When speaking about management systems, it is worthwhile having a view on what is meant by a management system and why have one?
The excerpt below is taken from the book, Integrated Management Systems: Leading Strategies and Solutions.
Simply stated, a management system is the framework of policies, systems, processes, and procedures to ensure that a business or organisation can fulfill all tasks required to achieve its defined and stated business objectives. There is a fundamental concept reflected in this definition: that objectives are defined and stated. Effective management systems, just like companies, are based on establishing and aligning goals, thereby ensuring unity of purpose and focused control while driving improvement.
Why do we even need a management system?
It may be argued that some organisations function quite well without a formalised, structured management system, or the associated documentation. Competition in their respective area of business may well be limited, risk may be minimal or perceived as minimal, and activities may be uncomplicated or mature.
Perhaps the most frequent argument against the introduction of a management system is that it is not needed because the organisation’s people are experienced, skills, and have strong relationships with the consumer. And it is true that quite often, people are the strength of the organisation. Processes and business knowledge reside in the brains of individuals who manage and perform the work. While those people are around, the organisation thrives; however, if circumstances change and key people are lost, the organisation’s strength becomes their vulnerability. With the loss of key people, potentially comes the loss of important business knowledge.
When consumer bases expand or expectations change, competition increases, more complicated processes are introduced, regulators impose new or more stringent requirements, new people are brought on, or skilled and knowledgeable personnel leave, the organisation may be put at risk and the need for a more formalised management system and associated processes emerges.
Larger organisations or those with complicated activities are typically more likely to have clearly defined processes, documented procedures, developed personnel hierarchies, and more sophisticated record keeping. The need for structure to manage risk and to ensure consistency, efficiency and continuing capability is easy to understand. It is more obvious that systems are required to provide order and maintain effectiveness. But a systematic approach benefits any organisation, regardless of size.
If one of your organisational objectives is longevity / scale, then you may decide that a robust management system is a core foundation requirement
To ensure effective control and to meet the requirements of consumers and stakeholders, including regulatory bodies and the community at large, an increasing number of organisations are implementing formal and strategic management systems. Depending on the areas of risk and what is needed to maintain control and guide improvement, different management system models may be used. Some of the more recognised are:
- ISO 9001 (Quality Management Systems)
- ISO 140001 (Environmental Management Systems)
- ISO 450001 (Occupational Health & Safety Management Systems)
- CSA Z45001 (Canadian Occupational Health & Safety Management Systems)
- ANSI/AIHA Z10 (OHS Management Systems / United States)
- ILO-OSH (OHS Management System / International)
Depending on the type and complexity of organisational activities, nature of risks, business priorities, customer expectations, or market demads, the decision may be made to implement more than one management system. For example, it is not uncommon for organisations to create separate management systems to control quality, occupational health and safety, or environmental management, and sometimes uniquely discreet functions within those areas.
Benefits and challenges of the management system
The list of possible benefits to be realised by implementing management systems is a long one and includes:
- Alignment of strategic and functional foals, and maximisation of key performance indicators;
- Establishing common objectives, processes and procedure;
- Recognition of how all people and processes interact and effect each other for more effective management of interfaces;
- Creation of an integrated team approach focused on mutual goals and benefits;
- Establishment of accountability and clear boundaries;
- Increased understanding of consumer, customer and stakeholder needs, wants, expectations, interests and perceptions;
- Enhanced customer confidence;
- Creation of synergies, thereby reducing redundancy and increasing effectiveness and efficiency;
- Reduction or removal of risk;
- Management based on factual data and overall analysis of performance metrics;
- Systematic prioritisation of effort for greatest organisational benefit;
- Comprehensive identification, analysis, and correction of problems;
- Savings of time, money, effort, and potential duplication;
- Collection and protection of organisational knowledge and capability;
- Improved internal processes and communications;
- Continual improvement
As the author points out, “gain competitive advantage” was previously in the list however an operational management system is a basic foundation and the absence of one places the organisation at a distinct disadvantage when its competitors already have this basic requirement. As an organisation digs into its structures, there will be many an argument against formal management systems. Some might even say that a dysfunctional management system is better than no management system at all, however this is not necessarily true.
