Does Santa Claus comply to ISO 9001?

Years ago, when my kids were little, they would spend an hour or so every Christmas Eve watching the NORAD Santa Tracker. You've probably heard the story behind how NORAD tracks Santa's progress through the skies every year. And indeed every year there are press releases updating the public on the current status of the Santa-tracking program.

These days I'm out of touch with the latest developments in aviation, but I'm correspondingly more interested in international standards. So today I find myself wondering, How far does Santa Claus comply with ISO 9001?

It's not an idle question. Last year an investigative reporter went to the North Pole—at least, that's what the article said—to check the operations of Claus Enterprises against OSHA's Top 10 workplace-cited standards for 2024. The results weren't pretty, though Santa himself put the best face on what he called "“an unfortunate misunderstanding," and pledged a prompt corrective action plan.

But even if safety issues have been addressed, what about Quality? Millions of children rely on Santa for presents each year. Can he really be counted on to come down all the right chimneys? Does he stand behind his work, or does he just fly away "like the down on a thistle"?

Up till now I have been unable to find an ISO 9001 certificate* for any part of Santa's operations, neither his workshop nor his delivery service. Partly the problem may be geographic: I'm not aware of any formal Certifying Body with jurisdiction over the North Pole. All the same, surely it's a good idea to do an advance check—like a pre-audit—to find which clauses need the most attention. So Santa, if you are reading this, treat it as a little free consulting, to help you get positioned.**  

These, then, are some clauses of the standard where I would expect discussion in an audit:

4.1 Understanding the organization and its context

Ever since the climate change amendment last year, this clause has included the requirement, "The organization shall determine whether climate change is a relevant issue." Well if the Polar ice cap is about to melt, that sounds relevant to me! Does Santa have plans to relocate? And where?

4.2 Understanding the needs and expectations of interested parties

How often are these needs and expectations reviewed or updated? I assume that the desires of little children have been broadly similar for centuries. But what about other players in the same market? Does Santa face competition from online retailers, or has he worked out some kind of deal?

5.2.1 Establishing the quality policy

What exactly is Santa's Quality Policy? Does he strive for 100% satisfaction? We know that every year some children are disappointed; so if the policy calls for 100%, there might be a problem. And what if a gift is defective, or has to be returned? Does Santa replace it himself, or does he require the parents to do the work? (See also clause 8.4 Control of externally provided processes, products and services.) 

7.5.3 Control of documented information

Children write letters to Santa from all over the world. Are those kept for future reference, in case there is some dispute over what a child really requested? And in what form? (For example, are the original letters kept on paper, or are they digitized?) If the letters are kept on paper, how are they preserved in the harsh Arctic climate?

A second topic is the retention policy: how many years is a letter kept? Santa is always said to be wise and to have a long memory; but the storage requirements for each new year's batch of letters must be enormous. Are they kept for a year? For a decade? For centuries? How are they indexed? How easily can they be retrieved?

8.2.3 Review of the requirements for products and services

There's another kind of control needed for the children's letters: regular review. Some children might request toys that are dangerous, or that are illegal in their place of residence. How is this review conducted, and how are conflicts resolved?

In addition to all the other reviews, subclause 8.2.3.1(c) requires a review of "requirements specified by the organization." Presumably this includes comparing all requests against the List of Who's Naughty and Nice. But how is that list managed and kept up to date? And how often is a naughty child really given a lump of coal instead of some other present? (I can think of children over the years that I thought had earned a lump of coal who never seemed to get one!) 

8.2.4 Changes to requirements for products and services

What about children who change their minds about what they want, and who send multiple letters? Is there a tracking system to allow the second letter to be filed with the first one, or to replace it completely?

8.3.2 Design and development planning

What is the ratio of customized gifts to off-the-shelf toys? The publicity photos of Santa's Workshop look like they are mass-producing toys, but there must be a lot of specialized requests as well. How is this handled? (See also clause 8.5.2 Identification and traceability.)

8.4 Control of externally provided processes, products and services

How much of Santa's work is subcontracted to local merchants, or to parents? And on what terms? Does Santa still get all the credit, in all cases?

8.5.2 Identification and traceability

How far is lot-traceability a relevant issue? (Note that if every job were custom—see also clause 8.3.2 Design and development planning—then lot-traceability would not be a requirement.)

8.5.4 Preservation

The North Pole has a cold, harsh climate. The same is true for much of the lower atmosphere. How does Santa preserve presents in good condition, and keep them from being damaged by the harsh environment?

8.6 Release of products and services

Does Santa keep records of every gift, and are those records filed with (or cross-indexed to) the corresponding request letters? This raises some of the same questions we discussed above under clause 7.5.3 Control of documented information. 

9.1.2 Customer satisfaction

What is Santa's current level of customer satisfaction? Has it been trending up or down? In case of any downward trend, has Santa chosen to implement corrective actions, and what do those look like?

9.2 Internal audit

Who does internal audits for Santa's enterprises? Are the auditors selected in a way that "ensure[s] objectivity and the impartiality of the audit process"? Is the scope of the internal audits the same as the scope of the enterprises, or are there some areas that are off-limits to the auditors? Can I see the results of the latest full audit?

9.3 Management review

Can I see the records of the latest management review? Has Santa ever introduced a major change to the operations as a result of findings in management review?

• If yes, what was it?
• If no, then is the organization really using the management review, or is it just a dog-and-pony show?

10.3 Continual improvement

Tell me about the latest continual improvement initiatives.

