Monday, May 16, 2011

Business systems and management system standardization

System is a set of interrelated or interacting elements. An organization is managed as one single system. As early as in 1950, Deming presented the whole company as a system of processes (see the following figure).

A system is always created and owned by somebody. A system is an entity that maintains its existence and functions as a whole through the interaction of its parts. A system has always an aim or purpose defined 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 outputs to system’s stakeholders. Stakeholders may set requirements to the system.

A system is managed as a whole. Management is based on knowledge and information and a feedback function. The system is managed on behalf of its owners (shareholders). The system has its internal structure and process architecture according to the business needs, and it is operating within a certain business community (system environment) and interacting with other systems. Systems have also partners and competitors in its business community.

General international standardization for the management systems started in the beginning of the 1980’s. The first standards were ISO 9000 standards for quality management and quality assurance. Later a lot of other standards have been created for many specialized disciplines of the business management, including environmental protection, social responsibility, risks, occupational health and safety, information systems/services, information security, etc.

There are general standards for these disciplines but there are also sector-specific standards for these disciplines, e.g. for automobile industry, software industry, aviation industry, military applications, health care, etc. The management system standardization for specialized management disciplines typically consist of two different kinds of standards:
  1. Standards describing comprehensively the discipline in question (e.g. quality managemet in ISO 9004) to be taken into account for the development of organization’s business management system 
  2. Standards describing requirements, i.e. needs and expectations, (e.g. quality management requirements in ISO 9001) for the discipline in question.  
However, these standards may not describe any management system itself because according to the well-known Russell's paradox “whatever involves all of a collection of objects must not be one of the collection” (see the following figure).

The first category (1) of the standards are guidance documents for organizations’ internal use. The requirements standards (2) are factually general standardized models of organization-external requirements that may become obligatory in a contractual context or that may be used for auditing purposes for quality assurance and certifications.

In the existing management system standards of the different disciplines, there are many structural and conceptual differences. That may cause difficulties when different standards are implemented simultaneously within an organization’s business system. Now, however, an improvement is coming because ISO has defined a high level structure and identical text-parts and common core terms and definitions that must be used in all management system standards in the future. The proposed high level structure consists of key issues of the business management that is a significant issue for promoting the business-integration in applying the standards.

There are many problems in applying management standards in practice in organizations. Specialized standardization of different disciplines is carried out by the experts of the different expertise who don’t have necessarily close contacts or communication with business leaders or with each other. Those standards and also their application in organizations may become rather isolated from the business management system and from each other. However, even experts should understand and appreciate traditions and recognized practices of business management that are very often emphasized by the business leaders from the financial and legal points of view.

In order to avoid problems, ineffectiveness, and inefficiency, standards should be applied with integration, responsiveness, and innovation. That is also possibility to fulfill organizations’ targets for competitiveness and sustained business success.


Anonymous Javis Lounsbury said...

So that's how business system works. How do you record the data coming from the tests it's going through? Thanks for sharing this information, this will be a big help to those who are planning on starting their business and to those who are having a hard time with it.

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A business outfit or a company must follow procedures and instructions to obtain an ISO certification. A written documentation of the quality manual is necessary for the process of certification. The quality manual must the standards of ISO and your company’s goals. The quality manual says what the company does and how it does it. It also provides proof that the company produces that certain product or merchandize.

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