The Business Value of a Good

QMS Building the Case for Quality in your Company

Copyright © November 2011

IBS America, Inc.

www.ibs-us.com 781.862.9002

“The Business Value of a Good QMS”

IBS America, Inc.

www.ibs-us.com 781.862.9002

IBS America, Inc.. 24 Hartwell Avenue . Lexington, MA 02421 .Tel: (781) 862-9002 Fax: (781) 862-9003 .www.ibs-us.com

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Introduction:

You understand what quality is, and you understand how important it is to the life of your organization.

It’s your responsibility as a quality professional to assure quality in the goods and services provided by

your company, as well as acting as an advocate for quality to upper management.

As you may know by now, this isn’t always easy: convincing C-Level executives of the value of quality

can be a daunting task, especially when you don’t know where to start. In this whitepaper, we’ll discuss

the business value of quality, which will help you to build a case to present to upper management in order

to increase your quality management systems efforts. We will look at the two-fold aspects implicit in this

topic. First, what is the value of organizing the company around a quality management system and

second, what are the advantages to be gained from using software to facilitate the operational aspects of a

QMS?

A Good QMS

Given the industry, it’s safe to assume that an organization will be dealing with quality requirements of a

single harmonized standard, meaning the countries involved have agreed to accept industry standards

such as the ISO 9001 or ISO 13485 certification/registration, rather than requiring an organization to

undergo registration to different requirements in each country where it intends to do business. From a

business’ marketing standpoint, this is a key point in terms of streamlining operations and reducing costs

of compliance.

This has led management in some organizations to view compliance to a standard as an otherwise

unnecessary set of activities that either unrelated to the business and which merely add costs…Unless this

perception (and it is only a perception – not the reality) of the role quality plays in the enterprise is

changed, not only will the value of the QMS be undermined, but the overall performance of the

organization will be hamstrung.

A good QMS (Quality Management System) should provide a well-defined representation of your

business model as an organization, company, and/or division that demonstrates conformance to the

standard that your company is held to be compliant to, whether it be ISO 9001, AS9100, ISO 13485,

ISO/TS 16949; etc.

Quality managers have commented in that past that companies that develop, implement, and embrace

their QMS as a way of running day-to-day operations, tend to be more successful in process performance

and delivering customer satisfaction to those who seek their products and services in comparison to those

who merely seek having a QMS because they “have to.”

“The Business Value of a Good QMS”

IBS America, Inc.

www.ibs-us.com 781.862.9002

IBS America, Inc.. 24 Hartwell Avenue . Lexington, MA 02421 .Tel: (781) 862-9002 Fax: (781) 862-9003 .www.ibs-us.com

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A recent blog post from Quality Digest, “ISO 9001 Proven to Help Win New Business”, outlines some

recent findings in terms of QMS implementation. In it, The British Assessment Bureau (BAB) states

that the business value of a good QMS comes into play when a company can realize that the effectiveness

and efficiency of their quality management system, and sees that the QMS has directly helped your

company or organization achieve and sustain their goals and objectives. This then leads to continuous

process improvement, profitability, and performance – and directly affects your bottom line.

The findings of the 2010 survey by the Harvard Business School, Quality Management and Job

Quality: How the ISO 9001 Standard for Quality Management Systems Affects Employees and

Employers, compares 500 companies seeking quality certification against otherwise similar

companies who were not. The research revealed significant positive differences between the two

groups of companies, including fewer certified companies went out of business, certified

companies were more profitable, and their employees were paid more. Sales and employment

also grew substantially more rapidly post-ISO certification at firms that adopted ISO 9001 than

those who did not.1

According to data from the BAB independent 2011 Client Satisfaction Survey, 44% of

respondents said that they had won business as a result of becoming certified to ISO 9001, the

quality management system standard from the International Organization for

Standardization (ISO). This survey, which was carried out by specialized market research

organization, Lake Market Research (LMR), showed that for many organizations, the prospect of

winning more work was the primary motivation for implementing the standard.

Bottom Line: “Build a better process, and they will come.” 2

The Case for Quality Management Software

Even with all the positive attributes and capabilities as outlined above, an effective QMS doesn’t always

have the respect that it deserves within a company. In reality, there is no difference between an effective

quality management system and a financial accounting system, a human resource management system, or

even a strategic management system – yet these can all be given priority over quality.