Having said all this, I have to admit that it would be the chance of a lifetime to audit Santa's Workshop at the North Pole. An operation with such vast scope, that has to achieve such delicate precision in its outputs, would be amazing to review.

So Santa—again—if you are reading this and want someone to do a test-audit before you call a regular Certifying Body, leave a comment on this post with your contact information and I'm sure we can work something out.

And to everyone else, have a jolly day, a delightful holiday season, and a very happy New Year! 

__________

* I did find one article here that claims Santa Claus is certified to ISO 9001 and a host of other standards as well, but it offers no links to objective evidence.  

** And with a little luck, giving away free consulting might be enough to move me from Naughty to Nice!     

 

What IS strategy, anyway?

I always appreciate feedback on these posts, especially when it shows me that I need to do better. In that sense, the best comment I got on last week's post (on "Strategic process definition") was one that showed me I failed to explain a critical point. One reader wrote that the post "didn't engage ME--it seemed to pertain only to large corporations with formally-defined management systems.  I like better the ones where I can see the immediate application to Martha's burger shack (or other mom-and-pop businesses, like the one where I work), and/or where you make that application apparent."

Oh my goodness, did I fail to explain that part? It's true that sometimes I write about issues that show up only in formalized management systems, or in large bureaucratic companies. But last week wasn't one of those times. So let me unpack this topic a little better.

What about small, mom-and-pop companies?

Last week's post is about defining your processes so they align with your strategy: not all your processes (or not necessarily) but the right ones, the ones where such alignment is appropriate. So in principle the discussion applies to any business that has processes and that also has a strategy.

But everyone has processes. Remember that they compose your management system. And we have discussed earlier (for example, in this post here) that every organization necessarily has some kind of management system, because the management system is the constitution or the nervous system that ties the organization together. The organization's processes and management system might be informal or unwritten. But they are still real, for all that. The processes and the management system are all the things you do that make you part of the organization.

• 
  Wear your company t-shirt when you are on duty.
• Record sales here, and in this way.
• Sell this kind of product.
• If a customer complains, respond like this.
• Log your hours here, in this tool or this database.
• Collect your check here. You'll be paid every week, or every two weeks, or monthly.
• If you need supplies, get them from this cabinet. If you take the last of something, tell this person so we can order more.

• It is (or is not) acceptable to use company printers for personal use, to print personal emails or a cute cat meme.
• If you want to plan vacation time, request it like this.
• If the building catches fire, exit promptly but calmly and meet here in the parking lot.
• And so on.

Each of these is a process. Taken together, they constitute a management system. They may not be written; people may just think of them as The Way We Do Things Around Here. But they are absolutely real.

And when I suggest aligning your processes with your business strategy, all I mean is that The Way You Do Things should support your big goals. Don't shoot yourself in the foot.

That sounds fine, but wait a minute: Do small, mom-and-pop businesses have strategies?   

What is a strategy, anyway?

Good question. How can you tell? What is a strategy, anyway?

Once again, I'm going to turn to Roger Martin, who answered this question in an article last year.* Martin starts by pointing out that any business has to make a lot of choices. Some of these choices really have to go they way they do; other choices could have been made differently, but weren't. 

• For example, you might choose how to pay your suppliers (cash on delivery, net 30, net 60, or whatever), but you can't choose whether to pay your suppliers! Obviously you have to pay them. The choice whether to pay your suppliers has to be Yes. 
• On the other hand, you might focus on one group of customers instead of another. If you sell office supplies, you might focus on business customers or you might focus on students at the local college. That decision could go either way. But depending which you pick, you will probably decorate your store differently; you might make other choices differently too.

Martin says it is only the latter kind of decision that counts as strategic. The other decisions are important too, but he calls them Operating Imperatives.

Martin describes the distinction this way.

[I was reading a list of business choices that one of my IT clients is planning to pursue, when ...] I realized that the single list contained two very different kinds of items. And the distinction revolves around the question ...: Is the opposite of your choice stupid on its face?

For some on the list, the answer is yes: the opposite is stupid on its face. For example, one item on the list was ‘suitability,’ i.e., the IT solutions need to aim for suitability for the internal users it served. Nobody strives for unsuitability in their IT solutions. That would be stupid.

For some, the answer is no: the opposite is not stupid on its face. And that is demonstrable because other players in the industry make the opposite choice and it doesn’t prevent them from succeeding. For example, another item on the list was ‘modularity.’ Many other players attempt to achieve their desired IT outcomes with systems that are more integrated and not modular at all.

I realized that I could go down the list of items and pretty quickly categorize them as yes-the-opposite-is-stupid or no-the-opposite-is-not-stupid.

The latter meet my definition of a Strategic Choice. Since the opposite isn’t stupid, it represents a real choice to do something meaningfully different than some or all competitors/peers. The former don’t meet the definition. Does that mean they are unimportant and shouldn’t be mentioned in a strategy document? No. This is what I have come to call an Operating Imperative. Because it is smart and there is no other obvious approach, we will fall behind if we don’t do the positive thing that everybody else is doing.

We make Strategic Choices when we want to gain an advantage over our competitors. That doesn’t happen when we do the same things as competitors. We follow Operating Imperatives when we want to avoid falling behind competitors on a meaningful dimension.

 Don't get hung up on the word "opposite" or the word "stupid." Martin isn't saying that Strategic Choices have to be contrarian or oppositional. Not at all! His point is just that strategy is when you make choices about your business that are real choices—choices that might have gone the other way. But once you make them, they make a difference in everything else you do after.

Big company examples

Let's look at some examples.

