should address the issue of market expectations and consider possible ..... types of organizational structures â the mechanical and organic ones. ...... management systems assuring the accreditation of testing laboratories ...... and Chemical Process Industries. frigg.ivt.ntnu.no/ross/reports/lcc.pdf. [accessed: ... The fifth section.
Product & Process Management
PROCESS MANAGEMENT IN COMPANIES
Authors:
Magdalena Ankiel: Chapter 8 Katarzyna Joachimiak-Lechman: Chapter 5 Alina Matuszak-Flejszman: Chapter 1, 2 Szymon Michalak: Chapter 1, 7 Dobrosława Mruk-Tomczak: Chapter 6 Bogdan Sojkin: Chapter 6 Sławomir Zapłata: Chapter 3 Anna Zielińska-Chmielewska: Chapter 4
2
Edited by
Alina Matuszak-Flejszman
Product & Process Management
PROCESS MANAGEMENT IN COMPANIES
Poznań 2018
3
Scientific editor and proofreading: Alina Matuszak-Flejszman Reviewed by: Maciej Urbaniak Cover designed by: Alina Matuszak-Flejszman Publication within the project POWR/03.03.00-00-M098/16 - A new international education program for second-cycle studies Product & Process Management at the Faculty of Commodity Science of Poznań University of Economics and Business supported by the grant from European Found – Knowledge Education Development 2014-2020
FREE PUBLICATION
Poznań University of Economics and Business bears sole responsibility for the content of this publication Copyright by: Poznań University of Economics and Business Faculty of Commodity Science Al. Niepodległości 10, 61-875 Poznań ISBN: 978-83-948206-4-0 Printed by: ESUS Digital Printing, 2018
4
TABLE OF CONTENTS Foreword ………………………………………………………
9
1. Selected aspects of managing organizations …………… 1.1. Introduction ……………………………………………. 1.2. Essence of managing an organization ………….……… 1.3. Organizations and relations with surroundings ………… 1.4. Planning and decision-making …………………………. 1.5. Designing organizational structures …………………… 1.6. Motivating ……………………………………………… 1.7. Control and auditing as tools for evaluating an organization’s operation …………………………….. 1.8. Process management in managing an organization …….. 1.9. Bibliography …………………………………………….
13 13 13 16 23 27 33
2. Systems approach to management in an organization ….. 2.1. Introduction …………………………………………….. 2.2. Essence of the systems approach to management ……… 2.3. Standardized management systems as tools for enhancing work organization ...…………………….. 2.4. Quality management system according to ISO 9001 ….. 2.5. Environmental management system in accordance with the ISO 14001 standard …………………………… 2.6. Health and safety management systems ……………….. 2.7. Bibliography …………………………………………….
59 59 59
3. Risk based approach within process approach – quality frame ………………………………………………..……… 3.1 Introduction ……………………………………………... 3.2. Standardization aspects of quality management ……….. 3.2.1. Role of quality management in functioning of an organization …………………...…………… 3.2.2. Elements of systematic quality management ……. 5
42 47 56
66 73 78 85 90
93 93 94 95 96
3.3. Process approach in functioning of an organization …… 3.3.1. Essence and role of process management in an organization ………………………………… 3.3.2. Defining and mapping processes in an organization ………………………………… 3.3.3. Key elements and participants of process management ……………………………………… 3.4. Risk-based approach in the quality-oriented approach to managing an organization …………………………… 3.4.1. Risk model management in an organization …….. 3.4.2. Risk management process in the area of quality………………………………………….. 3.5. Process measurement in an organization – quality evaluation through the prism of risk …………………… 3.6. Bibliography ……………………………………………. 4. Selected aspects of the human resource management process in an organization ………………………………… 4.1. Introduction ……………………………………………. 4.2. The nature and concept of human resource …………….. 4.3. The nature of human resource planning ………………… 4.4. Preparation of the recruitment process …………………. 4.5. The nature and concept of selection …………………….. 4.6. Chosen instruments of selection process in an organization ...……………………………………... 4.7. Employment decision-making ………………………….. 4.8. Avoiding errors in the process of recruitment and selection ..…………………………………………… 4.9. Assessment of the recruitment process effectiveness from the point of view of an organization ...……………. 4.10. Bibliography ……………………………………………
6
103 104 107 108 112 112 115 121 124
129 129 129 136 137 140 141 154 156 157 159
5. Life cycle based methods for product and process assessment ……………………………………………………. 5.1. Introduction …………………………………………….. 5.2. Life Cycle Assessment – basic information …………… 5.2.1. Terms and applications of Life Cycle Assessment 5.2.2. Methodology of Life Cycle Assessment ………... 5.3. Life Cycle Costing – basic information ………………... 5.3.1. Terms and applications of Life Cycle Costing ….. 5.3.2. Methodology of Life Cycle Costing …………….. 5.4. Eco-efficiency analysis – basic information …………… 5.4.1. Terms applications and methodology of eco-efficiency assessment .……………………. 5.4.2. Eco-efficiency analysis – case study ……………. 5.5. Bibliography ……………………………………………. 6. Managing the new product design and launch process … 6.1. Introduction …………………………………………….. 6.2. Searching for new product ideas ……………………….. 6.3. Generation of new product ideas ……………………….. 6.4. Evaluation and selection of ideas ………………………. 6.5. Creating new product value ……………………………. 6.6. Economic and financial analysis of the new product …... 6.7. Test marketing of the new product ……………………... 6.8. New product commercialisation ………………………... 6.9. Bibliography ……………………………………………. 7. Marketing research process in product and brand management ……………………………………………….. 7.1. Introduction …………………………………………….. 7.2. Essence of marketing research and its importance in managing an enterprise …….………………………... 7.3. Stages of the marketing research process ……………… 7.4. Quantitative and qualitative marketing research methods 7.5. Bibliography …………………………………………… 7
161 161 162 162 165 169 169 172 178 178 180 183 185 185 188 192 196 201 204 210 214 219
223 223 224 228 239 249
8. Process of marketing communication between an enterprise and the market …………………………………… 8.1. Introduction ...................................................................... 8.2. Definition, elements and function of the marketing communication process ………………………………… 8.3. Marketing communication tools for enterprises ……….. 8.4. Traditional marketing communication tools …………… 8.4.1. Advertising ……………………………………… 8.4.2. Sales promotion …………………………………. 8.4.3. Personal selling ………………………………….. 8.4.4. Public relations ………………………………….. 8.5. Modern marketing communication tools ………………. 8.6. Bibliography …………………………………………….
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251 251 252 258 260 261 264 267 268 271 276
FOREWORD The process approach is currently one of the most important orientations of the organization management system. It is also largely aimed at improving the efficiency and effectiveness of the company's operations, and thus even more rigorously and more accurately to meet the expectations of customers. Along with other management methods, it is currently the most used in organizations. The book Process management in companies is another part of a series of books titled Process & Product Management. This book touches upon process management in companies and presents basic concepts, requirements, methods and tools useful in process management. The publication consists of eight chapters. The first chapter entitled Selected aspects of managing organizations describes the essence of managing an organization. The organization was also defined and its relations with surrounding. One of the markers of an organization’s activity is the efficiency of decisions which are describes in this chapter. Also describes issues regarding the design of organizational structures. The next function within the management process is motivating. The next important activities for the management process are control and audit. There are tools for evaluating an organization’s operation. This chapter also describes process management in managing an organization. The second chapter entitled Systems approach to management in an organization presents essence of systems approach to management. Also describes standardized management systems as a tools for enhancing work organization. Next, the quality, environmental and health management system was described in detail.
