by Lorri Hunt
Although it’s always a struggle to manage quality management system costs, in today’s environment where organizations are challenged with economic shortfalls, layoffs, and keeping their business afloat, financial decisions can take an especially traumatic toll on the quality management system.
In times of financial uncertainty, the costs of maintaining certification to a management system standard such as ISO 9001 come into question. These quality management system costs can be real or perceived. Real costs are tangible costs such as the certification audit, including audit days and travel expenses for auditors. They might also include resources within the organization such as internal auditors or the ISO 9001 management representative’s time spent overseeing compliance issues. Perceived quality management system costs are those costs that the organization believes are a derivative of the quality management system, such as the bureaucracy of ISO 9001 or the philosophy that “ISO makes us do it.” These are requirements that the organization has implemented that they blame on the standard.
However, most management teams don’t recognize the difference between real and perceived costs. To ensure the integrity of your quality management system during tough economical times, consider the following tips in helping your organization manage financial issues.
- Communicate to management the relationship of requirements. ISO 9001 requirements are just one type of requirements. There are also customer, statutory, and regulatory requirements. These are the requirements that drive costs in the organization. Depending on the organization, this could be the cost for controlling nonconforming product or the cost of making sure employees have the right training to be competent in their respective jobs. It’s important to realize that some costs associated with the quality management system are related to ISO 9001, customers, and statutory requirements. For example, ISO 9001 requires you to control documents, and your customer has a related requirement. In some cases, if you eliminate requirements from an ISO 9001 perspective, you will still be required to demonstrate compliance to your customer. In these cases, leadership needs to understand that by eliminating ISO 9001 they aren’t eliminating costs since they are still required to meet customer requirements.
- Challenge your quality management system to determine if it is over-implemented. Although ISO 9001, customer, statututory, and regulatory requirements cannot be eliminated, many times the method we have implemented them increases costs. For example, documents need to show that they have been approved. It’s up to your organization to determine the method of approval. It can be as simple as an online review or an e-mail message or as complicated as circulating the document for approval through three levels of management. As you look for opportunities to reduce costs, examine the requirements, review how you have implemented them, and consider if there are methods of compliance in place that could be simplified or streamlined, reducing costs.
- Switch to annual audits. Although the number of audit days does not decrease from an audit conducted every six months to once a year, savings on travel costs can be realized when you only pay for airfare and travel time once a year. As a reminder, audit days are mandated by the International Accreditation Forum and adhered to by accreditation bodies such as ANAB.
- Seek a local auditor from your certification body. These auditors have less distance to travel, saving you on travel costs.
- Share travel costs. Frequently, auditors travel to the same city multiple times over the course of a year. Determine if your audit can be synchronized with another organization in your location that is being audited by the same auditor. This would allow you to share travel costs with another company.
- Determine if financial assistance is available in your state. Financial assistance is not consistent from state-to-state, but there are different resources available. Some programs provide training while others may provide you with a stipend to assist with costs in getting certified. It’s important to research what resources might be available in your area. What’s the worst thing that could happen? You might find that there aren’t any resources. You don’t know what is available unless you take the time to check. Good sources include your state’s economic development department, local universities and community colleges, and your local Manufacturing Extension Partnership (MEP). Small businesses should also check with the local Small Business Administration.
- Host training at your location and invite other companies to participate. The cost of training is always of concern to organizations. Many times the training isn’t geographically convenient for the organization so there are travel costs associated with it. Unfortunately, this often results in the employee not getting the training. When you host training at your location, you have the opportunity to train more employees because you are saving the travel costs. Inviting other companies, either sister organizations or non-competitors, to share in the cost, you have a great opportunity to share travel costs and network with other organizations.
- Trade resources. Consider trading internal auditor resources with other organizations. Obviously, you wouldn’t want to do this with a competitor but why not try it with other organizations? Each organization borrows auditor resources to conduct their internal audits. This is especially helpful for smaller organizations that frequently have to hire contractors to conduct their audits to demonstrate auditor independence.
- Use caution when making decisions to reduce costs. It’s critical when managing costs that you don’t arbitrarily make changes without considering the effect of the change. It’s understandable that organizations need to make adjustments that could reduce costs, but it’s critical that you carefully consider the effect these changes may have upon the organization. For example, if you realize you have too many procedures and decide to reduce the number of procedures by 10 percent across the board, you could realize a cost savings. However, when making across-the-board budget cuts in a quality management system costs, there is frequently an effect upon compliance. It’s imperative that you analyze each procedure and determine those that are non-value added or those that require steps that aren’t required by any standard or other requirement. This same approach needs to be considered when reducing headcount. Organizations need to consider what roles are needed. If an organization has a reduction in force and eliminates every employee who has been conducting audits, they need to find someone to fill that role or ensure that the activity is covered by another method.
- Make sure your senior leadership understands the concerns with managing costs. Although most quality professionals aren’t involved in budget decisions, it’s important for you to provide the background necessary to leadership so they can make fact-based decisions. It’s also important to realize that budget cuts are going to happen in most cases. Being proactive and sharing some of the approaches in this list provides you an opportunity to show how quality management system costs can be managed during times of financial crisis but within the constraints of demonstrating control.
The reality is that there are some costs to implementing requirements in a quality management system. However, the level of costs is easily managed if you think outside the box and look for opportunities where you can make change without affecting compliance to the quality management system. The key is to make those changes that balance reducing costs and a strong QMS that demonstrates compliance to ISO 9001. It’s a tight rope act, but with a little creative thinking you can demonstrate to management that the quality management system can add value and be cost effective at the same time.
About the author
Lorri Hunt is president of Lorri Hunt and Associates Inc. She has been implementing quality management systems in diverse organizations such as Honeywell, the Department of Energy, and small businesses since 1994. She is an active member of the U. S. Technical Advisory Group to ISO Technical Committee 176. She currently serves as the head of delegation for ISO TC176/SC2. In this role, she is responsible for overseeing the development of consensus positions for the United States related to ISO 9001 and 9004. She is a U.S. expert and task group monitor for the next revision to ISO 9001, which is currently planned for 2015. She also served as the international deputy task group leader to the ISO 9001:2008 amendment. She is also the co-author of The Insiders’ Guide to ISO 9001:2008, published by Paton Professional.