In his classic book Up The Organization, Robert Townsend tells the story** that when he took over as CEO of Avis Car Rental in 1962, he relocated his headquarters to Long Island, in between JFK and LaGuardia Airports. His idea was that if Avis rents cars without drivers, they have to go where they can find drivers without cars—and he wanted his head­quarters easily accessible by his working managers. 

Townsend's decision was a Strategic Choice for Avis, because it could have gone another way. At the time, the headquarters of their competitors were bottled up on the island of Manhattan, which proves that the opposite of Townsend's choice was not stupid. But it was a choice that worked for Avis.

Or consider any of Martin's examples from last week's post. We saw that Progressive Insurance has chosen to get "settlements to its customers so quickly that lawyers don’t get into the middle of the process." Could that choice have gone the other way? Sure—and many other insurance companies do, in fact, make the other choice by requiring longer in-house review and adjustment of a claim before paying it. 

Progressive has chosen to optimize for speed, and this choice has consequences. Last week we saw that it requires Progressive to manage its investment portfolio in a special way, to emphasize short-term liquidity even at the expense of growth. But Martin's article also makes clear that Progressive "empowers [their] claims-people to make settlement decisions and cut checks for customers at accident sites rather than having to go through a time-consuming head-office claims processing ritual."***   

Thus does strategy make a difference.

Small company examples

Finally we come back to the question, Do small, mom-and-pop businesses have strategies?

Of course they do. Small businesses have to make decisions, just like big ones. Some of those decisions could go either way. Those are the strategic decisions. And when I advised last week to align your processes with your strategy, all I meant is that you shouldn't let your daily operations undercut the decisions you've made about how you want to do business.

What does this look like in practice?

Let's say you run a small, local business in some line of work where customers need a little bit of technical knowledge (but not too much) in order to succeed—something like gardening. So let's say you run a nursery. There are a lot of things you have to do. You have to pay your suppliers on time. You have to service your customers. You have to comply with all the local laws for small businesses. In Martin's terminology, these are Operating Imperatives.

Other decisions could go either way. For example, people always come into nurseries asking, "How can I make my garden better?" Often they have follow-on questions. They talk to you for an hour about their problems. Then sometimes they buy something and sometimes they don't. What do you do about these people?

You can decide either way. Some stores act as Local Experts, and talk willingly. Other stores won't talk to these people unless they buy something. Either way the store should set a policy, so the choice isn't left up to each sales clerk each day.

But notice one consequence: If you decide that you want your sales clerks to answer questions for the community as Local Experts, then they really have to become experts. That means your hiring practices should favor people who already know something about gardening, and your personnel policies have to give your employees the chance to learn more once they are on board. If you don't adjust your hiring process and your personnel process, you risk undercutting the strategic decision you have made to serve your community as Local Gardening Experts.

The reason it is hard to see this alignment in small companies is that very often the decisions are made unconsciously.**** The immediate needs of today's issues always press very hard on small businesses, so it is often true that no one can afford the time or perspective to articulate the company's strategy in words—much less to check all the (probably unwritten) processes in the (unwritten) management system to make sure they align with that strategy!

But the processes exist anyway, even if nobody has identified them by name. 

The management system exists anyway, even if nobody has written it down. 

And the strategy exists anyway—as the collection of Those Business Decisions Which Could Have Gone Otherwise—even if nobody has ever checked to make sure that it is consistent, and that it is supported by the management system.

All this is to say that it can be very hard to do this sort of analysis in a small, mom-and-pop business. But if you can ever find the time, it surely matters.     

__________

* See "Is or Is Not The Opposite Stupid on its Face?" in Medium, February 5, 2024.  

** See "Mars, Man From" in Robert Townsend, Up the Organization: How to Stop the Corporation From Stifling People and Strangling Profits (New York: Alfred A. Knopf, 1970), p. 106. 

*** See "The Role of Management Systems in Strategy" in Medium, October 5, 2020. 

**** Of course I don't mean that literally.         

Strategic process definition

How do you align your business processes with your "strategic direction"?

It sounds like a good thing to do, and in fact ISO 9001 requires you to do it. In four different clauses,* the organization (or its top management) is required to make sure that the quality system is compatible or consistent with the business's overall strategic direction. And that's great, of course, ... but what does it really mean? How—in concrete terms—are you supposed to make this alignment happen? 

• You probably have a hiring process. But isn't hiring a well-understood activity? Is your hiring process really going to look that different from everyone else's?
• Maybe you sell widgets, and you package them before shipping them out. How do you align your packaging process with your business strategy? Is there really that much more to say besides, "Put the widget in the box, add the packing peanuts, and tape it closed"?
• Pick a couple more examples at random, and you might think that this requirement was included just because it sounds good, rather than for any more practical reason.

But it turns out you'd be wrong to think that. Process definition can support your strategic direction. It's just that most companies haven't thought through how to make the connection.

The other day, entirely by accident, I ran across the work of Roger L. Martin (LinkedIn), a writer, strategy advisor, and former professor. It turns out that he addressed exactly this topic in an article in Medium, back in 2020, called "The Role of Management Systems in Strategy." It's a delightful article that systematically works through examples of companies who have, in fact, used their overall strategic direction to make fundamental decisions about how to design their business processes. In fact, my biggest criticism of the whole article is terminological, because Martin regularly uses the phrase management systems to describe what could (I think) be better called business processes.** But that's a small cavil indeed.

