCA (Stakeholders and system-competitors) management model (feedback). An organization is a system. System management domain System requirements Internal interest External interest 11 Effectiveness and efficiency Effectiveness (Ref. Russell's paradox) 3732/20.1.2010/jan (*) Ref. ISO 9000 definition
  • 12. Two principal domains, management and assurance, of the organizational management AA/B Organization A MA AB/C Organization B1 MB1 Organization C Aim of the approaches: Organization B2 M  Excellence (internal interest) MC A  Confidence (external interest) MB2 Management disciplines: - MA, MB, MC:O rganization-internal (business) management (system) - AA/B, AB/C: Assurance between organizations (based on organization-internal management system) At all organizational levels there should be consistency among these disciplines. Both management 12 and assurance consist of many different expertises. 3733/3.1.2010/jan
  • 13. Quality management (QM) and quality assurance (QA) as consistent parts of an organization’s quality approach QM business system aspects QM = Quality management (QMS = Quality Management System) (focus on excellence of a business approach), ISO 9004 QA = Quality assurance (focus on confidence for product conformity), ISO 9001 Tailoring case-by-case ISO 9000 standards cannot be QA elements understood by ISO 9001 only. ISO 9001 is a part of ISO 9004: - in standard documents as a whole - in individual standard clauses A QMS covers the whole business QM principles management system (BMS). Situation is very analogous with all expertise areas of business 13 management, e.g. information security management. 0290/15.12.2009/jan
  • 14. Quality assurance (QA): - strengthening the confidence among the customers Process (product realization) Output/Product Process management Input Product delivery Customer channel Quality assurance (*) QA communication channel (*) Standard model ISO 9001 or tailored, and “e-Certificate” quality assurance plan / agreement 14 0676/16.11.2006/jan
  • 15. Managing activities and responsibilities (a management system) cover the whole organization. Breakthrough Top management activies Division Directors Improvement Unit / function managers activities and professionals Routine Process owners operational and maintenance activities Process team members 15 Portion of time spent on activity 1365/12.1.2009/jan (Ref.: The Itoh Model, Singh Soin)
  • 16. Infrastructure and elements of an organizational management system Action Development Strategies plans projects, Mission ”Becoming Better” (Purpose, justification Vision of the existence) Resources, Operational Procedure processes, Policies documents, ”Earning Money” Tools SHARED BUSINESS VALUES Purpose Strategic plans Realization means Action of the 3...5 1...3 0,4...1 just now company years years year 16 Separate X systems within this typical business framework are very artificial. All X actions must be integrated with the management system. 3735/29.3.2009/jan
  • 17. Integration is the main strategy for a professional expertise approach within an organization (system) Integration means: Expertises may include: • Implementing effective and efficient expertise –Finance items embedded within normal business –Quality management activities (especially in business processes) –Business risks • Acting against building distinct ”expertise –Information security systems” (i.e. lack of integration). Business- –Human resources separated expertise initiatives are artificial. –Information and communications –Knowledge One must understand and take into account the –Occupational health and safety nature of the organizational system, its business –Environmental protection and its realities when implementing expertise –Innovation initiatives of business management. Integration is always an organization-dedicated solution. –Ethics –Social responsibility Cross-application of all expertise areas is needed. –etc. E.g. information security is needed in quality management and quality in information security 17 management. 3745/2.1.2010/jan
  • 18. Business-integration of the standards ”systematicity” Business standards are established through orgnizations’ business structures and processes. 18 Separate management systems are illusions. 3704/7.10.2009/jan
  • 19. Management integration takes place at two levels • The strategic level, where one makes decisions and undertakes measures concerning the entire organization (business system of business processes) and considers especially the future competitiveness of the organization. • The operational level, where decisions and measures concerning daily management are made and undertaken. Emphasis is on operational questions of the individual business processes. These two managerial areas are very different by their purpose and therefore different methodology is needed for them. Integration covers all aspects needed for the management of an organization. 19 3731/23.8.2009/jan
  • 20. Conflicts of needs and expectations from specialized management areas Finance Quality Risk management management management Human resource management Issue X management Information/ knowledge management Occupational Information Environmental health and safety security management management management A consistent and balanced Conflicts: - on strategic level: General manager’s commitment integration is needed 20 - on operational level: Business processes’ commitment for avoiding conflicts! 1059/20.3.2009/jan