If not properly designed, understood and utilised, the system that is supported to make the organisation more successful, empower people, and guide improvement can become an expensive, resented time waster. It is important to understand what a management system should NOT be:
- Meaningless bureaucracies;
- The means by which to assign blame;
- Dusty collections of procedures and templates that don’t fit;
- Paperwork for paperwork’s sake;
- Justification for abdicating responsibility;
- More important than the work they support;
- Duplications of effort;
- Independent of or at odds with each other;
- Focused only on finding problems rather than improvement;
- Valued only as a bidding tool.
The list above can start to form the basis of business and design principles.
Designing and implementing a good management system will take effort and resources. But done right, and with dedicated leadership, the system will pay off and will strengthen the organisation. While there is nothing wrong with implementing a management system as a result of a direct stakeholder / consumer requirement, the biggest payoff comes from within the organisational structure and operations. Management systems that contribute most to success are those that are used as intended to control and improve. Organisations that benefit most from their management system are in it for the long term.
Credits for this excerpt
Pardy, W., & Andrews, T. (2009). Integrated management systems: Leading strategies and solutions. Government Institutes.
Let’s look at some intentional strategies where the management system is defined as a company priority and also adjusted based on regular reviews of the business model with a primary focus on profitability.
To foster our brand momentum and accelerate sales and earnings growth, we introduced a number of initiatives that we will focus on in addition to the three strategic choices and our corporate culture – Portfolio, North America, Digital and ONE adidas.
Portfolio: This is all about more focus and less complexity. We are constantly revisiting and sharpening the focus of our brand portfolio, fully concentrating on adidas and Reebok and on our core competencies in footwear and apparel. This will allow us to reduce complexity and pursue our consumer in a more targeted and consequent way.
- adidas North America: North America represents the biggest market in the sporting goods industry with a total share of approximately 40%. It is the single biggest growth opportunity for the adidas brand. That is why we have made North America a strategic priority and started to significantly increase our investments into our US business – people, infrastructure, marketing and point-of-sale – in order to be more relevant and always visible to the consumer.
- Digital: The digital transformation is fundamentally changing the way our consumers behave and the way we work. Technology has enabled us to build more direct relationships with our consumers. With our relatively young workforce we are in the unique position to continuously improve our digital capabilities – not only to interact with the consumer, but also to become faster, better and more efficient in every part of the organization.
- ONE adidas: We continuously strive for operational excellence. ONE adidas encompasses a set of initiatives that will enable us to work smarter, more efficiently and in a more aligned way. Because we know that when we act as one global company instead of 20 smaller ones, we can only get better
Here we can see that ONE adidas is describing the foundation requirements for adidas to strengthen its organisation. In the organisation ONE adidas has a punchy acronym, 6-2-1, meaning six markets, 2 brands, one global company (operating model).
In the case of Portfolio, this is a far more strategic view on the portfolio mix and direction of the business as a whole. In the article, Leading a company that wants to change lives through sports, adidas CEO explains how the portfolio is defined and the implications on the operating model (and therefore the management system) for 3 examples below:
We define our portfolio in terms of subgroups, entities organized by brand, country, and strategic business unit. On a quarterly basis, we look at the 10 lowest-performing entities in terms of profitability, and put action plans in place for them. Then we review our progress on a quarterly basis by country.
One example was Brazil. Before 2012, everybody expected Brazil to rule the sports world. It had the World Cup and Olympics coming up. So we overbuilt our organization there. Later, we put a restructuring plan in place to get Brazil back to profitability.
Another example was our outdoor [apparel] business, which we didn’t believe was getting the right level of focus within the organization. We put it into a different building, and gave those people freedom to change their operating model.
A third example: We decided we didn’t want to be in golf or hockey equipment, so we sold those businesses.