Let me quote a few of Martin's examples, to show you how this strategic alignment works in practice:***    

Four Seasons Hotels & Resorts seeks to win with a kind of service that is unique and that needs to be carried out by experienced Four Seasons hotel staff (as opposed to hotel staff experienced at other hotels), but in an industry that experiences 60–70% annual turnover. To get this kind of experienced hotel staff, Four Seasons has a management system that drives disproportionately huge investment in recruiting/hiring. To be hired, a recruit needs to have three successful in-person interviews, the last of which is with the hotel manager. This would be an unthinkably large expenditure of resources for other hotels, but sensible and necessary for Four Seasons desired capability. This [process] is rigorously enforced and adhered to. In addition, its career development [process] is disproportionately invested in because after recruiting the very best, Four Seasons wants and needs to keep them for a long career, which it does with turnover below 10%.

Progressive Insurance seeks to win, in part, by getting settlements to its customers so quickly that lawyers don’t get into the middle of the process because Progressive knows that on average when a lawyer is involved, it costs Progressive more and the customer gets less due to the high fees charged by the lawyer. In order to be in a financial position to pay claims quickly, Progressive has a management [process] for its investment portfolio that invests disproportionately in short-term liquidity at the cost of earning higher investment returns.

Procter & Gamble, when CEO AG Lafley took the helm in 2000, switched its basis for determining incentive compensation from market total shareholder return (M-TSR) to operating TSR (O-TSR). M-TSR, which measures performance based primarily based on movements in the company’s stock price, is the standard measure used across public companies. But it has the effect of encouraging management teams to focus on short-term fluctuations in stock price and the drivers thereof rather than on the long-term performance of the company, which O-TSR more closely measures by focusing on sales growth, profitability and cash conversion.

These are only a few examples. Martin's article gives ten more examples besides these, and I'm certain that his research includes plenty of others as well. 

So if it is possible to align your business processes with your strategic direction, why doesn't everybody do it? I haven't studied the rest of Martin's research, but I assume that the first answer is that figuring out the right alignment is hard to do. I'm pretty sure there is no simple paint-by-numbers approach that will generate your business processes automatically when you feed in your strategy. Like with any other strategic decision, you have to understand your industry really well, and then to understand your place in it. 

What can you do better than any of your competitors, and what does it take to enable you to do it? 

What risks can torpedo your efforts, and how can you neutralize them?   

These aren't easy questions. But then, they aren't easy for your competitors either. So if you can get a solid grip on them, and then derive unique business processes that play to your strengths, you'll be miles ahead.

__________

* In ISO 9001:2015, these requirements are found in clauses 4.1, 5.1.1(b), 5.2.1(a), and 9.3.1. 

** For example, Martin writes (in his fourth paragraph): "every company has numerous management systems. It has an order-entry system, a system for putting together its regulatory filings, a system for announcing new executive appointments, a capital appropriations system, etc." When I write about business systems in this blog, I would call each of these activities—order entry, regulatory filing, announcing appointments, and capital appropriations—a business process, in accordance with the definition in clause 3.4.1 of ISO 9000:2015: "set of interrelated or interacting activities that use inputs to deliver an intended result." But as I say, that is a very small and highly technical quibble.   

** All these examples are direct quotes from Martin's article cited immediately above. But I have replaced the phrase "management system" with the phrase "[business process]" (in square brackets, as shown) wherever I think it is clearer.      

A management system just for show

A few days ago I was browsing through LinkedIn, and I found a link to a video called "3 Signs Your Management System Is Just for Show." Well the title was intriguing, so I watched it; and it was three minutes well-spent. The information won't be new to regular readers of this blog, but it's expressed in compact points that any viewer can easily digest and carry away.* 

The basic message of the whole video is that your management system shouldn't be something special that you have to think about. It should just be The Way You Do Things. Did you get a customer complaint from the field? Open an 8D, because that's how you handle customer complaints. Are you making a big change to your manufacturing process? Schedule an FMEA, because that's how you evaluate the risks in production changes. Does someone have an idea for a cool new product? Call together a project team, because that's how you develop new products. The place you want to get to is one where you don't have to wonder, "What does our process say we're supposed to do?" or "What does the ISO standard require?" because you just know that this is how we do things here.

The video makes this message more precise by calling out three specific red flags:

• Senior management does not know what is happening with the management system.
• Audits are performed solely to maintain certification.
• The team does not know what the management system is for. 

These are concrete points you can look for. But in essence they all mean that you aren't really living your management system. 

If senior management doesn't know what is happening with the management system, it means they haven't been showing up for Management Review. But Management Review is the key to the whole organization, the place where you make system-level interventions so that the day-to-day work can move forward by routine without requiring senior management to fire-fight every little issue.

If an organization treats audits as no more than an emergency interruption to ensure certification, they won't get the real benefits of the audit program. We've discussed at length that audits shouldn't require you to do anything different from what you normally do every day. And experience with an audit program can help grow a Quality mindset.

And if a team doesn't even know what the management system is for, ... well, they can't be living it, can they? And the system won't do anyone any good if it just sits on the shelf gathering dust.

As I say, the lessons from this video aren't going to be new or shocking to regular readers. But I do like how they presented it all in such a compact way. I hope you do too.   

__________

* The video was produced by an organization called QMS Certification. I've never heard of them before, and know nothing about them. So this post does not constitute any kind of commercial endorsement of their services. But I liked the video.       

"How's our Quality?"

One of the risks in a mature Quality system is that there are a lot of details to master. So when you've mastered all the details, you think you know what's going on. But sometimes when all those trees crowd together you can lose sight of the forest.

I remember once, years ago, I worked for a company that had a very mature system. It seemed like they had metrics defined for everything but the coffee pot. When I first started there I had to learn the whole system pretty quickly, and my boss focused on the fine-grain details. Then suddenly we reorganized: instead of reporting to a functional expert located far away, now I reported to the General Manager in my own location.

