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Experiences with the Use of ISO 9000 in Finnish Local Authorities Salme Sundquist Head of Development Municipal Development and Research The Association of Finnish Local and Regional Authorities Toinen linja 14, 00530 Helsinki, Finland Tel.+358 097712278, gsm+358 50 66737 Fax +358 9 7712726 E-MAIL: [email protected] 1 Introduction The ISO 9000 pilot project for the quality improvement of municipal administration and services was part of the “Quality and the Community Programme” of the Finnish Association of Local Authorities. This programme started in 1993 and ended in February 1995. The Quality and the Community Project had three component parts. The first part focused on Total Quality Management in municipal service provision, “First proposal for a municipal quality standard”. The second part concentrated on the quality in service procurement, and the third part involved subprojects to build quality systems in five pilot organizations. The Quality and the Community Project was a part of the Finnish National Productivity Campaign. The Ministry of Trade and Industry provided the project financial support. In my presentation here I will concentrate on five pilot organizations. Five municipalities of very different sizes took part in the “Quality and the Community Project”. From the very beginning, the organizer of the experiment, the Association of Finnish Local Authorities, wanted to include a range of municipalities from different parts of Finland in the project. Individual pilot projects were conducted in: the social and health services of the city of Espoo (population 186,507); the Swedish-language front-office operations of the city of Vantaa (pop. 164,376); the general administration of Pori (pop. 76,561); the housing services of Hämeenkyrö (pop. 9,676); the financial administration of Kannus (pop. 6,291). The purpose of these projects was to determine the applicability of the ISO 9000 series of standards in improving the quality of municipal services and to test customized quality systems developed on the basis of those standards. After the end of the pilot project the cities and local authorities that participated in the pilot project have continued to work independently to develop their own standards systems. A follow-up study was conducted in spring 1996 to evaluate the progress and experiences gained in the pilot projects. The paper will briefly describe the implementation process of ISO 9000 in the five selected Finnish local authorities. Then the paper will continue to analyze the results of the interim evaluation of the pilots carried out in 1996. As the paper will show the evaluation of the ISO 9000 projects contains valuable lessons for other public service providers thinking about to use ISO 9000. 2 Fiscal Pressures and Quality Problems in the Finnish Public Sector in the Early 1990s In the early 1990s, when the Finnish Association for Local Authorities started the ISO 9000 projects public service-producing organizations had to face the dual challenge of ensuring competitiveness and improving quality. Finland’s public service-providers had to cut costs radically while improving the quality standards of their services. In year 1993 new legislation was accepted. Municipalities were not anymore obliged to produce the services themselves. Instead the services provision could be well subcontracted. Although the municipalities subcontracted some of services provision the responsibility on the quality of these services remained on municipalities. “Quality is to some extent an immaterial action, or series of actions, which usually — though not always — occurs in the interaction between the customer, service personnel and/or physical resources and goods and/or systems of the service-provider, and which offers a solution to the customer’s problems” (Grönroos 1990: 48-49). There are two levels to customers’ quality expectations: desired and sufficient. Desired service is the service that the client expects and hopes to receive, or, in other words, it is a combination of the possible and the required. Sufficient service is service that the customer can accept. Sufficiency is based on the client’s expectations of the service to be received. Sufficient service will get the job done, but it is not necessarily the best possible service that could be produced in terms of quality. (Berry, Parasuraman & Zeithaml 1992: 63-66, 70) Standardizing the service system in the each individual municipality is one way to ensure a specific level of quality, and, from this perspective, the standardization efforts of the pilot projects correspond to “sufficient service”. But, because meeting expectations with a sufficient level of service is not necessarily the same as providing the best possible quality, the standardization process can in the case of the pilot projects be considered as a foundation. It is a firm basis for developing higher-quality service. In this case, the ultimate goal is to achieve the desired level of service. The questioning was sent to all Finnish municipalities (450) and 200 answered. 60 were chosen as candidates. Finally five municipalities were selected and they represented different geographical areas and big cities and small towns. One was a Swedish speaking city. The chosen municipalities were able to provide one full time person as the resource for the project. The theme areas for the study were divided between these municipalities. At the time of the project there was a very deep recession in Finland. Unemployment rate rose from less than 5 % to more than 20%. A s the income of municipalities is based on taxation the income of the municipalities dropped sharply. However the municipalities wanted to maintain all the services without any prioritization. Hence only solution was to improve productivity and quality in the service provision processes. 