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The aim of the chapter entitled Risk-based approach within process approach – quality frame is to highlight the questions of process management while taking account of the approach based on risk (RBT – risk-based thinking) within the quality-focused actions in an organization. At the beginning was shown the role of quality management in functioning of an organization and elements of systematic quality management. Next it was described process approach in functioning of an organization and risk-based approach in the quality-oriented approach to managing an organization. Chapter has been completed by describing process measurement in an organization in perspective of quality and risk. The fourth chapter entitled Selected aspects of the human resource management process in an organization focuses on the concept of human resource management and planning, as well as on the preparation of the recruitment process. The nature of selection and instruments of selection of candidates for employees were characterized. Next, the process of employment decision making was discussed, and the most common mistakes in the recruitment process were pointed out. At the end of the chapter, the effectiveness of the recruitment process from the point of view of the company is assessed, as the entrepreneur strives to employ the "best" employees as soon as possible and with the least financial outlay. Hence, the recruitment and selection process must be properly planned and carried out. To sum up, the aim of the fourth chapter was to identify and evaluate the optimization of the use of selected methods and instruments in the process of recruitment and selection of employees in the company for specific and vacant positions. Numerous initiatives related to promoting Life Cycle Management (LCM) in the economic area have been launched in the last several 10
years. The chapter entitled Life cycle based methods for product and process assessment presents two pillars of Life Cycle Management: environmental included in Life Cycle Assessment analysis (LCA) and economic represented by Life Cycle Costing accounting (LCC). LCA enables to identify and assess the environmental aspects and their potential impact on environment associated with whole product’s life cycle. LCC is a method for cost calculation carried out in any and all phases of a product’s life cycle to provide input to decision makers. The title of the next chapter is Managing the new product design and launch process. The process of designing and launching a new product on the market requires a multidisciplinary approach and taking many strategic decisions for the company. Starting from searching for ideas for a new product, through generating and selecting new ideas, creating and testing prototypes, preparing economic and financial analysis, up to the development and implementation of new product commercialization strategy. This multi-stage process requires a wide range of competencies and skills, related, on the one hand, to creativity and mindfulness on the people and phenomena, and on the other, to analytical thinking, based on logical reasoning. The whole process becomes the great challenge and an unforgettable experience for the team involved in the project, as well as for the entire enterprise. The following chapter entitled Marketing research process in product and brand management presents the essence of marketing research and its importance in business management. Various classifications of marketing research were presented, as well as the factors that should be taken into account when deciding on conducting them. Subsequently, the stages
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of the research process were discussed. The chapter also describes the quantitative and qualitative methods of marketing research. The last chapter entitled Process of marketing communication between an enterprise and the market describes essence of marketing communication process as a specific type of social communication. Various definition, elements and function of marketing communication process was presented. Next, the traditional and modern marketing communication tools was presented. I believe that the present book comprehensively presents contemporary global trends in various field of process management which develop new products and processes in organizations.
Alina Matuszak-Flejszman
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1. SELECTED ASPECTS OF MANAGING ORGANIZATIONS 1.1. Introduction Steering an organization and acting in a successful way calls for systematic and transparent management. The chapter describes the essence of managing an organization. The organization was also defined and its relations with surrounding. One of the markers of an organization’s activity is the efficiency of decisions which are describes in this chapter. Also describes issues regarding the design of organizational structures. The next function within the management process is motivating. The next important activities for the management process are control and audit. There are tools for evaluating an organization’s operation. This chapter also describes process management in managing an organization. Keywords: management, organization managing, organization, relation with surrounding, planning, decision-making, organizational structures, process management
1.2. Essence of managing an organization According to Griffin (2008) management may be defined as a set of actions (including planning, decision-making, organizing, leading, i.e. managing people, and controlling) focused on (human, financial, material and information) resources of an organization and performed with a view to achieve an organization’s objectives in an efficient and effective
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way. Ensuring the effective (i.e. capable of using resources wisely and without unnecessary waste) and efficient (i.e. performed successfully) achievement of an organization’s goals is a crucial characteristic of management. Therefore, the terms of efficiency and effectiveness should be clearly explained. According to other authors (Koźmiński & Piotrowski, 2005) management means creating a reality with the use of the elements available to a manager: ideas, people and interrelations between them, formal legal institutions, material and financial resources, as well as the rights to avail of the resources. In relevant professional literature (Griffin, 2008; Certo, 2000; Kostera, 2001) we may come across the most popular definition of management, which consists of four phases: planning and decision making, organizing, controlling employees’ work, as well as managing through motivating employees in an efficient manner and using all available resources in order to achieve an organization’s objectives. Individual stages of the management process are closely interconnected. Within planning and decision making an organization sets goals and determines the best way of realizing them through making adequate decisions. On the other hand, the phase of organizing aims at ensuring the proper coordination of actions and resources, which means that human resources and others are organized in a way that allows for executing the previously developed plan. Therefore, organizing consists in the logical grouping of actions and resources. The next stage is the so-called leading, whose goal is to manage people in an adequate way. Some researchers (Griffin, 2008; Drucker, 2002) consider it not only the most important but also the most ambitious type of managerial activity. Leading amounts to a set of processes performed for the sake of improvement so as the members of an organization cooperate with each other in the
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organization’s best interest (Griffin, 2008). The final phase of the management process is controlling, which consists in observing and evaluating actions with a view to assess the advances within the scope of the realization of objectives (set at the stage of objective planning). It should be highlighted that while an organization makes effort to achieve its goals, the leadership must observe the progress made on an ongoing basis. They must place particular emphasis on ensuring that the obtained results will allow for reaching the planned result within the established timespan. On the other hand, according to Drucker (2002) management is based on several basic principles. The first principle is related to the goal of management, which is supposed to allow people to achieve objectives in a common effort. Moreover, management is deeply rooted in our culture and an enterprise must have simple, clear and unifying tasks. Management must be able to create opportunities for growth and progress in relation to the changing needs and possibilities not only for the organizations but also for each of its members (Drucker, 2002). On the other hand, an enterprise must be built on mutual understanding and individual accountability. The last principle relates to the market position, innovativeness, efficiency, as well as the development of human beings, quality and financial results. According to Drucker, these elements add up to the overall evaluation of an organization’s achievements and its chances of remaining on the market. While defining management one should always remember to mention the
contemporary
challenges
of
management,
which
include
the globalization of economic activity, product quality and production efficiency, the reduction of production and personnel, the questions
15
of property, ethics and social responsibility, as well as the diversity of workforce. Managers decide about efficient management. According to Drucker (2017) efficient managers can be characterized by the following features:
they know how they use their time;
they work systematically on managing the very little time they have at their disposal;
they focus on the world outside the organization, they place more emphasis on results than the work itself;
they rather begin with the question “what results are expected from me?” than from work to realization, let alone technology and tools;
they build the organization’s success on advantages, their own powers, the powers of their supervisors, colleagues and subordinates as well as their advantages in a given situation, i.e. on the things that people can actually do;
they do not build the organization’s success on weaknesses, they do not start activities they cannot do;
they make successful decisions, they know that a successful decision is always a solution based on varying opinions (as opposed to total agreement);
they try to make few decisions, but the decisions should always be well-thought-out and of crucial importance.