For my first meeting with him, I brought along all the charts and metrics that my former boss had always wanted to review, but the GM waved them away. Instead, he asked me, "So how is our Quality?"

I fumbled for a minute and started to explain, "We measure that in a lot of ways. Now this chart, for instance, shows that ...."

The GM cut me off. "How's our Quality?"

I couldn't tell what he wanted to know.

"Look, I know that the guy you used to work for asked for all these dozens of metrics. He used to present his charts to me and I couldn't make head nor tail of them. I just want to know how we are doing."

Whatever answer I gave didn't satisfy him. So when I got back to my desk I pulled out all the metrics and tried to look at them from a high level. I realized that they fell naturally into three buckets:

• metrics related to our product performance and customer satisfaction;
• metrics related to how well we complied with the formal procedures mandated by Headquarters;
• and metrics that tracked internal administrative activities—these weren't as important as the other two, but I had inherited them as part of the system so I still calculated them.

The other thing I realized was that the performance inside each bucket was pretty consistent. When I saw that, I knew how I was going to report the results to our GM.

Next week was my next meeting with him. And sure enough, he started by asking, "How's our Quality?"

This time I had an answer. "Our product quality is great, and our customers are very happy. Those metrics are all green. Our process adherence is lousy. Those metrics are all deep red. And our internal functions are kind of wishy-washy, not great but not terrible. You can call those yellow, if you like."

The GM grinned. "Thank you. That's what I was looking for. Also it's pretty much what I expected. Now go fix the ones that aren't already green."  

"Aye aye, sir." 

We communicated a lot more easily after that. And I learned, never lose sight of the big picture. Ultimately all those details are there only to support and flesh out that big picture. But if you can't see the big picture, you don't know where to start work.

      

The placebo effect in Quality

I have long argued that Quality means getting what you want. But people want all kinds of things. And sometimes a person's "wants" don't make a lot of sense. Are all these things still Quality?

• 
  A friend of mine recently overheard a conversation in a grocery store. A customer was buying baking soda. She couldn't find the expensive commercial brand she wanted, so she reluctantly settled for the cheaper commercial brand instead. She flatly refused to buy the store brand. But baking soda is a pure chemical—sodium bicarbonate, or NaHCO₃. It's the same chemical, regardless of the packaging.
• Years ago, when my dad was a boy, the local grocer in his town told him a story. This man sold coffee, which he ordered in huge sacks and then poured into little paper bags sealed with tape for retail sale. The bags came in two sizes: 8 ounces (sealed with green tape) and 12 ounces (sealed with blue tape). But then he priced the smaller bags so that they cost more than the larger bags. It was the same coffee, and he never claimed they were different! But some customers always bought blue, and others always bought green. Once a customer who always bought green let him know that the shelf was empty. He told her, "Well, I get my next shipment tomorrow. But in the meantime I do still have some of the blue coffee, if you would like to try it." She answered, "No, I tried that once and it just doesn't compare. I guess I'll come back tomorrow, when you've got your shipment in." 
• 
  For years, IBM repairmen famously wore suits with white shirts and ties, and they carried their tools in attaché cases. John Molloy tells the story* that this uniform was established when computers were still large and expensive, and had not been widely adopted. The stereotype among companies that were just starting to buy computers was that they were unreliable and always breaking down. So IBM dressed their repairmen to look absolutely reliable, to persuade customers that the computers themselves were just as good. 

What do these stories tell us? They tell us that customer perceptions of Quality can be influenced by factors other than the objective content of the product or service itself. Presentation, expectation, packaging, and even price—all these contribute to the customer experience, and therefore to the customer's ultimate judgement (positive or negative) about the product or service.

So does that mean that we can stop worrying about making our products any good? Can we sell defective products and still call them "Quality" so long as the packaging is shiny enough?

No, of course not. If you sell defective products that break as soon as they're out of the box, your customers will catch on quickly enough. Then they'll tell their friends, and your reputation will be in tatters. Understanding the placebo effect is no excuse for sloppy workmanship.

What it does mean is that you can't stop with the product itself. Precisely because customers evaluate the presentation and packaging and the rest as part of their total experience, you have to take care with those things too, so that the total customer experience is as good as possible. 

• If you are selling a product, make it easy to use and attractive to look at. 
• If you are selling a service, make it transparent to the customer. 
• Either way, make sure your advertising sets accurate expectations so that the customer isn't surprised later. 
• Since you are selling the sizzle as well as the steak, ensure that the sizzle is appetizing even while you also ensure that the steak is nutritious.

When you take as many pains with the presentation as you do with the content, you signal to your customer right away that she is in good hands. You encourage her peace of mind. And peace of mind, as Robert Pirsig points out, is the heart of Quality.

"Peace of mind isn't at all superficial .... It's the whole thing. That which produces it is good [work]; that which disturbs it is poor [work].... The ultimate test's always your own serenity."**  

__________

* I read this years ago and have lost the reference. So it is possible that I may misremember details of the story, since I can't check it. But I believe it is true in broad outline.  

