IMPACT OF MANAGEMENT SYSTEMS PERFORMANCES ON TECHNOLOGICAL CHANGES

Transcription

1 IMPACT OF MANAGEMENT SYSTEMS PERFORMANCES ON TECHNOLOGICAL CHANGES IVAN JANICIJEVIC, Faculty of Organizational Sciences, University of Belgrade, Jove Ilica 154, Belgrade, Serbia, NEDELJKO ZIVKOVIC, Faculty of Organizational Sciences, University of Belgrade, Jove Ilica 154, Belgrade, Serbia, POMS 20th Annual Conference Orlando, Florida U.S.A. May 1 to May 4, 2009 Management systems performances are one of more presently problem in management field researches today. Performances of various management systems and their impact on technological changes are analyzed in this paper. Quality, environmental, health and safety and social corporate responsibility management systems performances are separate analyzed as potential drivers for technological changes in organizational systems INTRODUCTION The need for quantifying the performances of an organization derives from the constant need for determining the present condition and constantly improving its function. Nevertheless, always present question is which of the performances give sufficient information to the organization for its sustainable development and survival on the increasingly competitive market.

2 Traditional approach of evaluating the degree of organization s success was based on the financial performances. Basic financial performances monitored through: profit, ROI, ROCE and similar and present today in the organization s operation and indicate the level of their success in predominantly longer time intervals. Kaplan and Norton (1996) refer to these sub sequential performances, lag performances of a organization, in longer time intervals. This traditional approach to measuring the performances, based on the account-keeping data, do not provide enough information about development and directing further steps to the organization, but defines the consequences, but do not give a sufficient information about the causes of its value. (Kaplan and Norton, 1996, and Neely A., 2002) Financial performances can be considered as consequences of successful management system within organization. Successfully implemented financial performances are in compliance with the need of the organization s owner, but they are not the instrument for reaching the objective, but are the objective as such. In order to make the financial performances certain, the management system seeks for performances to direct its operation in shorter time intervals and lead the overall organization s operation toward success. All of this imposes the need for performance identification and implementation, which will influence step by step the implementation of lag financial indicators. Kaplan and Norton (1996) refer to these performances as lead performances. So, although consequently significant financial performances have to be related to a number of other performances whose values should lead to their fulfillment, these performances should include different performances with which the needs of other interested parties are fulfilled (stakeholders) and not only of the owner. Fulfillment of the needs of

3 different interested parties should also be the means to fulfill ultimate desired performances of the organization. (Zivkovic, Janicijevic and Karapandzic, 2006) Management systems designed in accordance to standards ISO 9001, ISO 14001, OHSAS, SA 8000 (Karapetrovic and Jonker, 2003, Karapetrovic S., 2002) are one of the ways to also take into consideration the needs of other interested parties- customers, social community and employees as a means to achieve better performance of the organization. Mentioned standards of the management system are considered in the analysis because of their growing presence in the functioning of the organizations in the world market. Today, in order to survive on the market, the companies must improve the quality of their outputs constantly (product, reject etc). On the other hand the companies must constantly work on decreasing the expenses of these outputs, without changing its quality that is supporting and exceeding the needs of all stakeholders. One must bear in mind that this quality level must be on either the same or a higher level, as opposed to the competition. The basis for improving the quality of output, on one side, and decreasing the business expenses, on the other, is permanent improvement of organization s performances and management system which leads to their implementation. The performance of a organization represents a product of efficiency and effectiveness of the management system and can be regarded as performances of such a system. Besides being considered as the starting point for making the decisions based on facts, management system performances give clear and objective picture about it: Have been the terms of stakeholders fulfilled? Which fields need improvement? Have the improvements actually been implemented? Even though the role and significance of monitoring the performances are known, the question is whether some management system performances influence the technologic

4 changes (in accordance to the standards ISO 9001, ISO 14001, OHSAS, SA 8000) and whether those changes influence certain performances of these management systems? MANAGEMENT SYSTEMS AND THEIR PERFORMANCES Management system as one of the subsystem of a organization system, influence on all other subsystems of a business system (marketing, purchasing, sales, production, human resources, research and development, information, financial and similar) directing the resources though the organization processes towards realization of such outputs, which will in a longer time interval improve the overall performances. (Mitrovic and Zivkovic, 2000) If the management system would be considered a complex system, integrated from different management systems, then the performances of the management system could be divided according to their fields i.e. standards which define their requirements. Because the need for application of international standards and different management systems is increasing, in the companies throughout the world the management systems, may assure realization of financial performances in the companies, by monitoring the performances of these systems and meeting the needs of stakeholders. Monitoring the process of performance is one of the conditions for implementing the standard which defines the requirements for management system. Relation of management system standards, their elements and requirements regarding monitoring the performances is shown in the table 1. Table 1: Quality, environmental, occupation health and safety and social accountability management system standards regarding monitoring the performances. Standard Element Request ISO 9001: Monitoring Organization has to apply relevant and measuring the process performances methods for monitoring and, where possible, measuring the performance of the management process.