1.3. Organizations and relations with surroundings The context is a significant element of an organization’s functioning. The group of main component elements of the internal context most often
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includes: the management board, employees and the corporate culture of an organization. On the other hand, an organization’s external context consists of two strata (Griffin, 2008): the general context and the target context. The former embraces the roughly determined size and power within which an organization operates. These elements may have impact on its actions and are linked with other specific organizations. In the majority of organizations, the general context has an economic, a technical, a sociocultural, a legal and political, and an international dimension. The economic aspect of the general context is the main condition of the economic system, within which an organization operates (Rowlinson & Procter, 1997; Dosi, Marengo & Faillo, 2008; Rajan & Zingales, 2001). The so-called economic context is influenced by a number of important factors, which include: inflation, interest rates, unemployment and demand. It should be emphasized that the economic context is extremely significant for non-business organizations, because poor economic conditions may have negative impact on transferring resources to interested parties, e.g. in the form of governmental grants. The technical aspect of the general context refers to the available methods, which allow for transforming resources into products or services (Marengo & Dosi, 2005). On the other hand, the sociocultural dimension of the general context includes customs, habits, values and the demographic characteristics of the society in which a given organization operates. The importance of the sociocultural processes results from the fact that they determine which products, services and standards of conduct will be the most appreciated by the society (i.e. the so-called interested parties). The sociocultural factors affect the way employees evaluate their work and organization within the society. The legal and political dimension
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of the general context relates to the state economic regulations and the relationship between the economy and the state. The importance of this aspect mainly stems from the legal system, which defines what an organization can or cannot do. Furthermore, the favorable or unfavorable attitude of governmental circles to a specific economic activity can have influence on it. It should be stressed that political stability also establishes some framework for planning in an organization. No organization is willing to invest in a different country unless the business relationship with this country is adequately defined and stabilized (Marengo & Dosi, 2005). The last component element of organizations’ general context is the international dimension. This aspect determines the extent to which they are influenced by the economic activity performed in different countries and participate in this activity (Steers & Miller, 1998; Kirkland, 1988). The next group of factors that affect the efficiency of an organization’s actions – the target context – consists of concrete organizations or groups, which may have impact on the organization. The target context can include competition, clients, suppliers, labor unions, owners and strategic allies. Rivals can visibly affect an organization’s activities, because they compete with each other not only for customers but also for resources. Despite the fact that information about competition is frequently easy to obtain for an organization it has a great impact on decision making and the efficiency of actions. Another group within the target context embraces customers, i.e. the people, who pay for a given product or service and, surely, have specific expectations. It is clients, who decide whether an organization is going to sell its products or services. Consequently, it affects the efficiency of its actions. The target context also contains
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another group with influence on an organization’s efficiency - suppliers. It includes various kinds of organizations, which provide other organizations
with
resources.
Suppliers
may provide resources,
intermediate products, services, machines, devices, capital for an organization’s operation, etc. The quality of supplies plays an extremely significant role, because it has a large impact on the quality of the products or services offered by the organization. Regulators add up to another important group of factors related to the efficiency of an organization’s actions. Regulators are units, which can control, regulate or affect an organization’s policy and practice. This group may include:
regulatory agencies, which were appointed by the government in order to protect the society from certain economic practice or to protect some organizations from others,
an interest group, which is made up of an organization’s members in order to affect the organization, e.g. labor unions. The context of an organization is a pillar of a systems approach
to management. The Internet dictionary of the “Polish language by PWN” gives several meanings of the word “context”. The meanings include inter alia: “a set of coexisting factors, which are related to something” or “a set of references, which are crucial for understanding a literary work, a scientific text etc.”. In the dictionary of the modern foreign language (Dunaj, 2001) context has been defined as “accompanying circumstances, which are related to something, the background”. Draft (1998) defined the context of an organization as the organization’s size, strategy, technology, culture and environment (surroundings). Organizations are complex open systems, i.e. the systems, which remain in constant interaction with their context and consist of (directly
19
and indirectly) interrelated elements (Piotrowski, 2002). However, an organization should be seen as a whole, because it has a bigger impact on elements than the individual elements on the whole. Surely, it is important to view an organization as a process, because only then we may merge the ongoing independent actions into logical sequences and results (Weick, 1979). In this regard organizing is seen as a multifunctional, fluent and agreement-based activity, which to a great extent depends on it context. Consequently, the context of an organization always relates to an organization, which takes input resources from and provides output products for its surroundings (context) (Glinka & Kostera, 2012). While defining the context of an organization one should take notice of its multifaceted nature, e.g. the market aspect of an enterprise in operation as well as the social aspect. Thus, an organization remains in permanent interaction with its context (Katz & Kahn, 1966). The dynamic relationships between an organization and its context are important in the process-oriented approaches. In order to understand the organization and its context one should identify the internal and external factors related to the quality of products or services manufactured/provided by the organization, the organization’s or the organization’s products’/services’ environmental impact, and safety. These factors affect the main objective of the organization’s functioning. The information related to these factors should be monitored and reviewed. The analysis of external and internal strategic factors, which have impact on the context of the organization, is not a one-time task. The organization must “monitor and check” these issues and constantly take notice of significant changes. Furthermore, the organization must ensure that important changes are reflected in developing a management system
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(Matuszak-Flejszman & Pochyluk, 2016). Therefore, the organization should address the issue of market expectations and consider possible actions within this scope. In addition, the organization should take account of its position in comparison with other rival organizations as well as the issues linked with the application of new innovative technologies and the changes in legal, corporate and social requirements. It is also important to take notice of the constantly changing customer requirements and legal requirements, because the conditions of the organization’s context in the high-tech, corporate and global economy are rapidly evolving. Customer expectations and needs ought to be identified in relation to the offered products or services along with their environmental impact, so as the organization know what and when can be offered to a client. Moreover, the identification allows for understanding how to meet customer needs despite the changing conditions. The following elements should be taken into account while determining the internal context of an organization (Kleniewski, 2016): the mission, strategies, policies, objectives, the organizational culture, principles, codes of ethics, IT systems, relationships with employees and their competence, internal standards and guidelines, the specificity of a given industry. Therefore, while determining the internal context of an organization the strong and weak points of its processes, objectives as well as opportunities and threats are worth considering. Human resources and the
21
way they are managed are also important elements of an organization’s context (Kok & Uhlaner, 2001). There are many more factors, which have impact on the context of an organization. They are often related to internal factors or affect them in a direct or indirect way. As mentioned above, the external context is the external environment, within which the organization operates and makes effort to achieve its objectives. Hence, while defining the external context one should take account of the following elements (Kleniewski, 2016): cultural, social (the local government and neighbors), political, legal, financial, technological, and economic environments, the customeroriented competitive environment, key factors and trends with the impact on the organization, relations with external stakeholders, their perception and values (clients, suppliers of resources, cooperators and others). The needs and expectations of interested parties are an important element of the context of an organization. It should be noted that according to the definition given in standards interested parties also include people or entities, which consider themselves affected by the organization’s decisions or actions. It means that even the conviction of an interested party that the organization affects it is enough to take account of its needs and expectations e.g. because of prestige. The typical examples of (e.g.
interested
parties
neighbors),
are
suppliers,
customers,
consumers,
contractors
(including
social
groups
subcontractors
and service providers e.g. a water and sewage company), authorities, nongovernmental
organizations,
investors
and
employees.
Thus,
the context of an organization includes the internal and external factors
22
related to the environment and the quality of products or services offered by the organization (Matuszak-Flejszman & Pochyluk, 2016). The aim of establishing requirements related to the context of an organization is to increase the interest and understanding of issues linked with the environment and the quality of products and services among the representatives of the organization’s leadership. The leadership should at least be interested in (Matuszak-Flejszman & Pochyluk, 2016): the issues related to values, culture, knowledge as well as the organization’s achievements, the issues indirectly related to the condition of the environment – not only negative environmental impact linked with the organization’s activity, products and services but also issues affecting its operation e.g. resource availability, the possibility of using the elements of the environment in processes, external issues – cultural, political, legal, financial and competitionoriented. The leadership may also consider opportunities for the organization e.g. occurring as a result of its changing context. For instance, the increasingly stricter legal requirements in certain cases may create new outlets or increase the demand for some products or services.