The reasoning behind this is that the existence of a QMS must be justified by its ROI. It’s unfortunate

that most quality management systems are given a harsh “pass/fail” grade, and if they don’t perform, they

are scrapped. If resistance is met in this case, you must justify the QMS existence by identifying ways it

1 “Quality Management and Job Quality: How the ISO 9001 Standard for Quality Management Systems Affects

Employees and Employers” Harvard Business School, David I. Levine and Michael W. Toffel, January 2010

2 “ISO 9001 Proven to Help Win New Business” Quality Digest, June 2011

“The Business Value of a Good QMS”

IBS America, Inc.

www.ibs-us.com 781.862.9002

IBS America, Inc.. 24 Hartwell Avenue . Lexington, MA 02421 .Tel: (781) 862-9002 Fax: (781) 862-9003 .www.ibs-us.com

Page | 3

adds value to your specific organization. Or, if a QMS is already in place, identify ways in which it can be

improved, then present these findings.

Another obstacle the quality professional faces is that

having the most sophisticated quality management software

technology is not always available at their fingertips at

many companies. In this case, it can be tempting to “build”

your own quality management system, especially if your

organization is on a budget or not given priority within an

organization. After all, there are plenty of free tools to

utilize, right?

While some tools, like Excel and SharePoint, are excellent

for certain tasks, quality management isn’t necessarily one

of them. Having a comprehensive Excel template may

serve the purpose for a while, but it can be difficult to

document issues well and to track the history of each issue

during research, resolution and retesting. Additional test

runs of the same cases are also difficult to document well

and to link together for a comprehensive history.

Collaborative efforts to identify root causes, apply short-

term remediations, or organize effective long term solutions

can be much more time-consuming and fraught with failure

when these activities are not managed within an integrated

system.

Additionally, building an extensive library of test cases across all projects or related projects is

near impossible with these tools. It requires manually adding a test case list to another 'master

index' file with links. Without the ability to effectively assemble information, it is impossible to

leverage experience and “lessons learned” throughout the enterprise.

Having a library of test cases allows you to accumulate the existing test cases from any project in

order to start a new project. Once you implement an appropriate quality management software

system for your company, you will be able to have relationship links, extensive history with

details by user for each item, and an incident workflow. You can also customize the workflow

for any project and for any I.T. group, such as Operations, Training & Support, etc. And these

are just a few of the many quality management software capabilities that are available in the

market.

For a more specific analysis, IBS America took a look at an available tool, SharePoint, to see

how the technology stacked up to quality and compliance document control needs in our

whitepaper, “Why SharePoint Doesn't Meet Doc Control Demands for Quality and Compliance”.

Download this whitepaper to get some more details on the limitations of SharePoint.

According to data from the

BAB independent 2011

Client Satisfaction Survey,

44% of respondents said

that they had won business

as a result of becoming

certified to ISO 9001, the

quality management system

standard from the

International Organization

for Standardization (ISO).

“The Business Value of a Good QMS”

IBS America, Inc.

www.ibs-us.com 781.862.9002

IBS America, Inc.. 24 Hartwell Avenue . Lexington, MA 02421 .Tel: (781) 862-9002 Fax: (781) 862-9003 .www.ibs-us.com

Page | 4

Bottom Line: Business value is improved efficiency and better documentation of information

and relationships between objects. There are additional benefits that contribute to the business

value. The bottom line savings, in this case, is in man hours.

The Right QMS for You and Your Customers: A Competitive Edge

There is no blanket quality management software tool that will fulfill all company QMS needs.

Most companies don't make use of a QMS as tool for change, as the QMS must be able to fit the

needs of the organization, and often do not. An effective QMS also needs to be driven by

management, and unfortunately, seldom is.

A quality management system can be a very good tool to assess the current condition of the

business performance if all the requirements like audit management and Quality Management

Reviews (QMR 's) are conducted on a timely basis. Also, if it is well understood by the

appropriate departments, changes, corrective actions and preventative actions can be made

quickly to improve performance before major damage is done.

Having the right QMS can also help you stand out from your competition. Most organizations find that

a consistent, systematic approach - such as following either or both FDA and ISO 13485 requirements -

appeals to both wholesale and retail customers because it gives those customers a chance to compare

"oranges with oranges." Most customers are cost-conscious and having to evaluate a "wild card quality

system" versus those which adhere to a common, known Standard are considered more trouble than the

business is worth: any product or service cost benefits offered by the wild card system are offset by the

soft costs of evaluating the wild card system for efficiency and efficacy.

Thus, having an effective QMS system in place that aids in your company compliance to quality

standards and government regulations can help you to win business. Comments Christian Stoneham of

Masters Exhibitions & Shows, “We are starting to win new accounts that we could not have approached

in the past as they insisted on having ISO 9001.”3 That’s great - but how does this work?

Imagine that you have a pile of resumes to filter through for one job opening at your

organization. How do you reduce that pile to only a few qualified candidates? The answer is

credentials: which is exactly how your customers will separate you from the herd. A registered

QMS will put your business in the running with new clients.