  • 21. Integrating specialized domains of management standardization and ensuring natural business diversity The Finnish model Finance for integration (MSS) Product General management Environment quality system based on PDCA General Occupational management Ethics responsibilities health and safety and business Organizational system identity & privacy Social Security responsibility Risks Organizational diversity 21 3342/20.8..2009/jan (Ref.: ISO Management systems standardization, MSS)
  • 22. From a business establishment Promotion and support: to satisfying AN ORGANIZATION * Standardization * Political impact requirements * Consultancy * etc. Business activities: -Operational duties- -Strategic development- Action plans Infrastructure Management + Management system  Owner, Strategies Vision Mission Values and Policies Stakeholders + Needs and expectations: * Performance Competitors (Business creator) apprecia- * Price and cost + tions Purpose 22 Profound knowledge: Business management sciences and experiences + Expertises in quality, information security, environmental protection, etc. 3749/25.1.2010.2009/jan
  • 23. Defining a business-integrated expertise management, “X management” X management: Coordinated activities to direct X: and control an organization with regard to X –Finance –Quality Note: X management is not management of X but –Business risks management of an organization. –Information security X management is a responsibility of the business –Human resources management, and it is taking place through the –Information and communications managing actions of business leaders. –Knowledge –Occupational health and safety Experts have assisting roles both in X –Environmental protection management. Cooperation of different experts is strongly recommended. –Innovation –Ethics –Social responsibility –etc. 23 3736/3.1.2010/jan (Ref. e.g. ISO 9000)
  • 24. X management system, a core concept in X management standardization There are two elements in the concept X management system, XMS: 1. Management System (of an organization), MS: - System to establish policy and objectives (of an organization) and to achieve those objectives 2. X: - A qualifier (attribute) characterizing a management system (MS) characterizing how X is taken into account in the management system XMS = X of/in/for MS XMS is a concept for systematic approach, “systematicity”, for X in an organization’s management. XMS is principally aimed for organization’s own internal business management needs and purposes. In fact, the concept XMS is not at all needed for practical quality approaches in organizations. It has caused a lot of confusions, especially when translated into different languages. 24 3739/2.1.2010/jan
  • 25. Necessary emphases in modern X management? 1. Integration: – Implementing effective / efficient and business- X management  relevant X principles and methodology X of/in/for management embedded within organization’s normal activities of strategic and operational management 2. Responsiveness: – Being able to adjust quickly to suddenly altered Dynamic and flexible external conditions, and to resume stable business management operation without undue delay 3. Innovation: Standard approach  – Striving continuously for new organization- dedicated innovative and unique solutions and An organization’s unique encouraging various choices for X management approach in different organizations. 25 3737/2.1.2010/jan
  • 26. A problem among management standards users: Standards crumble organizations’ identity  There are still organizations that build and maintain separate systems for specialized management areas including quality, information security, environmental protection, OH&S, etc. Even that is promoted by consultation and training.  Organizations’ specialized systems - e.g. based on different standards - are distinct from the business systems.  Still the usage of different standards is promoted by different certifications.  Standards users have different (and even strange) opinions about standards.  There are very little evidence on innovative standards applications. 26 3734/2.1.2010/jan
  • 27. Standardization and users’ business reality Standardization Y: Issue Y / Standard element Y / Consensus process Y Standardization X: Issue X / Standard element X / Consensus process X Standardization subject area Practical realization of the subject area Organization A: Realization elements A: Innovation process A 27 Organization B: Realization elements B: Innovation process B 3516/27.8.2008/jan
  • 28. ISO 9000 Quality management principle #4: Process approach ”A desired result is achieved more efficiently when activities and related resources are managed as a process.” Key benefits: * Lower costs and shorter cycle times through effective use of resources. * Improved, consistent and predictable results. * Focused and prioritized improvement opportunities. Applying the principle of process approach typically leads to: * Systematically defining the activities necessary to obtain a desired result. * Establishing clear responsibility and accountability for managing key activities. * Analysing and measuring of the capability of key activities. * Identifying the interfaces of key activities within and between the functions of the organization. * Focusing on the factors such as resources, methods, and materials that will improve key activities of the organization. * Evaluating risks, consequences and impacts of activities on customers, suppliers and other interested parties. 28 This principle is relevant for all areas of organizational management. 3738/2.1.2010/jan An organization is managed as one single system of processes.