1.4. Planning and decision-making One of the markers of an organization’s activity is the efficiency of decisions (frequently called the efficiency of management). An efficient manager, who chooses the right things to do, amounts to the direct factor
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that affects the efficiency of decision-making. An efficient manager does not only need to be efficient, i.e. be able to do the right things, but they also must be effective, which means they have to master skills within the scope of management. Moreover, an efficient manager should apply each of these skills at the appropriate moment, i.e. ought to be capable of doing things in the right way. Despite the fact that the manager’s efficiency is important, the key to the organization’s success is their effectiveness, as it decides about seizing the occurring opportunities. An efficient manager must make numerous different decisions. The majority of the decisions fit one of the following two categories: the programmed ones of a complete structure, which repeat at certain intervals, and the non-programmed ones, which do not have a clear structure and are made much less frequently than the programmed decisions (Huber, 1980). The rationality of decisionmaking plays an extremely important role in efficient management. Numerous experts (Whyte, 1991; Judge & Miller, 1991) believe that managers should be as rational as it is possible while making decisions. In order to do so they should first explore and determine the decisionmaking situation. Next, they should identify adequate options and assess them from the perspective of feasibility, sufficiency and consequences. Surely, the best option ought to chosen and implemented. Then the manager should observe and evaluate the consequences of the selected option. Consequently, the conclusions should be taken into account while making subsequent decisions, which contributes to the efficiency and continuous improvement of the manager’s actions. The efficient management of an organization, which takes account of the functionality of decisions and the multidimensional character of their consequences, should rely on a homogenous and coherent management
24
system. In order to ensure a systems approach to management four stages of actions are applied. This approach is called the PDCA cycle or the Deming cycle. The PDCA cycle includes chronologically ordered actions, which are typical of a management system with feedback (Hamrol & Mantura, 2003). These actions relate not only to technological processes but also to products. In order to understand the character of the continuous improvement process based on the PDCA approach one should describe the
actions
belonging
to
its
specific
stages:
planning,
doing
(implementing), checking and acting. Within the Plan stage it is crucial to take notice of the possibility of introducing changes or enhancements of a process in order to plan it. Information is identified and collected in the areas of an organization’s operation, specific processes and products, in which changes could bring the best results. At the first stage the team should identify the areas, which amount to weak points or irregularities. Next, they develop a list of separate elements of a process, a product or a system, which may be enhanced and improved. The list ought to be subjected to further analysis with a view to determine priorities, i.e. the most important elements with which the process of planning actions should begin. The next step consists in identifying requirements for the improved process, product or system. Then the team collects the data, which characterize a specific process, product or system, e.g. indicators, ratios, measures, and measurements performed before, during and after realizing actions. Once the causes of imperfection have been identified, the team can move on to the determination of possible solutions. It leads to the development of a detailed plan of activity, which includes the main objective, specific objectives, methods and deadlines for their achievement, checkpoints,
25
milestones, and responsible people. The plan developed in that way ought to be presented to the team and the leadership of the organization. Within the Do stage the previously planned solutions should be implemented with the support and understanding of the top leadership. The scheme of actions planned at the first stage ought to be put into practice. This stage aims at introducing changes in a process, a product or a system with a view to increase its efficiency or eliminate the causes of problems. It is possible to implement actions of limited scope or to carry out tests of the solutions, which have been developed by the team at the previous stage of the cycle. During the realization of the Check stage one should perform the measurement of the obtained results and compare them with the assumptions made at the first stage, i.e. planning. This stage results in assessing whether the implemented actions have been adequate and efficient. The assessment of the implemented actions should embrace the previously developed indicators. Furthermore, the obtained results of measurements ought to be documented. In order to make the actions of the following stage easier the team should gather as much information about the consequences of actions as it is possible. In the case of detected deviations from the plan it is necessary to define the causes of them. In the case of observed deviations from the planned corrective actions ought to be implemented within the Act stage. It should be remembered that the Deming cycle has the form of a loop; therefore, the process of enhancement and improvement in fact is endless. The knowledge acquired at the last stage of the cycle should be used at the stage of planning within the next improvement cycle. Thus, it is extremely important to
26
implement the solutions, which have had positive impact on the process, and modify the ones, which have failed to bring desirable results. If the developed plan has not been executed successfully, then a new plan should be prepared on the basis of the experiences from the realization of actions within previous stages. If the actions have been realized successfully, the expectation level should be higher in the next cycle in order to ensure continuous improvement. It should be remembered that all actions ought to be documented in accordance with the accepted rules. In addition, the information gathered during the realization of the PDCA cycle should be shared with the employees involved. At the first stage of the next PDCA cycle adequate modifications should be introduced on the basis of the knowledge obtained at the fourth stage of the previous cycle. The customer’s voice needs to be taken account of again, as customer needs might have changed (Wawrzynek, 2003). It is crucial that all actions be documented in accordance with the accepted procedures and that the information gathered during the realization of the PDCA cycle be shared with the employees involved in the process of introducing changing (Karaszewski, 2007).
1.5. Designing organizational structures An organizational structure is the distribution of component elements, which add up to a certain whole (an organization), and the interrelations between these elements. The elements, which can shape an organization, include: organizational workplaces, organizational cells and organizational units (Griffin, 2008; Krzakiewicz & Cyfert, 2017).
27
An organizational workplace may be defined as a place taken by an employee in a given organization along with the equipment needed to properly perform the tasks assigned to them. The workplace is defined by: the employee themselves (the employee, who performs specific tasks) tasks (because of which the workplace is created), tools (necessary for performing specific tasks), information (necessary for cooperation and performing specific tasks in a proper way), finances (they determine the worth of a given workplace as well as its costs and possible profit), duties (resulting from the scope of tasks; they determine what the employee must do), authorization (they define the rights of the employee, including the right to use equipment, demand crucial information, and make decisions), accountability (which should be proportionate to the granted authorization) (Zakrzewska-Bielawska, 2012). An organizational cell is simply a set of organizational workplaces, which realize similar functions and are supervised by the common leadership. On the other hand, an organizational unit is a set of organizational workplaces and cells, which have the same supervisor (ZakrzewskaBielawska, 2012; Krzakiewicz & Cyfert, 2017). Designing an organizational structure consists in creating organizational workplaces along with the specific specialization of work (i.e. with the comprehensiveness level of actions assigned to specific positions), grouping positions, establishing the hierarchical interrelations between
28
individual
workplaces,
and
coordinating
activities
assigned
to
the workplaces. The issue of distributing decision-making authorization in an organization should also be decided. Therefore, decisions ought to be made within the scope of centralization or decentralization. Among the principles of designing an organizational structure we may also mention the determination of certain rules of an organization’s operation in the form of regulations (Griffin, 2008; Bolland & Fletcher, 2014; ZakrzewskaBielawska, 2012). Grouping consists in merging similar and logically related organizational positions into organizational cells; and, consequently organizational cells into an organizational whole. The hierarchy of authority is a multi-level system within the organizational structure. The manager of the highest rank is located at the top of the hierarchy, whereas the following ranks are occupied by employees of lower ranks. Hence, the organizational structure reflects the interrelations, which include both the levels of the hierarchy and the range of management. The range of management is the number of people (or departments) under one manager (Stoner, Freeman & Gilbert, 1999; Krzakiewicz & Cyfert, 2017). The group of factors, which have impact on the range of management, includes: the competence of supervisors and their subordinates, the physical dispersion of subordinates, the scope of the manager’s work apart from the supervising duties, the level of desirable interactions, the scope of the occurrence of standardized procedures, the similarity of the supervised tasks, the frequency of the occurrence of new problems,
29