** Robert Pirsig, Zen and the Art of Motorcycle Maintenance (New York: William Morrow & Company, 1974, 1999), p. 165.    

       

Giving your stakeholders a real stake

We've talked before about why it's important to know the stakeholders of your organization—I mean both the people who can affect your decisions, and those who will be affected by them. This is the kind of information every business needs to know,* and at some level you probably already do. The ISO 9001 standard goes so far as to require you to determine who are "the interested parties that are relevant to the quality management system" and what they want from you, and then also to "monitor and review information about these interested parties and their relevant requirements" as they naturally change in the future.**

Who speaks for your stakeholders? Mostly, you do. Depending on which stakeholder you have in mind, there are multiple ways of collecting their input: customers might bring you complaints (or praise!), local governments might send around inspectors, employees might communicate their opinions through their managers or through company meetings. But one way or another some degree of stakeholder input is channeled into management, and then management decides what to do with it. If these inputs conflict—maybe shareholders want larger dividends at the same time that employees want higher wages—the organization's management makes a decision and then the stakeholders mostly live with the results.

But what if you want your organization to serve some higher purpose—for example, a charitable purpose or something similar? What if you want one of your stakeholders to have an actual stake in the success of your business, so that they are sure to prosper as long as you do? If it's a small business and you are the owner, it's easy enough: just decide that every year you'll give them a percent of the profits, and then don't change your mind. But as soon as you involve more people in running your organization, the answer becomes more complicated.

It's an interesting question, though, and it turns out that there are several ways to do it. Strictly speaking this isn't a question about Quality, so normally I would stay away from it. But it is a question about governance, which is a closely related topic. So with your indulgence I'd like to take a few minutes to describe some of the common answers to this question. I can address a more recognizable Quality topic next week.

To be precise, the question I have in mind is this one:

"How can I ensure that my company supports a cause or beneficiary that is important to me, even if I bring in other shareholders or even after I die? How can I prevent the situation where future stockholders force future boards of management to neglect my cause or beneficiary so they can squeeze out the maximum short-term profit?"

I have found three answers to this question. In practice they can overlap, but there are important differences between them. One answer is to certify your business as a B-corporation. Another is to make it a benefits-corporation. (These are not the same thing.) And there is a third approach which appears to be called "steward-ownership." I explain the differences below.       

B-corporations

A B-corporation is a for-profit corporation that has been certified for its social impact by B-Lab. B-Lab is a private, non-profit organization that has been set up explicitly to offer this certification to qualified companies. To qualify for certification, an organization must score at least 80 out of 200 on a detailed questionnaire that covers five general areas: governance, workers' rights, community impact, environmental impact, and customer care. Then the organization pays an annual fee to B-Lab, based partly on its location and gross annual revenue, and recertifies every three years.

B-certification is not a legal status, and it does not (by itself) offer any legal protection against lawsuits by disgruntled shareholders. In some ways it is like ISO 9001 certification, in that it represents compliance to a voluntary standard which a company adopts either because of the discipline it imposes or as a marketing tool. (Or both, of course.) That said, certification does require companies to incorporate stakeholder commitments into their governing documents; in some cases these documents might offer legal protection that B-certification itself does not. Certified companies must also adopt a certain measure of transparency concerning their public impact.  

Benefit corporations

By contrast, a benefit corporation is a legal status, at any rate in jurisdictions that have passed the legislation. As of the most recent update to the Wikipedia article, forty-one American states plus the District of Columbia allow for-profit businesses to incorporate as benefit corporations. Outside the United States, benefit corporation status (or something similar) is recognized in the province of British Columbia, and in the nations of Colombia, Israel, Italy, and the United Kingdom.

This special legal status was created to offer some protection from the normal presumption in American law that a corporation exists for the financial benefit of the shareholders. Because of this presumption, directors sometimes conclude that their fiduciary duty to shareholders requires them to ignore the claims of any other stakeholders or beneficiaries, and to make decisions on the basis of profitability alone. Therefore benefit corporations explicitly define the fiduciary duty of the directors so that they are required to consider the interests of other stakeholders. Wikipedia explains:

The benefit corporation legislation ensures that a director is required to consider other public benefits in addition to profit, preventing shareholders from using a drop in stock value as evidence for dismissal or a lawsuit against the corporation. Transparency provisions require benefit corporations to publish annual benefit reports of their social and environmental performance using a comprehensive, credible, independent, and transparent third-party standard.      

What is the difference between a benefit corporation and a B-certified corporation? They overlap, and some companies are both. The biggest difference is that establishing your company as a benefit corporation gives it a legal status, while seeking B-certification does not. Other than that, there are detailed differences in the exact requirements around transparency and other topics. 

Steward-ownership

The third approach, steward-ownership, is rather different. It requires no special legislation, and no external certification. But it does require some planning in advance, and it's not really compatible with selling shares in the stock market. To use this approach, you have to restructure the ownership of your company in a special way.

I first encountered this model when I worked for Bosch, and for a long time I assumed they were the only company that used it. Bosch's governance structure is no secret, and they discuss it in some detail on their website. The basic idea is that they issue shares of stock, like other companies, although those shares aren't sold on the open market. But they distinguish sharply between voting shares and paying shares. Normally, if you own stock in a company then you have a right to vote those shares at shareholder meetings (though it might be impractical to do so in person), and you can also expect the payment of dividends on a certain frequency as long as the company is making a profit. But Bosch separated those two functions. Voting shares give you the right to vote on the company's governance. Paying shares pay dividends. And they are not the same.

With that distinction as background, the global corporation Robert Bosch GmbH has three shareholders:

• Robert Bosch Industrietreuhand KG is a steering committee that makes general governance decisions (the way a "shareholder's meeting" would for some other company). They hold 93% of the voting shares and no paying shares.
• Robert Bosch Stiftung GmbH is a non-profit charitable foundation that funds the Robert Bosch Hospital, schools and daycare centers, and peaceful social initiatives around the world. They hold 94% of the paying shares and no voting shares.
• The Bosch family (the descendants of Robert Bosch) own the remaining shares: 7% of voting, and 6% of paying. This way they are not forgotten, but neither can they wrest control of the company to do something crazy.