  • 29. Historical notes for the process approach • Process approach was used already in ancient plant and construction activities. The concept is often referred to in cases of natural development. • Through industrialization processes became an everyday concept in so called process industry. • From 1980’s process approach has been used for computers’ internal activities according to structured analysis and design technique (SADT). • In a large scale business process approach has been used comprehensively for the benefits of business management only for less than twenty years, and during that time a lot of practical means have been developed for that purpose. • Process management thinking got learning from system theory and system dynamics. • To the quality management standards ISO 9000, process concept was introduced in the 1990’s and just in very recent years the methodology came to the other international management standards, e.g. information security management standards. • BPR (Business Process Reengineering) is a concept for process improvements according to the ideas of PDCA model. It was particularly promoted by Michael Hammer, James A. Champy and Tom Peters in the 1990’s. • BPM (Business Process Management) has become during the recent years a popular concept within IT experts in automating business processes according to SOA (Service Oriented Architecture) principles. • Today organizations’ all business processes are “complex responsive processes of relating”. 29 3122/20.3.2009/jan
  • 30. A business is a system of processes A business system consists of processes: 30 3740/2.1.2010/jan (Ref. Dr. Deming, 1950)
  • 31. What is a (business) process? Process means a continuous(*) activity by organized resources for fulfilling organization’s basic duties: – Processes put into practice organization’s business / action plan. – Operational every day work is done in processes. Process – Processes produce outputs (results) to the stakeholders. (acting) There are always processes in all organizations. Structure (e.g. organizational structure) is a contradictory dimension to the processes. The both are needed – in fact they are also always existing in organizations. They cannot be replaced by each other. Process is the primary one, The structure Structure should serve it. (existing) Modern organizational processes are “complex responsive processes of relating”. The key business management from the quality point of view is: How to manage business processes? 31 3041/20.8.2005/jan (*) A project is a singular or unique process.
  • 32. The process/structure dilemma: Managing for balance Functionality Structure #1 Structure #2 Process (doing, acting): Real time Active Balance issues: Skilled - Freedom / control Emergent Agile - Awareness / instructions Adaptive - People / systems Flexible - Proactive /reactive Open Free Living Structure- stiffness Structure (being, existing): Planned, Built, Passive, Past, Prescribed, Stagnant 32 3723x/3.11.2009/jan
  • 33. Enterprice identity is based on its business structures and processes 33 Modern Times (1936): A story of industry, of individual enterprise - humanity crusading in the pursuit of happiness. 3625/7.2.2009/jan
  • 34. A P A comprehensive process management model C D Business performance assessment and review Process performance assessments (audits) Re-design and Corrective Conformity re-engineering action check M Performance control e a Business outcomes A business process Output s Process Inputs data u • require- outputs Work activity r ments Internal • needs data e Other • requisites Other m processes People resources Procedures e n t 34 Other processes Preventive action, improvement Analysis 0588/28.3.2004/jan
  • 35. New foundations for business infrastructure Uncertainty and ambiguity  Emergence and self-organizing networks of actors  Many heterigeneous global actors in virtual networks  All linked with everything else, all linkages not known  Customers and other stakeholders differentiating with singular needs  Pradoxal freedom of the actors (”both-and” instead of ”either-or”)  Signifigance of immaterial issues (information, knowledge, services)  Informal learning and serendipity  Increased speed of activities and change  Signifigance of transaction phenomena  Complex responsive processes of relating  Simultaneous agility and maturity requirements  Immense pressure / stress of business leaders Certainty and predictability 35 1544/2.9.2009/jan (Refs.:D Zohar, R D Stacey)
  • 36. Crises in business expertises: To adapt to the needs of modern society Speed Marshall McLuhan: Changes Business ” Today each of us lives Agility environments hundred years in a decade.” Complexity and society Diversity Immaterialness Variety Problem Established business expertises Time Are the experts not able to follow the general development of organizations' business development and trends of the society at large? Are they providing only "Plus ca change, plus c'est la même chose “? 36 3724/2.12.2009/jan
  • 37. Customer’s differentiation and organization’s capabilities Customer differentiation Organization’s capabilities Differentiated High lll lV lll lV Customer’s value Communications flexibility l ll l ll Uniform Low Customer’s needs Production and Uniform Differentiated Low logistics High flexibility 37 2377/20.9.2002/jan (Ref.: D Peppers, M Rogers)