the preferences of supervisors and their subordinates (ZakrzewskaBielawska, 2012). Centralization is the process of maintaining authority and authorization by the managers of the highest rank, which consists in depriving the mangers of lower ranks of decision-making authority. On the other hand, decentralization is a process of delegating authority and authorization from employees of higher ranks to employees of lower ranks, i.e. to the lower levels of the organizational hierarchy. Among the factors, which determine the scope centralization and decentralization, we should distinguish: the size of the organization, the context of the organization, technology, tradition, the character of decision-making, the level of employees’ qualification, territorial consistency, etc. (ZakrzewskaBielawska, 2012). One of the most important objectives of designing an organizational structure should be to ensure the flow of information both horizontally and vertically, so as employees receive the information necessary for performing their tasks without delay and do not waste time on processing the information. It should be decided whether the organization is focused on the vertical communication and control (the traditional model of assuring efficiency) or on the horizontal communication and coordination (the modern model of a learning organization) (Krzakiewicz & Cyfert, 2017). Designing the organizational structure to a great extent should be adjusted to the context of a specific organization’s operation. We may observe some contexts of relative stability, but there are also contexts of a high level of unpredictability. In this regard, we may distinguish two
30
types of organizational structures – the mechanical and organic ones. The mechanical structure can be characterized by a relatively high level of fossilization and is more suitable for organizations, which operate in a stable context (then the specialization of employees may be of large importance. Other characteristic features of such a structure include inter alia the hierarchical structure of management, the high level of centralization and formalization, the domination of vertical communication channels, the great importance of loyalty, following instructions accurately, defining duties and methods for acting accurately, the specialized tasks of the organization’s members. The organic structure denotes a relatively flexible structure, which operates in an efficient way in the changing context, within which new problems and unexpected situations occur. In such a context, the knowledge of various disciplines is required. Moreover, the level of realization is relatively lower. This type of structures is characterized inter alia by the use of specific knowledge and skills of the organization’s members within the process of performing interrelated tasks. Consequently, the knowledge is concentrated in the whole organizations (and not only at the highest organizational level), the structure of authorization, control and communication (with the dominant role of horizontal communication) resembles a network, and an employee is evaluated on the basis of the contribution to achieving goals (Krzakiewicz & Cyfert, 2017). Among the typical types of organizational structures, we may distinguish the functional structure, the divisional structure and the project (team, matrix) structure. In the case of the functional structure the grouping of an organization’s members is performed on the basis of the fulfilled functions (Krzakiewicz & Cyfert, 2017). Individual organizational cells
31
at all levels of the hierarchy have the same function in common (Krzakiewicz & Cyfert, 2015). The functional structure is the most suitable for organizations focused on one product or on one market. It allows for the aggregation of employees’ knowledge and skills. Due to grouping employees of similar skills the functional structure enables the maximization of results within a specific area (Krzakiewicz & Cyfert, 2015; Bolland & Fletcher, 2014). The process of designing the divisional structure is justified if products offered by the enterprise are sold on numerous markets. Then the organization consists of many divisions, which, in fact, may operate as separate enterprises. Each division has its own structure (e.g. the functional structure) and is an independent unit managed by a specific strategic team. This type of structures is the most suitable for organizations, which operate on numerous markets or geographical areas and are focused on many products. On the one hand, the divisional structure is favorable in the unstable context of the organization. On the other hand, there might occur problems related to the communication between divisions and the coordination of actions. Moreover, as a result of differences in values, systems and expectations divisions may be conflicted with each other. However, the fact that the divisional structure helps each product to be better fitted to receivers’ needs, e.g. on a given geographical market, is an enormous advantage of this type. The project (team and matrix) structures are created in order to perform concrete tasks. The essence of these structures is the aggregation of concrete tasks within a given team of employees aiming at realizing a given undertaking in a specifically defined time at a certain level with the use of specific resources. Once the works related to the realization of the undertaking have been finalized, the project team is dissolved and its
32
members come back to their original organizational cells, are delegated to another project or leave the organization (Krzakiewicz & Cyfert, 2015).
1.6. Motivating Motivating is the next function within the management process, which to a great extent determines achieving goals. Stoner, Freeman and Gilbert (1999) state that motivation is a psychological condition, which contributes to the level of a human being’s engagement in something. Motivation is commonly considered a positive thing. Moreover, it decides about the level of an employee’s efficiency and may help managers to organize the attitude to work in an organization. However, it should be highlighted that motivation must be periodically renewed, as it tends to evaporate. On the other hand, according to Griffin (2008) motivation may be defined as a system of powers, which encourage people to behave in a specific way. Motivating ought to be treated as the basis for the efficient management of human capital in an enterprise (Bombiak, 2017). Leaders have motivational instruments (motivational stimuli) at their disposal, which can have a positive or negative impact on subordinates (Krzakiewicz & Cyfert, 2015). The efficiency of motivating is inextricably connected with the adequate selection of tools, which should be able to properly direct a given employee or evoke their appropriate attitude to the assigned tasks (Krzakiewicz & Cyfert, 2015; Bombiak, 2017). On the one hand, the identified needs of an employee ought to be satisfied. On the other hand, the objectives of a given organization should be realized. There are three basic groups of theories touching upon motivation – content theories, process theories and reinforcement theories.
33
Content theories focus on needs, which underlie employees’ behavior. Needs (and the sense of shortage) are transformed into internal motivation, which shapes the behavioral patterns of employees focused on meeting the emerging needs (Krzakiewicz & Cyfert, 2015). The key to creating the efficient motivational system is exploring the needs of employees. In the opinion of some researchers’ needs may be grouped according to the level of their importance.
selfactualization esteem love and belonging safety needs physiological needs
Figure 1.1. Pyramid of needs according to A. Maslow Source: own work based on: (Stoner, Freeman & Gilbert, 1999; Griffin, 2008; Krzakiewicz & Cyfert, 2015)
The most popular conception within this scope is the hierarchy of needs developed by A. Maslow, who claimed that people seek to meet their needs. They can be divided into five levels (Figure 1.1). This theory assumes that people will seek to meet the dominant (at a given time) need by climbing the levels of the hierarchy. In the first place the physiological needs, i.e. the most basic ones, must be satisfied. Then one must satisfy
34
the following needs: safety needs, love and belonging, esteem and selfactualization (Stoner, Freeman & Gilbert, 1999; Griffin, 2008; Krzakiewicz & Cyfert, 2015). In reference to an employee’s needs in the working environment the physiological needs include e.g. the adequate level of earnings and the working environment itself. Among the safety needs we may distinguish the sense of stability, protection from extortion/mobbing of supervisors and other colleagues, a just system of looking into complaints, the program of insurance and pension benefits. The love and belongingness needs include e.g. belonging to formal and informal groups, friendships at work. Esteem needs embrace e.g. the need of one’s positive image and self-esteem, the need of recognition and respect from other people as well as the desire to get promoted or rewarded and to obtain a certain status. The self-actualization needs are located at the top of the pyramid and are satisfied last. They may relate the willingness of a given employee to make constant progress as well as to combine work and passion, education and skills (Stoner, Freeman & Gilbert, 1999; Griffin, 2008; Krzakiewicz & Cyfert, 2015). Maslow assumed that at a given moment one can satisfy needs from a specific level of the hierarchy. Once these needs have been satisfied, the employee begins to be motivated by the needs within the following levels of this hierarchical system. Therefore, in accordance with this assumption taking the actions, which aim at satisfying needs of a higher level without proper satisfying the needs of lower levels, reduces the efficiency of the motivational system (Krzakiewicz & Cyfert, 2015). Another hierarchy of needs is the ERG motivation theory proposed by Alderfer (ERG – the abbreviation stands for the following English
35