5 ISO 14001:2004 OHSAS 18001:1999 SA Monitoring and measuring Monitoring and measuring result 9.5 Planning and Implementation Organization has to set up, apply and monitor and measure the key characteristics of its operations that significantly influence environment. Organization must establish and maintain procedures of regular monitoring and measuring the result of health care and safety at work The organization shall ensure that the requirements of this standard are understood and implemented at all levels of the organization; methods shall include, but are not limited to: d) continuous monitoring of activities and results to demonstrate the effectiveness of systems implemented to meet the organization's policy and the requirements of this standard. Nevertheless, the standards do not show the performances which organization should monitor within certain parts of management system. This comes as a consequence of generic application of requests from the given standards to different companies and more concretely, the companies are to identify performances, depending on its characteristics and requests of stakeholders. The efficiency and effectiveness of management system operations will be evaluated, through these performances. Some of the performances for monitoring the above-mentioned management system are given in the table 2. Table 2 : Quality, environmental, occupation health and safety and social accountability management system performance Standard Performances ISO 9001:2000 Capacity of production line Capacity of giving services Average time of making a product Percentage of nonconformity products Percentage of reject Number of exchanges, extra work and repairs Number of after claims

6 Standard Performances Expenses of after claims Time spent for exchanges, extra work and repairs Average time of waiting for the next operation process Unforeseen downtime Number of repeated control and analysis Total number of users per shift /daily/ weekly/ monthly Number of users per service point Service waiting time at the designated service point Average delivery time Number of once applied correction measures, etc. ISO 14001:2004 Number of incidents Expenses of incidents/ EMS unconformities Material used Water used Energy/power used CO2 emissions Air and water pollution index Renewable energy resources quotient Solid waste index Recyclable waste index Used recycled material index Ratio of waste material recyclables, etc. OHSAS Number of sick-days 18001:1999 Number of work injuries resulting in death /Total number and impact Work injuries / Total number and impact Number of sick days caused by work injuries /Total number of days due to sick days Number of employees with health problems (blood pressure, diabetes, cancer etc.)/ Total number of employees received without problems with the mentioned health problems Number of employed smokers/total number of employees Losses due to sick leaves/total The value of invested means in improvement of work conditions and programs regarding healthcare of employees/total income, etc. SA 8000 Number of negative reactions in public due to socially irresponsible behavior Number of litigation caused by socially irresponsible behavior Number of corruption cases Number of contracts not closed with the contractors due to their policy of endangering general interests

7 Standard Performances and civil rights Number of local protest and gatherings Number of litigations/total realization Litigation costs /Total expenses Participation of local community representatives in general interest decision making Number of complaints due to socially irresponsible behavior Number of women in managerial positions Number of employed under 18 years of age Number of disadvantaged employees Number of minority employees Number of employees belonging to other denominations Number of general interest activity programs The value of investments in programs of general interest Number of employees included in general interest programs Number of men hours used on the general interest activities Number of organizations of general interest with which the organization has a partnership, etc. By monitoring the defined management system performances, we are determining whether the organization processes realize the planned results and fields for improvement of these process performances are identified. The planned values of the process performances are possible to define, taking in consideration: Defined objectives, Claims for regulations and other normative documents, Realized values in the previous period, Competition performances value And the extreme values. One of the important factors influencing the planning, the possibility of realization and the behavior of these performances are also the technological changes in the organization. But the question is when to change technologies within a organization and whether the need for those

8 changes is possible to recognize through monitoring performances of some management systems. The answer to this question is further elaborated in this paper. THE IMPACT OF MANAGEMENT SYSTEM PERFORMANCES ON TECHNOLOGICAL CHANGES If you look at the relation between organization s performances, management systems and technological changes, it is necessary to come to the known assumptions: Organization performance is the consequence of performances of a system of organization management. Organization performance, among other, is the consequence of implementation of technological changes in the organization. Performances of the management system are the consequence of performances of parts of that system. When looking at the given assumptions and viewing the performances of the quality management system given in the table 2. one can notice that performances of this management system ex: line capacity, the percentage of unusable/rejected products etc can be linked with the level of technology applied in the organization. The higher level of the performances with the higher level of applied technologies is more certain. Similar results can be applied also to the case of environmental and occupation health and safety management system. Nevertheless, if social accountability management system performances are analyzed, low or even undetectable influence of technology level can be noticed, and by that the impact of technological changes on their values. Although the impact of technological changes to the performances of the management system designed in accordance to ISO 9001, ISO and OHSAS is noticeable, the