3 The five municipalities/cities that participated in the pilot projects demonstrated a particularly high level of innovation and willingness to experiment. And they have continued to display this spirit of innovation, as all but one of the projects have continued to apply and develop the quality systems they designed during the pilot phase. Introduction of ISO 9000 in the Five Selected Finnish Local Authorities The project was informed by each of the municipal councils. The operational management of the project in each municipality was accepted by the city / municipal manager. As the project was also concerning the personnel trade unions were incorporated in the project. Working groups were formed within the project administrations, and the Association of Finnish Local Authorities supplied expert assistance. The working groups first set out to describe their own work processes and then to use the methods of the ISO 9000 system to improve the quality of those processes. In particular, two standards of the ISO 9000 series were applied: ISO 9001 and ISO 9004-2. The ISO 9001 standard, which provides guidelines for quality control and quality assurance, was of special importance because it would form the basis for subsequent efforts to obtain quality system certification. ISO 9004-2 prescribes the components of quality management and the building blocks of a total quality system. Furthermore, ISO 9004-2 gives guidelines for quality management in services, which makes it easier to apply to municipal service provision than ISO 9001, which is geared more to manufacturing operations. Each of the pilot projects produced its own quality manual meeting the requirements of the ISO 9000 series.Once the pilot projects were completed, a preliminary audit was made of each of the quality systems, and they were found to meet the ISO 9000 criteria. The quality systems were then introduced in day-to-day work. The first Interim Evaluation of the ISO 9000 Pilot Projects in 1996 The work done by the pilot projects after the “Quality and the Community Project” ended was evaluated in a follow-up study in spring 1996. The empirical part of this study was done by means of semi-structured written survey addressed to the quality managers of the pilot projects and the city/municipal managers of the participating communities. The purpose of this survey was to obtain information on the current state of the standardization projects and on quality-improvement work done throughout the municipality. The questionnaire was divided into themes according to the quality manual for municipal service provision. The themes were: the management of the municipality in the council level and in the operational level, functioning of the quality system, commitment to service provision, procurement, quality audits, human resources development, customer satisfaction, process development and other. The questions in the “other” section mainly pertained to the broader applicability of standardization to public-sector quality-improvement efforts and the problems associated with it. 4 The follow-up sought to determine how the pilot projects had independently begun to benefit from their quality systems and how they had proceeded to further develop those systems, as the real problems and advantages of such systems only become apparent once they are put into practice. One of the longer-term goals of the pilot projects was to focus more attention on quality-improvement work in the pilot communities. However, because of the different sizes of the participating municipalities and organizations, it was difficult to obtain comparable information on the extent of quality-improvement work in those communities. The result of the survey was meant to support Finnish municipalities to build quality system. The information of the survey was relevant to any local authorities that wished to seek certification of its quality system. Management and the functioning of the quality system When initiating quality-improvement work, it is essential to secure the full commitment of management. In the pilot communities, municipal managers continue to be commendably devoted to the quality-improvement efforts and are either working to develop the quality systems or seeking new models that would be better suited to the functions in question. The Finnish system of local government has two distinct decision-making mechanisms: the political and the public-servant level. In addition, numerous indirectly elected bodies are involved in decision-making within tightly defined spheres of activity. Quality development efforts must take these different mechanisms into account. Democratically elected officials bear political responsibility for decision-making, while appointed public servants are in charge of drafting proposals and implementing decisions. The general goals and principals of quality policy were set by the political management in the pilot organizations. The operational management was responsible for translating these general goals to practical action and implementation. One of the key points of the project was the commitment of top-level management. It is nowadays quite general that also politicians or elected members like to participate to training, in our case, quality – improvement training. In this five pilot organizations elected members participated to two cases. Management reviews are an integral part of quality management. At one of the pilot organizations, the Espoo social and health service, management reviews are conducted four times a year. These assessments focus on quality-related matters and pay close attention to customer feedback. The basic structure of the quality systems designed during the pilot phase was still intact in most of the pilot communities in 1996, with the exception of Hämeenkyrö where the planned quality system was never implemented. The quality system designed in Hämeenkyrö adhered very closely to the original standard, which is probably one of the main reasons why it was never put into practice. It was too explicit and demanding for a 5 small organization, and it did not correspond to local needs. Furthermore, the Hämeenkyrö housing services are rather disjointed and split up between various functions, and cooperation during the pilot standardization effort was not what it should have been. On the other hand, with a little more adjustment, a documented quality system could have been instituted also in Hämeenkyrö, and so opportunity still exists for further development. It is in the spirit of standardization work that the documented quality system should enable the organization to produce a consistent product, or in this case a consistent service. It became apparent in the practical work of the pilot organizations that standardization methods intended for manufacturing operations are not necessarily in harmony with the goals of public service provision. Some public service functions seem to require “looser” standardization for the quality system to function properly. Especially challenging in this respect are those public service