words: existence, relatedness and growth). It distinguishes three categories of needs – existence needs (they are analogical to the physiological and safety needs in Maslow’s hierarchy), relatedness needs and growth needs. We may indicate two significant differences between the ERG theory and Maslow’s considerations. Maslow assumed that once a need has been satisfied it loses the capability of motivating further. He also claimed that people only go upwards in the hierarchy of needs. On the other hand, the ERG theory assumes that people do go upwards, but the downward movement in the hierarchical system is also possible. Alderfer assumed the existence of the element called “frustration-regression”, which means that if an employee is able to satisfy their (higher) needs within a specific period, they will feel frustration and return to the already satisfied lower need. Moreover, the ERG theory assumes that employees may want to satisfy their needs simultaneously, including the situation in which they try to satisfy all three categories of needs (Stoner, Freeman & Gilbert, 1999; Griffin, 2008; Krzakiewicz & Cyfert, 2015). The third need-focused theory of motivation is the McClelland theory. It distinguishes three needs of crucial impact on employees’ motivation – the needs for power, achievement and affiliation. The need for power is linked with the desire to affect other people, to control the surroundings, or, generally, to direct employees’ behavior. People with a highlydeveloped need for power are often open, energetic, do not avoid confrontation and are ready to defend their opinions. The following need – the need for achievement – may simply be understood as having the desire to be successful or lead to an effective conclusion of one’s activity. Employees with a strong need for achievement tend to set moderate goals for realization, take risk within limits, be willing to take on the responsibi-
36
lity for solving problems, like showing initiative during problem solving. They also get utterly involved in the tasks they realize, want to be rewarded for the results of their work, expect concrete and immediate feedback from managers, desire independence and diversity, and feel comfortable when their job is challenging, complex and motivating. Research has shown that employees, who have an outstanding need for achievement, are successful in competitive situations. The third need – the need for affiliation – may be understood as the desire for company and acceptance from other people. Employees with a strong need for affiliation are interested in helping other employees as well as doing the work, which allows them to develop interpersonal relationships and make friends (Stoner, Freeman & Gilbert, 1999; Griffin, 2008; Krzakiewicz & Cyfert, 2015). The two-factor theory by Herzberg is another conception based on the hierarchy of needs. According to its underlying assumption employees’ dissatisfaction and satisfaction result from two independent sets of factors – hygiene factors and motivators. Hygiene factors are external in relation to work. In addition, these factors cause dissatisfaction among employees, but they do not cause satisfaction. It means that if their level is not high enough they weaken employees’ motivation (cause dissatisfaction). Consequently, the high level of them means that employees do not feel discontent with their work, but at the same time they do not feel satisfaction. Hygiene factors should be treated as a certain minimum, which must by assured by a company within the adequate scope, so as employees realize the tasks they have been assigned to and remain in an organization. However, the factors themselves do not motivate people to do their work more efficiently. Among the basic hygiene factors, we may distinguish – remuneration, working conditions, managerial control, company policy,
37
relations with subordinates, relations with colleagues, occupational safety, position in the organization etc. On the other hand, motivators are internal in relation to work and have positive impact on employees’ motivation. The group of motivators includes: recognition, achievements at work, character of work, responsibility, promotion and (private and/or professional) self-actualization prospects (Stoner, Freeman & Gilbert, 1999; Griffin, 2008; Krzakiewicz & Cyfert, 2015). Therefore, the role of managers first and foremost consists in eliminating the factors, which have a negative impact on motivation, i.e. ensuring the adequate level of hygiene factors in order to satisfy basic needs and taking advantage of motivators with a view to satisfy higher needs and increase the level of employees’ efficiency (Krzakiewicz & Cyfert, 2015). Process theories focus on explaining the way an employee distributes their effort in order to achieve various goals and how they choose a specific way of behaving. These theories do not deny the importance of needs in the motivational process, but they assume that needs are not the only determinants of employees’ behavior (Krzakiewicz & Cyfert, 2015). At this point two process theories will be discussed – the justice theory and the expectancy theory. The justice theory assumes that by evaluating remuneration for the obtained results employees try to achieve the state of social justice. In this case justice is equivalent to an employee’s belief that they and other employees are treated equally. People assess justice according to the inputoutput relation. Input (outlays) is e.g. education, experience, skills, relevant effort, time and loyalty. On the other hand, output (results) is e.g. remuneration, recognition, promotion, social relations, and internal rewards. In order to obtain specific results at work an employee needs
38
to give their input. Employees compare their individual input-output relation with other employees (not necessarily – employees of the same organization). Consequently, on the basis of this comparison they assess whether they have been treated fairly. We may talk about the sense of justice when the relation between a given employee’s results and their input are comparable to analogical relations of other employees. The sense of justice may also be achieved when the results obtained by other employees are higher than the ones of a given employee on condition that the input given by these employees is proportionately bigger (Stoner, Freeman & Gilbert, 1999; Griffin, 2008; Krzakiewicz & Cyfert, 2015). If an employee as the result of the comparison comes to the conclusion that they are treated differently, then they feel injustice and might think they are “underestimated” or “overestimated”. According to the theory of justice in the case of an employee’s feeling treated unfairly they will take actions aiming at eliminating the perceived injustice through (Krzakiewicz & Cyfert, 2015): changing the input (outlays) – increasing or reducing an employee’s resources spent at work (e.g. reducing the intensity of work, improve education); changing output (results) – e.g. demanding a pay rise or a promotion; changing beliefs – if an employee cannot change input or results, they might modify their image of justice (e.g. in the form of subjective overestimation of their work’s status); changing the employer – for an employer offering work with a positive input-output relation. The theory of expectancy by Vroom assumes that the occurrence of an unsatisfied need is not a sufficient condition of motivating a human
39
being to achieve a specific goal. The employee also must hope that the way of behaving chosen by them leads to satisfying the need or obtaining the desirable state of affairs (Krzakiewicz & Cyfert, 2015). In Vroom’s motivational model the following relations are analyzed: the expected relation between input (effort) and output (results, achievements); the expected relation between results (achievements) and remuneration (results); the importance of the value of remuneration. The first relation refers to the probability of an effort’s leading to greater achievements of an employee. If employees do not take heed of the direct relationship between the effort made by them and the obtained results, their motivation will decrease. The second relation concerns the probability (perceived by an employee) of the obtained results’ leading to specific remuneration (result). As mentioned earlier, if an employee does not take notice of the relationship between the obtained results and specific (expected) remuneration, their level of motivation will decrease. On the other hand, the importance of the value of remuneration is simply the level of a given employee’s desire to receive specifically defined remuneration (result), or the attractiveness of a given remuneration (result) for the employee (Griffin, 2008; Krzakiewicz & Cyfert, 2015). The reinforcement theory explains in what way the results of earlier behavior affect future behavior within a cyclical process of learning (Stoner, Freeman and Gilbert, 1999). The theory assumes that employees’ behavior depends mainly on external factors – reinforcement measures, which are defined as any direct consequences of actions, which increase the probability of repeating (or abandoning) an employee’s specific ways
40
of behaving (Krzakiewicz & Cyfert, 2015). The law of effect is inextricably connected to the reinforcement theory. This law assumes that employees’ behavior, which leads to positive outcomes, will probably be repeated by them, whereas the behavior, which leads to negative consequences, will not be repeated. Thus, employees will repeat the positively reinforced behavior and avoid the behavior, which is not reinforced (Stoner, Freeman & Gilbert, 1999; Griffin, 2008; Krzakiewicz & Cyfert, 2015). Reinforcement is understood as any actions, which cause the repetition or, contrary to it, the abandonment of specific behavioral patterns. We may distinguish four types of reinforcement – positive reinforcement, rejection of moralization, punishment and gradual abandonment (Krzakiewicz & Cyfert, 2015): positive reinforcement – binding rewards with an employee’s desirable behavior (e.g. a bonus for exceeding the obligatory workload); the positive consequences (a reward) aim at stimulating a specific employee to repeat the desirable action in the future; rejection of moralization (avoidance) – it is the elimination of unpleasant consequences in the case of the desirable behavior (e.g. ceasing to being criticized by the manager, if a given employee eliminates their undesirable behavior) – employees will change their behavior in order to avoid unpleasant consequences (in the case of rejecting moralization the reinforcement of the employees’ desirable behavior also occurs); punishment – it is the reduction of an employee’s undesirable behavior through creating certain negative consequences (e.g. a reprimand for poorly done work); abandonment / elimination – it consists in the absence of reinforcement through a manager’s neglecting or utter withdrawal from the use of
41
positive stimuli (e.g. withdrawal from a pay rise, promotion, expressing gratitude or other benefits) (Stoner, Freeman & Gilbert, 1999; Griffin, 2008; Krzakiewicz & Cyfert, 2015).