As I say, for a long time I assumed this structure was unique to Bosch. But when I began researching this article, I discovered that a few other companies do the same thing. In September of 2022, Patagonia reorganized around a similar model.*** IKEA uses another variant of foundation-ownership, including benefits to a charitable foundation, although the IKEA governance structure is much more complicated than that of Bosch or Patagonia. And there are other examples as well. 

Again, for a small company with a single owner, these tools are probably more than you need to think about. But if you want to build a legacy, or if you want your company to support a beneficiary or a cause, these are among the ways to do it.   

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* See, for example, the discussions here and here. 

** ISO 9001:2015, clause 4.2. 

*** This article in Medium goes into some detail.     

    

In praise of roundabouts

The first time I ever noticed roundabouts, I was on vacation in the UK. This was many years ago, but they seemed to be everywhere. At first I thought it was just one more peculiar feature of local transportation, along with narrow roads, streets that changed their name with each new block, and driving on the left. In fact, I didn't realize how much they improved the flow of traffic until I found myself immobilized in a column of cars for what seemed a very long time, only to realize we were all stopped for a traffic light.

That afternoon I saw why roundabouts were so common in the UK, and I began to wonder why they aren't just as common everywhere else. Of course rebuilding an existing intersection is time-consuming and expensive. But the statistics comparing roundabouts to traditional intersections are remarkable.

• The Federal Highway Administration estimates that replacing a traditional intersection with a roundabout reduces the number of fatal and injury crashes by about 80%. (That's 82% for a two-way stop-controlled intersection, and 78% for a signal-controlled intersection.)*
• When collisions do occur, they are generally side-to-side collisions from merging or changing lanes, rather than head-on or right-angle collisions. On the whole, side-to-side collisions are less damaging and less often lethal than the other kind.
• Not only are they safer for cars, but roundabouts have 10-40% fewer pedestrian or bicycle crashes than traditional intersections.
• Since cars typically don't have to wait as long at roundabouts as at traditional intersections, they contribute to reducing air pollution from idling engines.    

And all these benefits stem from one root cause: Roundabouts are far simpler than traditional intersections. In this context, simplicity is measured by counting "conflict points." These are points in the intersection where a collision can be foreseen. A traditional intersection of two roads, each supporting two-way traffic and crossing at right angles, has 32 conflict points. If those same two roads meet in a roundabout, the number of conflict points drops to eight. No wonder the roundabout is safer!

Why am I writing about traffic this week? There's no special reason, except that it illustrates in a dramatic way another important Quality principle: when other things are equal, simplicity is better than complexity. In other words, if you have two solutions to a problem and they both solve it equally well, choose the simpler one. The complex tool has more parts; the complex procedure has more steps; the complex intersection has more conflict points. In all events, this means that the complex solution has more ways to go wrong: more parts that can break, more steps that can be mis-executed, more collisions that can happen. From the perspective of risk management, the complex solution is always—again, other things being equal—more fragile and more at risk of failure.

Years ago, a colleague at work was telling me about the cup holders in his cars. He owned two cars, and the cup holders were very different. One car had a sleek and elegant design. The cup holder was tucked discreetly out of sight until you pushed a button; then a little motor gently unfolded it for you. But at the time we talked, a tiny part had broken in the motor, so it had stopped working. He had contacted the dealership, but it would be several weeks before they could get the piece in stock.

The other car wasn't nearly so elegant. But it had a piece of plastic in arm's reach, molded to hold a cup. The overall look wasn't nearly as sleek and beautiful as the first car, but there was nothing that could break. From the perspective of customer satisfaction, the simpler solution clearly had the higher Quality. And it's often like that.

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* You can find more detailed numbers, for example, here.    

Quality in the checkout line

Writing this column once a week, I find myself looking for Quality aspects in many of the things I do each day. From one perspective, this makes sense: I have argued, after all, that Quality isn't really a set of rules or procedures (though it uses both those things), but rather is an awareness of what it takes here and now to do this task correctly. If that's the case, then Quality might just be applicable to anything you do.

Anything? Pretty close. 

The other evening I went out to get groceries. Everything was fine until I got home, when I found that they had failed to scan a dozen eggs and a package of butter. In effect, they undercharged me by $9.98. It was too late to go back that night, but I went back the next morning to tell them about the mistake and to make up the difference. They thanked me for letting them know, and said they would update their inventory; other than that, they sent me on my way. "Call it our gift to you." 

What does this story have to do with Quality? I see two principles that it is important to remember.

Don't disrupt a working process

Why did the mistake happen in the first place? The checker was in the middle of scanning my groceries when a second checker came up and offered to help. I think the second checker moved things in the cart; then the first checker concluded that if the eggs and butter were here instead of there, they must have already been scanned. It's a simple mistake to make, but the point is important: if somebody is in the middle of a procedure and it's working for them, don't interrupt without making very sure of what you are doing. It's easy to throw them off their count, or mix up their stacks, and then the procedure might be ruined. 

Of course if you are using formal, written procedures and interacting with machines that require fixed inputs, it's harder to get mixed up that way. But often you aren't, especially in small or medium-sized enterprises, or in service functions (as distinct from manufacturing). 

Keep corrective actions proportional to the problem

When I went back the next day, the store thanked me for my report but didn't take my money. Of course I appreciated their kindness, but they aren't in business to be kind. How can they afford this?