operations where requirements change frequently and rapidly. One positive finding of the trial phase was that the pilot organizations which established quality systems have also tried to develop those systems and keep them up to date. In year 1993 the government made legislative amendments and the dismantling of various regulatory constrains. It gave the municipalities greater leevey to arrange public services as they see it. For instance, after the amendment of Finland’s Local Government Act, the participating organizations have altered their quality systems accordingly. In addition, the town of Kannus has developed a special index format for its quality manual, and Pori seems to be following suit. The index-format quality manual describes the work process, identifies the participating staff and sets out the procedures for lodging complaints or appealing decisions. This should boost the consistency of the process, and should help ensure that staff turnover does not weaken the quality of the process. Control of quality-related costs is an essential part of the quality system. So far, the methods for monitoring quality costs in the pilot organizations have been insufficient. In some cases, quality may not cost anything, while lack of quality can be expensive; in other words, it pays to do things right the first time (Crosby 1986: 1). Then again, getting started with quality-improvement work demands human and financial resources, and so quality is never entirely free in the early phase. The total funding of the project rose to 610 thousand €, with the most part of it being provided by the Association of the Finnish Local authorities and its subsidiaries. The Ministry of Trade and Industry contributed 90 thousand €. The 1996 survey tried to assess the “costs of quality”. But little had been done in the pilot organizations to measure the costs of the substandard quality that existed before the development effort began. Furthermore, the pilot organizations had not formulated adequate systems for monitoring the costs of quality control nor determined what was to be monitored even though this should have been an important part of the standardization experiment. So it was impossible at the follow-up stage to obtain comparable information on the evolution of net costs and benefits of the ISO 9000 exercise. 6 Monitoring the costs and benefits of quality in the public sector is indeed difficult, if not impossible, in certain respects. Some of the costs of substandard quality stem from intangible factors, such as a dented reputation which can eventually lead to loss of trust which in turn could lead to a loss of economic investment in the local area. The pilot organizations are working ( year 1996) to develop their own methods of quality-related cost control, but this is a long-term effort and it will take several years before comparable information is available. There is probably no universally applicable measure for quality cost control, but, in the future, organizations that aim to develop quality as a means of reducing costs should first make a thorough assessment of costs in the areas where they intend to achieve savings. Next, they should choose specific measurements for monitoring costs, and finally, they should set goals. Such an approach would enable them to determine whether the adoption of quality-improvement methods, such as the ISO 9000 standards, does indeed help them to achieve their savings objectives. Commitment to service provision and procurement The 1996 follow-up study found that the municipalities/cities taking part in the pilot projects had not adopted service agreements of the “Citizen’s Charter” type, so that the standardization process could not be assessed from this angle. The quality indicators were in general based on law and there did not exist any operational indicators in officially/ state level. The pilot organizations made their own definitions of the need for service at the start of the pilot project, and those definitions remain unaltered. A customer-centered approach was taken in defining the need for service. However, the pilot organizations had generally done a good job of making municipal residents aware of the services and opportunities available to them, though they tended to use rather conventional methods (newspapers, local radio, own publications). According to the ISO 9004-2 standard, service design reflects the basic choices of the organization. It reveals the organization’s goals and its policies for achieving those aims. It was the goal of the pilot projects to achieve quality customer service/ quality indicators for services, and that meant that the goals were standardization in that individual case. In the future, the Finnish public sector is likely to turn increasingly towards procurement, rather than direct provision, of services. However, when the pilot organizations’ procurement activities were assessed, most of them reported more materials procurement than purchasing of services. Especially in larger municipal organizations, materials purchases are usually made centrally, often through the technical services department. The purchases that the pilot organizations made independently were usually so small that they were not subject to standardized quality assurance. 7 The Espoo social and health function does use some purchased services, but the collection of feedback on those services is still very haphazard. On the whole, quality assurance in procurement operations is still poorly developed, even though the standardization process would require energetic quality assurance in this area as well. However, service procurement is still less advanced in the pilot organizations than it was perhaps expected. On the basis of the follow-up study, it is conceivable that a specific standard could be developed for municipal procurement activities as part of the broader standardization process. Quality audits and human resource development Standard ISO 9001 describes the quality audit as an independent examination to verify whether quality activities comply with planned arrangements, and to determine the effectiveness of those activities. The auditor must be accredited to perform quality audits. This applies to external quality audits. In addition, internal quality auditing practices should be suited to the status and importance of the activity. Quality audits are purely an inspection procedure. They determine whether the quality system complies with the underlying