Analysis of the requirements of ISO 9001:2015 for objectives and measurements and their practical implementation in the form of strategy and KPI scorecard.
This article will be useful for:
- Strategists who plan to align existing strategy and KPIs scorecards with the quality management system established according to ISO 9001:2015 requirements.
- Managers who are preparing for an internal ISO 9001:2015 audit and looking for automation of planning and measurement.
Stakeholders and Their Interests
Section 4.2 of ISO 9001 suggests using the terms “interested parties” and “requirements”. As a common theme throughout all documents, it is advised to “define and monitor” interested parties.
In strategic planning, interested parties are typically called stakeholders. Similar to the ISO standard, in strategic planning, we recommend:
- Define the list of the stakeholders, their needs, resources, constraints.
- Align the specific goals, KPIs, and initiatives with the relevant stakeholders.
The last will help to establish clear responsibilities, as well as keep the stakeholders informed.
The changes in the stakeholders and their interests is part of regular strategy discussions. For that purpose, we recommend doing value-based strategy decomposition, quantifying sub-goals with value created for stakeholders, and use the findings of performance analysis to support the discussion with stakeholders.
Users of BSC Designer can:
- Define stakeholders and their interests via the Strategy tab in application Settings, and
- Align the stakeholders with the goals, KPIs, and initiatives via the Owner field.
Functional Scorecards and Objectives
A typical strategy workspace is a combination of aligned strategy and functional scorecards. The focus areas of the scorecards, as well as their structure, depend on the challenges of the organization.
We typically see:
- Main strategy scorecard
- Functional scorecards for specific challenges, like quality, cybersecurity, digital transformation, leadership, procurement, leadership, corporate governance
- Dedicated scorecards for business units and local offices
The ISO 9001:2015 standard gives general guidelines to formulate objectives for relevant functions (section 6.2.1), as well as some specific requirements for operational functions (section 8), leadership (section 5), performance evaluation (section 9).
The objectives for the relevant functions can be formulated in separate functional scorecards to be later aligned with overall strategy.
Users of BSC Designer have access to a number of templates of the functional scorecards that suggest some common goals and performance measurements to get started.
Learning and Infrastructure Perspective
In the K&N Balanced Scorecard framework, the drivers of strategy are the Internal and Learning and Growth perspectives. In the Learning and Growth perspective, we formulate the goal related to the skills and infrastructure required to execute the strategy.
The ISO 9001:2015 suggests a similar approach in section 7. Support by defining the mechanics that support proper quality infrastructure.
With properly defined goals and performance metrics of the Learning and Infrastructure perspective, the strategy team satisfies the requirements established by section 7.
On the automation level:
- Quantify the goals of the Learning perspective with appropriate leading and lagging indicators.
- Define specific actions and align them with relevant progress indicators.
Goals and Objectives
Section 6.2.1 of the standard defines the requirements for objectives like:
- Be consistent
- Be quantified and measurable
- Be communicated
- Be actualized
This matches perfectly the approach to formulating organizational goals used in strategic planning discipline.
An important difference is how the action plans are treated:
- In the standard, it feels like the action plans (section 6.2.2 – how to achieve objectives) are part of the objectives,
- In strategic planning, we argue that the objectives, initiatives and performance measurement should be three artifacts that share common context (defined by objective) but are defined separately
In BSC Designer software, the triangle of goal, initiative and KPI can be presented as separate items. The initiatives and KPIs are defined in a context of a certain goal giving user independent representations of the planning, action, and measurement levels.
Setup of Performance Indicators
Today, the term KPI (Key Performance Indicator) is widely used for any number, indicator, or measurement.
When referring to the similar idea, the ISO 9001:2015 standard uses a safe and neutral term “measurement”.
For obvious reasons, there are no specific measurements mentioned (with exception of “customer satisfaction”).
The general requirements of the correct measurement are formulated in section 9.1.1 as:
- a) The need to define subject of measurement
- b) The need to define method of measurement
- c) The need to define update interval
Users of BSC Designer software can create measurements/indicators on the KPIs tab. To complete the setup, use the General, Data, and Performance tabs.
Via the Values Editor, users can specify the required update interval for the indicator to maintain the indicator’s data organized and keep owners informed about the need to update the value of the indicator.
You can find more specific indicators for quality in the Quality KPIs and Scorecard article.
Initiatives Aligned with Objectives
In strategic planning, a common term for an action plan is initiative. Similar to the KPI/measurement case, the ISO 9001:2015 standard uses a neutral “action” term.
We can find the clue about the required attributes of “action” in section 6.2.2 that overlaps with common project management ideas like scope, resources, responsible, due date, evaluation criteria.
Users of BSC Designer will find required attributes for an action/initiative in the Initiatives dialog.
Alongside the objectives, in section 6.1, the approach to risk management is defined.
As explained in clause A.4 of the standard, the organization should plan risk analysis and mitigation, but there is no requirement for a specific risk management method.
Before, we discussed the role of risk in strategic planning. A basic risk planning includes:
- Identifying risks for the goals
- Quantifying risks
- Suggesting a risk mitigation plan
In BSC Designer, risk is a type of initiative that can have a response plan, aligned key risk indicator, allocated budget, owners, etc.
The key risk indicator is automated as an indicator with “minimization” as a performance formula, impact and probability fields. The risk can be visualized on the Risk diagram.
Management Review: Qualitative Inputs and Outputs
Section 9.3 of the standard includes the requirement for management review of the quality system.
The review of the findings of previous audits and the implementation of corrective actions is a starting point of the ISO 9001 audit.
In strategic planning, a similar review is done on regular strategy meetings:
- Qualitative feedback and improvement ideas can be formulated via comments and hypotheses.
- Quantitative estimation of the actions and achieved results is presented via leading and lagging indicators.
In BSC Designer, qualitative feedback is automated via date-specific comments for the values of KPIs, as well as via initiatives, reporting, and BI dashboards.
As for quantitative estimations, the software allows tracking separately leading and lagging indicators. The type of indicator (leading/lagging) can be changed on the Context tab. The software will calculate separately leading and lagging performance of the goals.
Audit Trail for Strategy Scorecards
Along the ISO 9001 standard, the need to maintain documentary evidence of objectives, measurement and corrective actions is underlined many times, like, for example, in sections 6.2.1 or 9.1.1.
In a case of strategic planning, similar contextual information is critical for proper strategy discussion, execution, and general accountability.
BSC Designer software provides necessary contextual information via the History of Changes and Audit Trailfunctions.
The built-in quality score helps BSC Designer users to create a KPI scorecard following the best practice of strategic planning that overlaps with the requirements of ISO standard.
Click on the quality score indicator to get detailed improvement recommendations.
BSC Designer is a Balanced Scorecard software that is helping companies to better formulate their strategies and make the process of strategy execution more tangible with KPIs.