9 question whether the follow up of these performances can be used in planning needs for implementation of technological changes in the organization remains. Performance Value A B P1max P1min t Picture 1: Impact of corrective measures on the performance improvement of management systems If the projected performance of a management system, as they are stated in table 2. are not reached in organization s functioning, corrections and corrective measures have to be made in order to ensure conformity of performances with the planned values. By taking said measures, a constant `` step by step `` improvement is being made. When applying these corrective measures, it s necessary to determine the cause of nonconformity and define and apply necessary measures which will ensure that these nonconformity does not appear again. Such incremental changes in the way of realization of the process or the inputs are often limited by natural boundaries of dispersion of performance values as the consequence of application of the concrete technology. With these changes the stability of performance values in certain time period and ensures their functioning within the natural boundaries as displayed in picture 1. With these corrective measures, performance values in point A and B are returned inside the planned values boundaries ( P1 min and P1 max ). The process seems stabile and it s performances are within planned boundaries. Such process advancements are a possible consequence of the changes in the existing technology which usually demand smaller investments and efforts in order to ensure planned performances of management system.

10 When by application of given corrective measures a stabile system output is achieved, it is possible by further measures to make an influence on the growth of values of these performances up to the P1max limit displayed by the point C in the picture 2. By such action through smaller technological changes and by reaching point C as the uppermost performance value, usually it is not possible to attain further significant growth of performances due to technological and economical factors. In a certain moment, when it is no longer possible to ensure the conformity of process performances with the needs and demands of the interested parties, it is necessary to radically improve the process quality since the level of needs of the interested parties is constantly rising. Because of this, it is necessary to replace the technology with the new one which can attain the new performance boundaries P2 min which is higher in respect to P1max value of the performance as displayed in picture 2. Such technological changes usually demand new work methods, new machinery and tools, new organization, new products/ services, new qualification structure, new management modes which usually demands bigger investments in the organization. Performance Value Picture 2: The influence of introduction of technological changes on performance of management system process

11 With the implementation of these new technologies and reviewing of process performances, it is possible to repeat the cycle and returning to the situation described in picture 1 or the situation displayed by points D and F in picture 2. Mentioned analysis of the improvement of the management system performances through technological changes is possible to show by the technological curve in picture 3. P2max T2 Performance value P1max T t Picture 3: The curves of technological changes and the improvement of the management system performances By dividing of this curve in characteristic segments, it is possible to make an analogy to previous analysis and conclusions. Smaller technological changes by modification of the existing technologies which influence the stability of the management system performances are mainly done in the faze 1-2 and partly in the faze 2-3 of the technological curve T1, while faze 3-4 applies to the technological changes which lead the management system performance to the achieving of their maximum values for given technology. By introducing a new technology it is possible to raise the performances to a considerably higher level by which the cycle is repeating itself as shown as the new technological curve T2.

12 Picture 4: Relation of systems for the monitoring and performance measuring of the management system and technological changes This continuous cycle of following the management system performance and the implementation of technological changes demands a serious management system performance measuring and monitoring system which meets the demands of all the stakeholders in the organization. A possible concept of such a system is shown in the picture 4. CONCLUSION In this paper the relation of the system of performance monitoring of management systems designed in accordance to ISO 9001, ISO 14001, OHSAS 18001, SA 8000 and technological changes has been analyzed. By monitoring the performances of the management system, as mentioned in the paper, it is possible; taking into account additional factors, define the need for implementation of technological changes to the exciting technology or changes related to innovation and acquisition of new technology. Management system performances and the way of change of their value in time can direct future steps taken by the organization in way of technological changes application. On the other hand, the consequences of the impact of technological changes to the manifestation and value level of management system performance are emphasized.

13 In this paper management system performances in view of their different influence to the need of technological changes are not separately analyzed because the goal of the paper was to point out the existence of this impact. By further research and concrete applications of conclusions of this paper more complete results and a basis for more detailed analysis of interrelations and influences of individual performances to the technological changes and vice versa. REFERENCES 1. Neely A. (2002), Business Performance Measurement, Cambridge University Press, Cambridge 2. Kaplan R. and Norton D. (1996), The Balanced Scorecard, Harvard Business School Press, Boston. 3. Mitrovic Z. and Zivkovic N. (2000), Structuring and Modeling of Business Systems Anatomical Approach, Zbornik radova Symorg 2000, Faculty of Organizational Sciences, Belgrade. 4. Zivkovic N., Janicijevic I. and Karapandzic S., (2006), System Approach and Integration Management Systems (IMS), Zbornik radova Symorg 2006, Faculty of Organizational Sciences, Belgrade. 5. Karapetrovic S. and Jonker J., (2003), Integration of standardized management systems: searching for a recipe and ingredients, Total Quality Management, vol. 14, No. 4, Karapetrovic S., (2002) Strategies for the integration of management systems and standards, TQM Magazine, 14(1), pp Christensen, C. M., (2003), The Innovator s Solution, Cambridge: Harvard Business School Press, 2003.

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