standards and whether the system is implemented as prescribed in the quality manual. The pilot organizations have not pursued external quality auditing as this is necessary in the case of certification. Internal audits have been conducted in two pilot organizations, in Vantaa and in Pori. The Pori organization justified its preference for an internal audit by noting that the designated auditor already had a good idea of how the process was supposed to work. The other pilot organizations saw no need for auditing at this stage of the quality-improvement process, and the Espoo organization was somewhat sceptical about the whole idea. Espoo preferred more TQM thinking (EFQM) and found ISO 9000 standard work to heavy for them. The standardization of municipal services is still such a new concept in Finland that work is still needed to establish a suitable auditing practice. Even so, further development of the pilot organizations’ quality systems would certainly benefit from thorough internal audits. On the other hand, the internal auditor should be qualified for the job. So far, the most progress in this area has been made by the town of Kannus, which has begun training expert auditors in cooperation with a local private company. The experience gained in the pilot units suggests that external audits could be held once the standardized processes are up and running and are an integral part of the service-providing organization. At this stage, the pilot functions are less concerned with obtaining certification than with simply getting accustomed to the new qualityimprovement procedures. The Association of Finnish Local Authorities has been working together with the central government and the private sector to develop a quality strategy for public service provision in 1996-97. The project is also assessing the position of auditing and certification in improving the quality of services, and it is exploring ways to embed those practices in processes. 8 The main focus of personnel development in the pilot communities is to expand qualityrelated training so that all employees would eventually be introduced to the fundamentals of quality. In other words, they are not trying to force their quality-related training into a mould specific to the areas of standardization, but rather are working to provide broader training and information. One interesting finding is that the pilot projects are generally seen as tools for training in quality management. The standardization experiment offers an excellent opportunity for building cooperation and for examining work processes. This has been especially evident in the practical work phase. When employees are knowledgeable about what their colleagues do, processes tend to become quicker. For instance, employees have a better idea of whom to turn to in problem situations, and so the service process runs smoothly and faster. Initially, the pilot organizations provided training with the help of outside consultants, but, in later stages, training has become a matter of internal learning. Above all, the town of Kannus has stressed the concept of the learning organization during the followup study. Again, the results are rather sober: Although all pilots recognize the need for training it only took place in an initial phase but there is no such thing as continuous training (embedded in career development). It seems that also the HRM aspect of ISO requires quite a lot of investments into training and the pilots did not seem to have the necessary resources. During the follow-up, it was interesting to note that the pilot organizations generally had a very sound attitude towards quality development. Quality has not been put up on a pedestal, but rather it is seen as the result of a successful process. It seems highly likely that the municipalities that participated in the pilot projects will continue to emphasize the ‘learning of quality workmanship’ Customer satisfaction and process development The pilot communities all have a clearly customer-centered approach to service provision. Their customer-centered attitude extends to external and internal customers alike. Direct customer feedback is the most common form of feedback used by the pilot organizations. The standardization experiment on the basis of the ISO 9000 series of standards has certainly affected the service provided by each of the pilot organizations, but customers are hardly aware that the improved service is the result of the pilot project. The main issue was that the customer/ residents got a quality service, service what he / she needed. During the period of this follow-up, the standardization project seems to have had only a rather minor effect on the service processes. Small adjustments have been made to the processes, but, on the whole, they have remained largely unchanged. Standardization has had its biggest impact on employees’ understanding of their work processes; this was achieved by identifying and specifying those processes at the beginning of the project. While staff is now well- equipped to influence and develop their work processes, 9 there has not been much spontaneous effort by individual workers to engage in such development largely because of the increased workload. Management still has a very important role to play in this area. Yet another problem, and one that is closely related to the issue of how to measure costs, is the question of how to measure the efficiency of work processes. The pilot organizations should establish measures of long-term operational efficiency, with the goal of securing customer satisfaction. In gauging performance, the difficult challenge is to apply measurements to things that can in fact be reasonably measured. When aiming for efficiency, process through-times for technical services are perhaps one easy place to start measuring. This has already been done on a small scale in the Pori pilot project. The municipality of Kannus used ISO 9000 quality process for the improvement of it`s accounting processes. By the improvements in the billing and streamlining all accounting practices the economic gain was 25%. Other Findings of the 1996 Survey The follow-up study also confirmed the general applicability of standardization as a tool for extensive quality improvement in municipal services. The experience gained so far in the practical work of the pilot organizations suggests that standardization could indeed be given broader scope. While it is unlikely that a single, uniform