  • 38. Activities within complex responsive processes of relating All kinds of activities Low Innovation may exist in networking Chaos Creativity processes. Anarchy Political Debate Agreement control - “Zone of compromise Complexity” Serendipity Trial & Error Standards Guidance Experimenting High Monitoring High Certainty Low 38 3430/15.1.2008/jan (Ref.: Stacey: http://www.plexusinstitute.org/edgeware/archive/think/main_aides3.htm l)
  • 39. Performance of business networks is influenced by individual actors’ power and communication abilities Real networks are unplanned and emergent systems. Their growth is sporadic and self- organizing. An actor’s impact in a network: • Access = Actor’s easiness getting to the resources of the network • Reach = Actor’s potential wielding influence in the network • Control = Actor’s ability to control over the resources of the network Power law of the scale-free Knots with k links networks: Many knots with few links Few knots with many links Business network is not any business system. 39 3721x/16.11.2009/jan Number of links (k)
  • 40. Modes of operation in business processes All business processes and activities consist of actions with three concurrent dimensions comprising different degrees of freedom and variety: 3. Dynamic Complex, chaotic spontaneus 2. Organic responsive Variety 1. Mechanistic complex, organized innovative Diversity virtual Degrees of serial interacting actors freedom automatic networks variative accuracy concurrent variable rules due order communion personified quantum leap Operational and structural complexity 40 1754x/27.1.2005/jan (Ref.: Legat)
  • 41. Management of an organization is particularly related to managing organizational information / knowledge Procedure document, standard, operational model, recorded operation, factual knowledge, etc. (explicit issue) Conscious Reality of the issue in the minds of the individuals and in the practical operations (implicit / tacit contents of the issue) Sub-conscious – This part is the most significant regarding to the actions for the issue realization. – The contents may change due to time and situation and depending on influences and learning. 41 2645/9.1.2007/jan
  • 42. Empirical fact-based information and inherent knowledge are needed for successful management Wisdom - myths - values Knowledge Intervention - explicit records Reflecting and deciding - tacit knowledge Plan / Act (know-how, competence) Information ”Ba” Analysing You get what A P you measure Data C D Environments Measuring ... Facts Effects 42 The performance reality of the company business processes 0609/25.3.2008/jan
  • 43. Business performance or X management is not any on/off concept! YES (1) XM NO (0) NO YES Specific actions (strokes or tricks) 43 3741/3.1.2010/jan
  • 44. Enhancing an organization’s business performance (from early stage to maturity) – X Integration Business performance is a fuzzy concept: Excellence 1 = perfect Grade of business performance Leadership Organizations with a third party Competitive- certificate (*) ness Need of change? How to get the change happen? Effectiveness Beginnings 0 = good-for- Anecdotal nothing 0 10 30 40 60 70 90 100 Assessed overall business performance % (*) Third party certifications do not define any particular level of performance. Organizations cannot differ from the others on the basis of third party certificates 44 3742/2.1.2010/jan
  • 45. Theses of the new approach for applying X management and related standards Striving for competitive X integration by: • Recognizing performance excellence instead of a narrow X conformity thinking • Striving for flexible realization of X in management and leadership instead of distinct X management by using effective managerial methodology • Applying innovative “systematicity” (systematic approach) of the X in management instead of formal and distinct X management systems • Using business-related X management principles and actions instead of fulfilling formal and general X assurance requirements only • Setting stretched business objectives instead of minimum standard requirements • Aiming at innovative and unique solutions instead of stereotyped systems • Relying on internal business performance self-assessments and advanced X assurance communication instead of third party audits and certifications of “artificial” X systems • Getting advantage of tacit knowledge instead of only records of explicit data and information • Networking with partners and recognized world-wide communities of multifarious expertise • Supporting various ways of collaborative learning instead of narrow-minded continual improvement • Reinforcing and using company’s own internal awareness and expertise instead of passive use of external consultants 45 3743/2.1.2010/jan
  • 46. Epilog There will be also in future standards-experts who don’t understand or don’t want to understand business realities of real organizations. Consensus process of standardization has a detrimental influence on the clarity and ambiguity of general standards: “Stupidity condenses in the masses - The mob has many heads but no brains” However, standards must not hinder creative applications of the standards by responsible organizations. Juhani Anttila 46 xxxx/2.1.2010/jan