The Green Sheet Online Edition

August 11, 2008 • Issue 08:08:01

Three-step systemization

By Biff Matthews
CardWare International

In the payments industry, ISO means independent sales organization, but in many business circles it may also mean international standards organization. Such an organization issues rules and requirements that businesses and products must meet in order to gain ISO certification.

Examples of quality ISO certification programs are TQM, ISO 9000, Six Sigma and others that originated in the manufacturing sector but are now widespread within the service sector. In fact, service industries now account for the highest number of ISO 9001: 2000 certificates, according to the standards organization.

The focus of ISO is documentation: doing what you say you do and supporting that commitment with continuous improvement in the quality of both the end product and the process that produced it. Some programs emphasize detection and correction; others preach prevention. Each requires substantial documentation, flow charts, self-assessments and training, along with internal and external audits. Becoming certified may take as little as nine months; more often it's 24 to 30 months. Maintaining certification requires regular internal and external audits.

Certifiable

Achieving certification requires commitment, time and money over an extended period. Certification is always a positive. It looks great on your letterhead. But, as in life, the real benefit is the journey, not the destination.

CardWare International became certified to ISO 9000-2001 in the mid 1990s and maintained formal certification until just recently. Our staff continues to operate under the ISO 9000 principles, and the framework remains a major contributor to our success because it helps us maximize customer satisfaction and retention.

Achieving certification is a process toward systemization: Procedures are put in place that, in the end, help businesses run as efficiently and profitably as possible.

Examples of systemization

A colleague manufactures 500 electronic components, each part tailored toward client specifications. Before systemization, the company's lead time was two to four weeks. The expense of manufacturing and testing was rising as well, and the electronic technicians required hefty payment for their expertise.

Therefore, building a one-size-fits-all inventory of parts by competent, but not expert, technicians was not practical. So, over a span of 16 months, the company built a manufacturing system and semi-automated testing process that required fewer technicians.

Using the new system, hourly wage employees could build, test and package any of the 500 products within a day. Product quality increased and production costs dropped, allowing the company to reduce prices for its clients, which in turn increased sales, resulting in a considerably higher profit margin.

The company was able to systemize its business to make it run faster and better - not cheaper, just more efficient. The new system necessitated the use of better, higher-priced components, thus improving product reliability, while still permitting price reductions. Both outcomes increased customer satisfaction. What would it mean to your company if you could achieve shorter turnaround time with fewer employees?

Another colleague used a different system to design, build and manage municipal wastewater treatment plants. Her workforce is minimal for all aspects of the process. The system has made workers more accountable and directly responsible to both the company and the client. Above all, the time between concept generation and project completion was shortened.

Her system also improved the efficiency of wastewater plants, saving municipalities money for initial construction and system upgrades, and accelerating the permit process. Most importantly, her system raised the quality of the effluent, which dramatically reduced the amount of Environmental Protection Act-reportable incidents.

Payments industry systemization

So, how are the experiences of an electronic components maker and a wastewater treatment plant builder relevant to the payments industry? If you know me, you know I am a stickler for checklists, particularly in the sales process. That also applies to every other aspect of the acquiring business.

A checklist is a critical part of any system, be it focused on quality, operations or software development. It is documentation, process control and quality assurance, responsibility and accountability, all in one package. Systems eliminate gray areas that, left unattended, often become black holes in businesses plagued with errors, personal fiefdoms and excuses. Here are three steps for creating and sustaining successful systems:

Step 1: Understand and agree upon processes.
a. Designate individuals to oversee process implementation, and give them full responsibility with commensurate authority. (I realize the last three words are difficult. But they are essential.)
b. Document progress toward achieving systemization.
c. Make sure all stakeholders are onboard with the goal of systemization.
d. Create flow charts detailing systemization progress, including information and paperwork flows.
e. Use flow charts to identify and address weaknesses in the system.
f. Edit documentation to accurately reflect the data contained in flow charts.
g. Create schedules for regular review and updating.
h. Distribute and train workers on system processes.
i. Follow reviews and audits.
j. Take corrective measures to refine the system.

Step 2: Identify and eliminate bottlenecks in process flow, along with redundant or unnecessary steps to streamline end-to-end processes.

a. Require an in-depth understanding of the audit data, how it is received and used, and whether or not it is "required" data. Fewer data elements lead to leaner, faster processes, with less wasted data to confound good decision-making.
b. Achieve commitment from high-level stakeholders and managers to do what is necessary with employees. Individuals committed to the company and the goal of systemization, and who are willing to evolve professionally, should be retained, reassigned and retrained if needed. The others should be fired.
c. Resolve that nothing is sacred - no process, no person, no department, no current way of doing anything and (especially) old assumptions about how things should be done.
d. Keep up-to-date with the progress toward systemization using charts and documents.
e. Ask why certain aspects of the system work, as well as why others don't work.
f. Test new steps and processes.
g. Create new documentation and flow charts when goals are completed.
h. Distribute documentation enterprise-wide; then train employees on the new processes.
i. Maintain and follow system reviews or audits.

Step 3: Embrace failure and the corresponding Corrective Action Report as an opportunity to refine and improve the system.

a. Assume the system is the cause when failures occur. The process may not have been fully vetted. The 80/20 rule is never more applicable than it is here: 80 percent of the problems are in the system.
b. Scrutinize employee training. Failure to follow documented procedures is a training issue. But only look to human error after all other avenues have been exhausted. A well-documented, well-constructed system permits increased automation, requiring fewer technically skilled individuals, and hence fewer human errors. But if personnel problems are identified, they must be addressed.
c. Accept that a good system is fluid and evolving. Constantly improving on it requires regular reviews, with the goal of making it run smoother and with greater integration into the overall business.

The look of success

In the end, what does the successful implementation of a system look like? Success entails:

• Streamlined, seamless processes that are fully documented

• Well-trained employees who are responsible and accountable

• New processes that are easy to follow, with no guesswork or assumptions that cloud the issue

• Shorter lead times without errors, leading to lower production costs

The result is improved product quality, lower production costs, higher profit margins, satisfied clients and happy employees.

One word of caution, however: Never permit a system to become a barrier to the goal of delivering quality products and services. Meeting customers' expectations is the minimal goal, but exceeding expectations is preferable. Systems, therefore, should never be used as an excuse for failures.

Remember, implementing a system is more about the ongoing journey than the destination. As the German writer Thomas Mann once said, "You ask, what is the use of classification, arrangement, systemization? I answer you: Order and simplification are the first steps toward the mastery of a subject - the enemy is the unknown."

Biff Matthews is President of Thirteen Inc., the parent company of CardWare International, based in Heath, Ohio. He is one of 12 founding members of the Electronic Transactions Association, serving on its board, advisory board and committees. Call him at 740-522-2150 or e-mail him at biff@13-inc.com.

The Green Sheet Inc. is now a proud affiliate of Bankcard Life, a premier community that provides industry-leading training and resources for payment professionals. Click here for more information.

Notice to readers: These are archived articles. Contact names or information may be out of date. We regret any inconvenience.