For thoseof us who have spent some of our working lives in engineering or manufacturing, the importance of quality is self-evident.
Total Quality Management (TQM) is regarded as a key success factor in maintaining a competitive advantage.
The big players, in the quest for ‘continuous improvement’, have spent a great deal of time and money on TQM and make great marketing mileage out of attaining internationally recognisable quality credentials via the famous ISO 9000 accreditation process.
This was not always the case.
Quality of manufacture could once be simplistically defined as the need to keep on the right side of consumer sentiment and industry regulators that supposedly represented these same consumer interests.
To gain an appreciation of the evolution of quality as a strategic advantage, let us consider any token industry — say egg production.
The early evolution of the quality movement was focused on the control of outputs from production. It manifested itself via ‘inspection’.
In the poultry industry, the process of ‘candling’ meant that eggs were inspected against the background of a concentrated light source — a candle flame — to reveal any telltale dark patch through the semi-transparent shell. Any embryonic development could be quickly detected and the egg was rejected before being boxed and wastefully contaminating the hungry consumer’s breakfast.
As such, quality realistically meant the rejection of product and the reduction in throughput. Hardly an attractive proposition but definitely a necessary evil.
A company could afford only so many ‘bad eggs’ to find their way into the consumer market before its reputation risked being permanently tarnished.
The parallel with the current state of the evolution of compliance in the still fledgling financial services sector is there for all to see.
In the face of regulation, the legal face of consumer protection, we rely on compliance to keep us on the right side of the law and enable us to maintain our dealer’s licence.
It is unquestionably necessary but nevertheless another overhead; arguably an impediment to throughput because it fixates on meticulous scrutiny aimed at rejecting the bad egg!
Compliance practitioners can often feel that they are merely tolerated in a busy organisation and their important contribution fails to be appreciated and supported by advisers and management focusing on budget demands.
Very seldom however does the compliance team itself, little less management, view their contribution as more than reactive — a necessary systemic insurance. They fail to evangelise the potential for a strategic contribution.
How did the quality movement seek to reposition itself in the forefront of the quest for competitive advantage? The key change in mindset and focus of activity shifted to the control of inputs to the manufacturing process.
The aim became to engineer the manufacturing process so that problems could be detected and beaten before any throughput was contaminated and rejected.
The quality inspectors gave way to the quality managers who, with senior management, looked to install not only empowered processes, but also structural and cultural change to harness suppliers, production staff, distribution and sales to anticipate and stop the incipient rot.
This initially enabled the significant reduction of waste with the option of more competitive pricing.
More importantly, the gradual realisation came that many minds focused upon the ideal of ‘faultless throughput’ resulted in effective innovation, staff and consumer satisfaction and ongoing advantage in increasingly competitive markets; especially as Australia raised its eyes to confront increasing competitiveness internationally.
In short, quality evolved into TQM and, excepting the arguable overkill of the ISO process, remains a key factor in the success of any mature manufacturing industry.
My contention is that compliance is financial service’s version of the quality paradigm and so currently suffers from the same limitations of early evolution. The Australian Standard for Compliance (AS3806) is at best focused on strategies to reduce legal risk.
The need is for those with vision to both implement and, through their success, educate the rest of the industry that compliance can be a key factor for competitive advantage.
Otherwise, we await the domestic model of a financial services ‘Japan’ to challenge our complacency.
Again, the way forward is for the best of our creative compliance personnel to focus upon advisory business inputs and help to construct systems that not only ‘inspect’ but encourage a grass-roots culture of excellence.
The goal must be to ‘engineer’ advisory processes and measurements that seamlessly encourage business to continually reflect and improve; not just to overlay a painless system of checks.
The field lies open for a champion of total compliance management.
Shane Miller is an authorised representative withSAI Group, Melbourne,and unit chair in Organisational Development forthe APESMA/La TrobeUniversity MBA program.