The answer is that it doesn't happen often, so they had no procedure or mechanism to make the correction. What's more, any method they tried to improvise to allow them to take my money would have cost them more than $9.98 to implement. It was—quite literally—not worth it to them to correct this particular shortfall.

Sometimes that happens, and it's good to recognize when it does. Focus your work where it matters.

So yes, there are Quality aspects even to a simple mistake in the checkout line. The awareness of the task—including awareness of what might go wrong, how to avoid it, and when not to bother—is always the most important part.  

    

Hierarchy of hazard controls

When I find that I've interrupted myself—twice in a row!—to make a disclaimer that's no part of the main post, maybe I need to pay attention. Maybe it's time for me to discuss the topic on its own, to get it settled, rather than pushing it off into footnotes.  

My last two posts—last week and three weeks ago—were about how to use written procedures. In both articles, I explained that written procedures should be regularly enhanced with the lessons learned from mistakes or disasters, so that the organization learns from those mistakes and doesn't repeat them. And both times I had to include a little caveat, to the effect that updating procedures is often not the best way to prevent safety problems.

Why did I bother to say this—especially twice? Also, what is the best way to prevent safety problems?

For the first question: I bothered to say it because updating procedures is probably the easiest way to address safety problems. Typically it costs less than any other approach, and it usually takes less time. But it is also one of the least effective ways to address safety problems, because people forget what they read, or decide to ignore it, or never get around to reading it in the first place.

For the second question, ... well, it depends. Classically there are five options, but they aren't always available in every case. So you have to see what you can do in each specific situation.

By Original version: NIOSHVector version: Michael Pittman
https://commons.wikimedia.org/w/index.php?curid=90190143

Elimination 

The most effective way to control a hazard is to eliminate it completely, but this isn't always possible. If your workplace has extension cords stretched across walking areas, those constitute a trip hazard. Get rid of the extension cords, perhaps by installing power outlets where you need them or by rearranging your workstations, and you have eliminated the trip hazard. If some work is being done high above the ground, there is a falling hazard. If you can relocate the work to ground level, you have eliminated the falling hazard. Again, this is the most effective approach—the hazard is gone, after all!—but sometimes it is not practical.

Substitution

The next-most-effective approach is to substitute something less dangerous for the original hazard. A common use-case for substitution involves the use of hazardous chemicals, because sometimes there is a less-hazardous chemical that will do the same job. Some operations have replaced the solvent benzene, a carcinogen, with toluene; others have replaced lead-based solder with lead-free solder. These substitutions generally cannot be done overnight: lead-free solder melts at a different temperature than the lead-based original, so converting a printed circuit board to lead-free solder requires sourcing new components and re-laying out the board. Still, it can be done. 

Engineering controls

Engineering controls do not remove the hazard, but isolate it. The easiest example is a guard rail or shielded enclosure to keep fingers out of machinery, or a ventilation hood to shield people from breathing noxious gases. Lockout-tagout mechanisms serve a similar purpose by ensuring that a machine cannot be serviced until it has been powered off and disconnected. In all these cases the hazard still exists, so if someone went out of his way to override the engineering controls there is a theoretical chance he could be injured. But he would have to go out of his way. In normal operation, engineering controls should keep people from getting hurt.  

Administrative controls

This is where we talk about updating your procedures! Administrative controls are all the measures that rely on telling people not to do things that can hurt them: they include written procedures, but also training, signs, and warning labels. Other administrative controls could include job rotation or work schedules, to reduce the exposure of each individual worker to a certain hazard; preventive maintenance programs, so that the equipment functions properly; scheduling certain tasks during off-peak hours, when fewer workers are present; or restricting access to hazardous areas. All of these measures are important, and they certainly have a place alongside more effective measures. It may also happen, because of special circumstances at your workplace, that sometimes these are the best you can do. But they all rely on human compliance. And as we have seen, human compliance is not always reliable. That's why administrative controls rank so low on the effectiveness scale.

Personal protective equipment (PPE)

Finally, sometimes you just have to walk in and grab the hazard in both hands. After analyzing it every possible way, you find that you can't eliminate the hazard and can't substitute it; and because the work requires direct human action at that point, engineering and administrative controls are beside the point (because both of those are designed to keep you away from the hazard). Fair enough. Do what you have to do. But at least wear gloves. Or a breathing filter. Or a hazmat suit. Or whatever the right PPE is for this particular hazard. PPE is rated as the least effective form of hazard abatement, because the only time you use it is when you are getting up close and personal with the hazard itself. But sometimes that's what you've got to do, and PPE is just what you need.

Once upon a time, years ago, I was talking to the management team for a mine. (They were mining diatomaceous earth, not coal or gold, but I bet the principles are the same.) I asked them if their employees tended to suffer from emphysema, or other lung ailments. They said that back before the 1950's, yes, that was a big problem. But in the 1950's someone invented a breathing filter which screened out the tiny particles of diatomaceous earth and other rock products, and after that they'd never had any trouble. I asked about enforcement, and they said: 

"Oh, that's easy. We painted a white stripe across the road into the mine. Then we announced that anybody who was found on the other side of the stripe without his breathing filter in place and working would be fired. On the spot. No questions asked. No excuses. No matter who.

"And you know? We haven't had a single problem since then."* 

PPE may be ranked as "least effective" but sometimes it's exactly what you need.

Anyway, that's the hierarchy of hazard controls. That's what's behind the little disclaimers in my last two articles. I hope it helps.

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* Technically this means they used PPE, reinforced by administrative controls (the white stripe).