To take the medical design industry as an example, first question asked of such a company from

a prospect would be “Are you ISO 13485 registered?” Prior to implementation of said standard

and Current Good Manufacturing Practices (CGMP), many potential customers will simply

walk away upon hearing “no”, as the liability of working with a non-certified company is not

worth the professional relationship. Additionally, when you as are working to qualify vendors,

you should also ask the exact question of them.

3 “ISO 9001 Proven to Help Win New Business” Quality Digest, June 2011

“The Business Value of a Good QMS”

IBS America, Inc.

www.ibs-us.com 781.862.9002

IBS America, Inc.. 24 Hartwell Avenue . Lexington, MA 02421 .Tel: (781) 862-9002 Fax: (781) 862-9003 .www.ibs-us.com

Page | 5

Bottom Line: Choosing the right QMS for your industry and business not only enhances your

performance in day-to-day activities and requirements, but also distinguishes yourself from your

competition when you look to gain new customers.

Savings by the Numbers:

Having an effective QMS that adds value to your company can also be quantified in numbers.

After due diligence into your own company’s QMS, you may be able to identify and forecast

savings and ROI specific to your organization or industry.

To help inspire you, here are some companies that have provided some metrics: IBS customers,

for example, have seen a 42% improvement in 'first time through' performance of the build

process. Another has seen a reduction of staff turnover, from 80% to 20%. One company defined

$7 million in Cost of Quality savings in the first 3 years of implementing a QMS, on an annual

revenue base of about $120 million. Yet another removed a costly 60% rework loop, which was

costing the company thousands each quarter. It's all dependent upon the maturity of the

management and control of processes, overall.4

According to the 2011 Aberdeen Research Report on Closed Loop Quality Management, Best-

In-Class organizations were shown as more likely to adopt a QMS application. Quality

management systems help these organizations automate end-to-end business processes across

sourcing, design, manufacturing, delivery and service.5

4 Data provided by personal experience of LinkedIn quality professionals

5 2011 Aberdeen Research Report: Closed Loop Quality Management across the Value Chain

“The Business Value of a Good QMS”

IBS America, Inc.

www.ibs-us.com 781.862.9002

IBS America, Inc.. 24 Hartwell Avenue . Lexington, MA 02421 .Tel: (781) 862-9002 Fax: (781) 862-9003 .www.ibs-us.com

Page | 6

Implementing a Successful QMS

If you are considering revising your quality control system, take the time to revisit past QMS projects that

were considered in the past:

Why were those projects selected?

Did management resource the project, and endorse for its success?

Was the employee base receptive and engaged, or merely waiting for the "flavor of the

month" to pass by?

If the projects failed, why did they? Talk with the stakeholders from past projects; review the

project notes, charts, presentations.

Were the projects too easy or too complicated?

Or were they too aggressive to complete with an unrealistic deadline?

Was the project motivation based on a periodic bonus or a true internal need?

Try to leverage the knowledge you gain in order to move

your company forward. If you are new to the company or

don’t know where to start with this QMS evaluation process,

try downloading this IBS Whitepaper, “You’re In Charge of

Quality…Now What?” to help you get started.

Also try to discourage the management inclination to “throw

more money at the problem” with new hires. Remember,

simple quality management concepts and tools should

not be taken for granted: Job Descriptions, Performance

Goals, Organization Charts with clear reporting

structures and accountability have much more value

than simply adding personnel to a department that lacks

structure, which will only cause further problems in the

long run.

“With QMS implementation, new

audit and reporting procedures were

implemented, document control

procedures were improved, and more

effective corrective actions and

preventative actions were performed

to name a few of the changes. The

result was a 42% improvement in

our external inspection and a dramatic

increase in customer satisfaction.”1

“The Business Value of a Good QMS”

IBS America, Inc.

www.ibs-us.com 781.862.9002

IBS America, Inc.. 24 Hartwell Avenue . Lexington, MA 02421 .Tel: (781) 862-9002 Fax: (781) 862-9003 .www.ibs-us.com

Page | 7

One company offered the following reflection after a QMS implementation:

“My experience with QMS implementation was a result of regulatory/certification findings that

forced an overhaul of the way we conducted business processes. New audit and reporting

procedures were implemented, document control procedures were improved, and more effective

corrective actions and preventative actions were performed to name a few of the changes. The

result was a 42% improvement in our external inspection and a dramatic increase in customer

satisfaction.”6

Results of Effective QMS

An effective QMS provides confidence to customers and management that you have the

infrastructure to meet customer expectations and needs in a consistent manner. When a QMS is

effectively implemented, you have clearly defined ownership and processes that meet your

business and customer needs.

An effective QMS also provides the framework and infrastructure to identify, monitor, measure,

and improve performance. Lastly, it provides more revenue, lower costs, higher profits, engaged

employees, delighted customers, and successful suppliers.

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6 Quote given by experienced quality manager from the Quality Management LinkedIn group

Download the Quality Management Software Data Sheet