1.7. Control
and
auditing
as
tools
for
evaluating
an organization’s operation Control and auditing are very often used interchangeably. Audit is informally defined as an expected process, whereas control can be unexpected. Moreover, an audit is believed to be related to the evaluation of management systems, whereas control refers to the evaluation of an organization’s operation, which is not necessarily true, as during an audit an organization’s operation is also evaluated. Contrary to audit, which is a random method, control embraces all areas. According to the International Association of Internal Auditors an audit is defined as “an independent, objective evaluation of an activity, which has an ensuring and consulting character and is conducted in order to bring value added to the organization as well as to enhance its operation. An internal audit supports organizations in achieving their planned goals through a systematic and consistent activity, which aims at evaluating and improving the efficiency of risk management, the control system as well as the processes related to managing an organization” (Wawak 2005, p. 125). In accordance with the definition included in the ISO 19011 international standard an audit is a systematic, independent and documented process of acquiring objective audit evidence along with its objective evaluation with a view to define the level of meeting the audit criteria (ISO 19011, 2018, p. 3.1). Auditors and the auditing personnel are
42
usually employees of a given organization, which have several years’ professional experience and the adequate education. On the other hand, control is defined as a process related to supervising and coordinating the course of the realized tasks, including comparing whether the obtained results are in agreement with the planned objectives. In the case of deviations control assumes corrective actions, i.e. actions aiming at eliminating the causes of the deviations. Therefore, we may state that auditing and control are equivalent, as they should be understood as a process, which aims at providing the leadership with the information needed for the evaluation of the functioning of specific organizational cells, actions, processes or the organization seen as a whole. In the case of detecting any irregularities within the organization’s functioning during an audit the leadership takes adequate actions aiming at eliminating potential deviations from the desirable state through decisions or recommendations for the evaluated entity (Wysokińska-Senkus & Senkus, 2017; Krzakiewicz & Cyfert, 2015; Flaszewska & Szymańska, 2012). Furthermore, the actions should be focused on the verification of the causes of irregularities. We may enumerate several basic functions of both control and auditing (Flaszewska & Szymańska, 2012): informative (providing information about the realization of tasks, results and irregularities), preventive (preventing undesirable phenomena), corrective and protective (eliminating undesirable behavior), inspiring (encouraging the achievement of better results), instructive (giving explanations, indicating methods for correct functioning, preventing undesirable phenomena and irregularities),
43
stimulating (causing specific changes in the mindset of controlled people). Both control and auditing help organizations to adjust to the changes within their context. A properly designed evaluation (control or audit) system should support the leadership in predicting the changes within the scope of the conditions of functioning and adequate reaction. Both control and auditing also help to limit the accumulation of mistakes. Individual minor mistakes do not have to be a problem for an organization and hardly ever lead to serious financial losses. However, the accumulation of minor mistakes may result in the occurrence of more severe consequences. Auditing and control also aim at dealing with the complexity of actions in an organization as well as with determining the weak and strong areas of the organization’s operation. The bigger the organization, (probably) the more it will need a complex and efficient evaluation system. The key advantage from enterprises’ perspective is that an efficient evaluation system should contribute to the reduction of costs and the improvement of production (Griffin, 2008). It should be stressed that an auditor or a controller ought to follow the principles enumerated below (ISO 19011, 2018): ethical conduct understood as the basis of professionalism, fair presentation of results, which entails auditors’ obligation to conscientiously and thoroughly present audit results, adequate professional care, which is reflected in diligence and reasonable auditing, confidentiality, which ensures information safety,
44
independence, which is the basis of the impartiality of the audit and the objectivity of audit results, the evidence-based approach, which results in auditors’ obtaining credible and reproducible audit conclusions in the systematic process of auditing, the risk-based approach. In the professional literature within the scope of management we may come across numerous classifications of control, which may be divided into (Griffin, 2008): control of operations – it is focused on processes, which allow the organization to transform resources into products (e.g. quality control); financial control – it is focused on the financial resources of the organization (e.g. budget control, financial report, profit and loss account); structural control – it is used to determine to what extent specific elements of the organization’s structure serve the purpose they have been designed for; strategic
control
–
it
aims
at
evaluating
the
efficiency
of the contribution of the organization’s strategy in achieving its goals. According to the control duration criterion we may distinguish (Krzakiewicz & Cyfert, 2015): introductory (preventive) control – it aims at preventing potential deviations from the accepted assumptions; ongoing control – realized in parallel with the controlled actions; provisional control – it is realized when it is needed;
45
final control – it consists in verifying whether the final outcome of a given action are in compliance with the previously accepted standards. Moreover, types of control may be classified according to e.g. type of the organization’s evaluated resources (control of physical resources, control of social resources, control of financial resources, control of information resources), location of the control body (internal control, external control), control activities (full control, fragmentary control), character of control (formal control, substantive control, documentation control, physical control) (Wysokińska-Senkus & Senkus, 2017). Control is a process realized in three basic phases. The first one is the development of standards and criteria (norms, models, patterns) or the indication of the desirable effects. The second phase is the evaluation of actions in reference to the developed standards or the indication of the actual effects. At this stage, the actually obtained results are compared with the previously accepted standards, i.e. the extent to which the results reflect the leadership’s expectations is determined. The range of tolerance to potential deviations from standards should be defined – the range must not be either too wide, or too narrow. One should remember that the control process is effective only if the benefits of it outweigh the outlays related to control activities. The second phase finishes with the evaluation of the information concerning the obtained results. The third phase of control consists in determining the method for eliminating the identified deviations and, if necessary, taking adequate corrective
actions,
or
not
taking any actions
and
continuing
the measurement of results. In the case of the decision to take corrective actions the deviations may be eliminated (once their cause has been
46
understood). Furthermore, it may be verified if the accepted standards are fair (e.g. due to the changes in the organization’s operation) (Krzakiewicz & Cyfert, 2015). The group of desirable characteristics of a well-functioning control system ought to include: desirability (control should support the objectives of a given organization), efficiency and quickness (possibly early revealing and elimination of irregularities of actions), objectivity, flexibility (in the control process we should remember about the dynamic character of the applied standards), comprehensibility (for both the controlling and the controlled entities) and resulting in improvement actions (Krzakiewicz & Cyfert, 2015).
1.8. Process management in managing an organization In order to lead an organization and act in a way that brings success the organization must be managed and monitored in a systematic and clear manner. The efficient management of the organization, which takes account of the functionality of the decision-making and the multidimensional nature of its outcomes, should be based on a homogenous and coherent management system. The radical answer to the imperfections of classical management was a conception called business process reengineering (BPR), which was first to take notice of and pay major attention to processes (Chammer & Champy 1994). According to the common definition reengineering is a fundamental rethinking and radical resigning of processes in an organization, which lead to breakthrough improvement in accordance with critical contemporary measures and the obtained results such as: costs, service, quickness.
