Critically Analyse How A Quality System Might Enhance Performance Management In An Organisation Of Your Choice

QUALITY SYSTEMS – MBA1410–L – TERM 2

“Critically analyse how a quality system might enhance performance management in an organisation of your choice”

LECTURER: Teddy Foster

STUDENT: JULIANA ROCIO FORERO NINO

ID: 090211-78

UWL: 29002067

ASSIGNMENT DUE ON 29 DECEMBER 2010

Introduction

Colombia is the third country in Latinoamerica after Mexico and Brasil leadering the value market in the dairy industry. This year (2010) a new free trade agreement between European Union (EU) and Colombia has been signed, which let European companies to sell products in Colombia and the other way round, which improve the commercial ties between EU countries and Colombia by opening the economic border and generating new investment and commercial opportunities as affirmed by Spanish ministerial Communicate (Dinero, 2010). Besides, this would generate more competition for Colombian local companies, which would have to compete against many organisations from all different countries which are part of the EU. This news has not been received well by the colombian milk industry as they feel this is a threat for their business not only because the new competitors but many quality standards implemented, as Colombians inhabitants might believe that European products are far better than local ones, creating one problem in many areas including milky products.

In this new economic treatment many European Countries, regarded as being developed countries which have applied almost all quality systems available, would be exporting their products, brand image, quality systems, and experience to entering the Colombian market. Conversely, Colombia is a developing country which economy is primarily based on agriculture and its industrialisation process is in some areas of its economy behind standards levels. Moreover, many workers felt the pressure of international competition as the Semana Magazine (2010) observed thousands of dairy farmers and ranchers marched in several regions of Colombia to protest against the signing of the Free Trade Agreement (FTA) between Colombia and the European Union (EU), as they believe that this agreement will lead the sector to bankruptcy. The milky workers have seen this as a threat to its market, showing their disappointment by generating strikes and stop selling milk. This agreement between EU and Colombia would have many implications fro milky companies including Colanta which would have to improve its performace management by implementing a quality system.

The aim of this document is to analyse how Colanta Ltd. can improve its performance management (PM) and achieve its goals by adopting ISO 26000. The methodology used is secondary data based on information found on the web which is then compared with theories learned in class and books to establish the foundation of this issue. In the following section the literature is reviewed and critically discussed as well as an analysis of the Colanta case which shows the benefits and possible dissadvantages on applying or not this standard.

Implementation of ISO 26000 in Colanta Ltd.

One of the companies which would be affected by the introduction of the FTA agreement is Colanta Ltd., a Colombian cooperative which produces and processes pasteurized milk, U.H.T. milk, powdered milk, cheese and milk derivates, all summing up to 2.5 million litres of milk per day (Colanta, 2010). Its value market was $470 million dollar in 2006 and it is increasing (Proexport Colombia, 2008). According to this report, Colanta leads the market and it is almost doubling its following competitor Alpina.

Even though Colanta is the principal company in Colombian market, it should be aware of the threats coming from the agreement with the EU. In order to minimise any inconvenience, Colanta as well as any successful organisation must aim to have the most talented managers and workers who are producing the best possible products. Managers direct and lead workers and the organisation in general by creating the circumstances that enable the organisation to survive and flourish beyond any specific supervisor or manager. According to Certo & Certo (2007) accomplishment of goals is the role of management within organisations, and managers are responsible for searching and obtaining organisational resources to make sure that the organisation accomplish those objectives. Indeed, Colanta must establish its business strategy, setting goals and objectives in order to have a competitive advantage which will help the company to overcome threats coming from the introduction of EU products, which is explained by Porter (1979) in his 5 forces theory model as the threat of new entrants, so that Colanta would be prepared to battle and prosper in the market.

Although the excellence in any part of the organisation is essential, managers must pay special attention to performance management which is concerned with the behaviour and result of employees who are the most important asset of any organisation. As Baron and Armstrong (1998 in Beardwell and Holden, 2001, p.538) stated performance management (PM) is a “strategic and integrated approach to increassing the effectiveness of organisations by improving the performance of the people who work in them and by developing the capabilities of teams and individual contributors”. The improvement of PM guarantees good communication between employees and managers about the expectations of each one to meet the company goals; it is about the support that managers offer to their employees in a daily basis not only by offering rewards but coaching, trainning and feedback.

One way to enhance the PM in Colanta is by the implementation of quality systems (QS) because in this globalised and competitive world, it is important that companies such Colanta demonstrate to their actual and future clients that they are accredited by important international standard QS assuring consumers they are buying quality products which have been already checked and approved. Even though there would be many similar milky products from different brands which aim to solve the same need, their quality might be hugely different depending on the maker, brand, country of origin and experience of the company, characteristics which might either deter or encourage people to buy them. Colombians might think that a specific product from the EU, which might be more expensive than the Colombian one, is made with higher quality standards; conversely, cheaper products would be regarded as possesing lower quality. But what is quality? Who says something posses higher quality? Under whose standards? An interesting definition of Quality is “the degree to which a set of inherent characteristics fulfils requirements” (ISO DIS 9000:2000 in Tricker, 2005, p.4). As the American Society for Quality Control (in Griffin 2008) stated quality is the sum of all characteristics and features of a product or service and its capability to satisfy requirements or needs. Certainly, quality is defined by those characteristics posses by any product or system compare with others of the similar kind, in this case milky products, which would be bought by consumers who would pay what they think it is fair for the benefit of solving their requirements or problems.

However, there are different levels of quality, or as Dr Deming (1993) said “Good quality does not necessarily mean high quality”. Similarly, ISO argues that quality is a relative concept as the quality of something cannot be found in a vacuum; quality is constantly relative to a set of requirements. Even though companies control the quality of a product or service, it is generally not used to improve the quality of that product neither to improve its PM. Thus, developing and implementing a quality system which improves the company’s PM can be achieved by implementing Quality Management Systems which include all the actions that organisations use to direct, control and coordinate quality, including the formulation of a quality policy and its objectives, also quality planning, control, guarantee and improvement.

With regard to Colanta, it has implemented many quality standards such as ISO 9001:2000, ISO 14001 and ISO 18001, as well as the HACCP (food and safety). Moreover, Colanta has been a pioneer in the certification project of Grade A-PMO that is mandatory to obtain permission from the USA government to export milk towards that country (Colanta, 2010). Hence, Colanta is a pioneering Colombian company which is able to compete in products and quality management against any EU company.

Nevertheless, one interesting standard which Colanta and other companies in Colombia could use in order to be more competitive against European’s ones and improve its PM is the implementation of ISO 26000 which discuss social responsibility. The implementation of this standard will give Colanta powerful features which could be used as a competitive advantage in both entering the European market and maintaining its leadership in Colombia since Colombian costumers would be aware of the commitment of Colanta to fellow citizens who would be more supportive with this company which would implement this standard. As the ISO 26000 came to light quite recently and it is not a compulsory standard, there are very few companies in the world which have started the implementation process of such standard.

The main objective of ISO 26000 is to provide business sustainability and caring for the society in which the business is running in, which would give Colanta an advantage over its competitors. According to ISO 26000 (2010) not only providing products and services that satisfy customers without damaging

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