standard could be created for municipal service operations in general, standards for distinct branches of service could be created. Nevertheless, the ISO 9000 series of standards contains a number of broad guidelines that can be applied to service organizations in a way that will have the same impact as true standardization. It would be possible to write a broad series of standards in the language of municipal operations, which could be applied to various branches of local service provision in the same way that the ISO 9000 series is applied in industry. However, when writing guidelines in this special “municipal language”, the fundamentals of standardization should be retained: quality should not be allowed to suffer because of a lax approach. The pilot organizations that have come through the trial phase and are continuing their standardization efforts are also interested in using other quality control tools, or have already adopted such tools. For instance, the town of Kannus is now considering whether it should base its broader quality-improvement work on the ISO 9000 series or on the criteria recommended by the Finnish Society for Quality. The Espoo pilot organization has begun to apply the Society’s quality award criteria in its selfevaluations. In Vantaa, things are still a bit confused because the town lacks a general quality policy ( year 1996). In Pori, quality development work is continuing on the basis of the standardization project and has also spread to operations other than the general municipal administration, which was the pilot unit. Key Findings from a Follow-up Survey 10 Quality and the Community Project was a part of Productivity for the future campaign. The programme of the new Finnish Government includes a follow-up of the national productivity campaign. In this context also this Quality and Community project was evaluated ( the years 1996-1997). Some of the results were following: The project has promoted quality awareness in the municipal sector, making various quality- boosting tools known to those responsible for municipal services. The results have encourage the municipal sector organization on all levels to continue working both the ISO standards and in other ways, mainly total quality management (TQM) and quality awards. The aim with every pilot project was to create a documented, ready – to- use quality system in accordance to the ISO 9000 standards, and to add total quality management to result management. The aim in the pilot municipalities is to apply the quality system to all municipal operations. The steering committee proposed that the Economic Council should appoint a new tripartite steering committee for follow-up. Some of the projects in the new campaign continued and Quality and Community project was one of these. The work was continued by the next stage of the campaign: Quality strategy for public services. Conclusions ( Follow-up survey 1996) In general, the practical phase of the project can be considered as a success in the pilot organizations. They are now using the quality system they have developed. This has provided valuable experience for further development and customizing of standards for municipal operations. A great deal of work still needs to be done in the area of measurement and quality cost monitoring. A sub-project of the “Quality and the Community Project” entitled “Quality Strategy for Municipal Services” is now developing tools for measuring progress towards quality objectives. Efforts are being made to design measurements that are rational and well-suited to the service functions to which they will be applied. This should also improve monitoring of quality-related costs. The ISO 9000 set of standards is still an excellent tool for introducing organizations to quality development work, as long as the process begins with adequate training. For instance, the Espoo pilot unit uses quality manuals as training material when introducing new employees to the service process. The pilot units have also been invited by other municipal service organizations to tell about their quality-improvement work. Although it would be an exaggeration to say that quality thinking had made a breakthrough, there has nevertheless been plenty of interest in the pilot projects. The experiences of the five pilot projects, and their efforts to promote the concept within their municipalities, will certainly have a big impact on how quality-improvement work and the ISO 9000 standards are embraced more widely in the municipal sector. The pilot units have found ISO 9000 standardization to be a rather heavy procedure, but, because of the thoroughness of the standards, it offers a firm foundation from which to begin developing quality control. 11 Further efforts in this area could be pursued by, for instance, adopting quality award criteria or benchmarking, depending on the specific goals of the service organization. It is too early to recommend any particular certification procedure, or to say how significant it will be, but quality certification is likely to gain importance in the public service sector in the future. The Use of ISO 9000 in Finnish Local Authorities Today ( in the year 2001) The quality improvement work is continuing with the different quality methods in all of the municipalities participated. Also municipalities in general have taken up ISO 9000 quality improvement work. The main reason has been the growth of the contracted services provision. On the other hand ISO 9000 has been approved generally as on of the best frameworks for process improvement. However the use of it is still quite limited. In the summer 2001 a survey was made on the use of various quality improvement tools. In this survey it was found that ISO 9000 was used only in 12% of the municipalities. Quality Award criteria was used in 16% and Balanced Score card in 30% of the cases. The most used method was the personnel annual report, in 63% of the municipalities and customer satisfaction surveys were used in 56%. Several methods were used simultaneously in many municipalities. ISO 9000 certification is used very seldom. Only about 20 municipalities have certified some of their processes and only one municipality has certified the all the processes. 12 References Berry, Leonard L., A. Prasuraman & V.A. Zeithaml (1992). Understanding Customer Expectations of Service. Sloan Management Review. Vol.? No.? Pages? Crosby, Philip B. (1986). 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