47
Hence, business process reengineering can be considered a pioneer of the conception of process management, which has been transformed into a more mature and richer form on the basis of BPR’s achievements and received criticism. At the moment, the process approach is one of the most commonly used methods. The present subchapter aims at giving the description of the process approach in the context of a systems approach to management and the continuous improvement of an organization’s actions. The process approach amounts to the basis for creating a management system in an organization. Moreover, it is the basis for the realization of the total quality management (TQM) philosophy. The term “process approach” is often treated as a mere slogan. It is frequently used as an argument for creating management systems in a rather free or sometimes even chaotic way. However, it should be stated that “the
process
approach”
nowadays
should
be
treated
mostly
as a requirement, which allows for a thorough analysis of an organization’s activity, in particular in the context of quality, environmental protection as well as assuring occupational health and safety. One should also remember that the application of the process approach, ensuring the stability of the functioning of processes, and then enhancing them to a great extent affect the efficiency of an organization’s actions and development. In relevant professional literature, the importance of the process approach is often stressed in relation to the efficiency of an organization’s actions (Mosslam & Ghoniem, 2006; Krivokapic et al., 2007; Flynn, Schroeder & Sakakibara, 1994). Process management incorporates the methods for gradual process improvement including the kaizen and benchmarking conceptions, which
48
were not embraced by the early radical version of reengineering. Therefore, it should be stated that process management is a wider, more mature conception, which is suitable not only for the times of revolutionary changes
but
also
for
the
times
of
evolutionary development
of organizations. Along with other management methods (e.g. controlling, the application of the balanced scorecard – BSC) the process approach is now the most frequently used tool in organizations focused on improving their actions. It is virtually impossible to manage an enterprise in an efficient way without the use of an adequate information technology. Management itself is an extremely complex process, as it is difficult to determine all its stages and component elements. It mainly depends on the option chosen by the manager, who needs to take account of the present situation of their organization, though. While defining processes in an organization one should take account of many significant elements such as the beginning and end of process, structure of process, input and output elements, suppliers and clients, process owner, process evaluation criteria, impact on the whole organization, process measures, measurement tools, process evaluation tools, process directing methods and criteria, resources and exceptions, as well as process documentation and the documentation of the course of the process (Biazzo & Bernardi, 2003). Therefore, we may say that a process is a chain of consecutive changes and states, which is ordered in time. A physical system is always a medium of each process. Every subsequent state/change is caused by the preceding state/change or by the external impact on the system. In organizations all the actions, which add up to the totality of the production or service activity of a given enterprise may be called a process. It is the global sequence of realized
49
tasks, which aim at transforming the initial state into the final state in accordance with customer expectations. The process approach to a great extent also aims at improving the efficiency and effectiveness of an enterprise’s actions, i.e. meeting customer expectations in a more adequate and accurate way (Bullington et al., 2002). The very process first and foremost must have a high value for the customer. Hence, clients should be divided into internal and external ones. The latter must be treated with a special interest. Surely, all processes, despite their distinction, will not be realized in total isolation in relation to other component elements of the management system. In general, processes can be divided into three basic groups: management processes, main processes and support processes. An exemplary activity realized within specific processes has been presented in table 1.1. The process structure of a management system in an organization is determined by the presentation of the way processes are interrelated within the organization. It should be remembered that the process structure of a management system to a greater or lesser extent stems from the organizational structure. On the other hand, the organizational structure of an enterprise reflects a given, accepted in practice, management method as well as the way the enterprise and its production process are organized. Consequently, the organization of the production process depends on the type and range of manufactured products as well as relevant technologies, logistic activities, which support production, providing the necessary resources and the process location, etc.
50
Table 1.1. Classification of processes occurring in an organization Management processes strategic management
Main (customeroriented) processes receiving an order
Support processes human resource management
information management market analysis
purchases
budget management
product design
storage
environmental management
process design
maintaining movement
safety management
feedback from the market
communication
changes and innovativeness
complaint management
maintaining order
Source: own work
The first step of ensuring the efficient management of an organization is the distinction of main processes. Depending on the specificity of a given organization, there might be from several to a dozen or so main processes. Most organizations, which treat the management process seriously create different types of documents – development strategies and various kinds of visions, which formulate the most promising directions for future actions as well as the strategic plans of their development. Once the main processes have been identified they should be confronted with the objectives, which have been determined in the organization’s development strategy, and presented in the form of a process map. Strategic objectives should always be reflected in the realized processes. Such confrontation allows for taking notice of the elements, which have not been programmed properly yet. It also increases the possibility of transferring resources from the locations in which there an excess amount of them to the locations in which the amount of them is not sufficient. The abovementioned arguments
51
show how important a well-defined development strategy of an enterprise is. Moreover, it has a crucial impact on the process model developed by the enterprise. While applying the process approach, which allows for the efficiency of the realization of actions in an organization, one should: define main objectives, identify elements, which will add up to main processes, develop the course of processes in an organization in a thorough and comprehensive way, take actions in accordance with the planned course of a process, identify and define objectives for a process, specify certain measures, which allow for evaluating the efficiency and effectiveness of the realized process, monitor process abilities, continuously improve and update processes, so as they are as efficient as it is possible. The continuous effort to improve, update and innovate is an important principle of the management of an organization, as it allows for remaining on the market, acquiring new clients and gaining profits. The processes conducted in organizations are: one of the main factors of improving competitiveness, an important catalyst of the realization of the enterprise’s development strategies, a factor, which allows an enterprise to perform its activity in agreement with customer expectations, a factor, which makes it easier for the members of an organization to enhance their qualifications,
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an instrument, which contributes to achieving the satisfaction of both employees (who can fulfill themselves professionally) and customers (who consume products of high quality, which to a great extent meet their expectations. In the context of the fact that a specific organization can manage processes well, which means that its actions are efficient, it is even more important to make effort to improve these actions. By applying the process approach we are sure that the decisions are made not only by managers. The decision-making is also performed by employees of lower ranks, who are directly involved in a given process. In this case, the organizational structure visibly becomes more horizontal. Consequently, the decisionmaking performed by the people dealing with specific issues becomes natural. No longer is it the domain of managers and top leaders. Moreover, the realized actions get more efficient and improved. It should be stressed that all processes may occur in several different versions. It is crucial for satisfying all customers, who have different tastes. Furthermore, in various types of organizations a large number of professions are merged. Narrow specialization or performing one specific task by one person becomes unprofitable. This form of work becomes less and less common in the contemporary business world. The process approach calls for merging individual activities and actions so as one person is able to monitor the whole process. If the realized process is too complex to make one person responsible for it, most often a team is created in order to take the responsibility for the realization of a specific process. In organizations, which are managed efficiently with the use of the process approach, specific tasks are realized only at the locations making a lot of sense. Processes must be conducted in such places within the organizational
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structure that allow for their coherence and maintaining their efficiency and effectiveness. It helps to save a significant portion of costs, which is crucial for ensuring the efficiency of actions within the whole organization. The application of the process approach does not exclude the natural order of work in an organization. In most organizations, it is a linear order, which means that the end of one task determines the beginning of the subsequent one. However, this method is sometimes unprofitable, as in some instances it is possible to perform several actions simultaneously. It is a serious argument for introducing non-linearity in all places, where one might expect benefits in the form of saving the precious time. Furthermore, the number of various types of controls and checks is reduced significantly. Enterprises often deal with the excessive number of unnecessary controls. The process approach assumes the reduction of control actions to the critical minimum. The application of the process approach in an organization helps to eliminate a vast number of mistakes, both external and internal in relation the organization. It allows for both saving time and reducing costs. It should be stressed that the use of the process approach encourages the recognition of those, who invest in self-education, feel responsible for the company and its success. Not only does it refer to employees but also to the company’s clients. Therefore, it is vastly important to identify and define both the internal and external clients along with their expectations. It is also recommended to determine the future benefits of an enterprise resulting from contacts with a specific client (Skrzypek, 2000). The manager as well gains exceptional importance. They become a bond, the point, which connects human resources and physical resources in an organization. The manager coordinates the whole process and is responsible for the realization of it as well as for
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contact with client. The so-called mixed operations, in particular the centralized and decentralized ones, become increasingly popular. Nowadays various elements of these two models are frequently combined. It is possible thanks to the use of the latest technologies. It should be stressed that it also contributes to meeting customer and market needs and expectations in a relatively easy way. In order to ensure the efficiency of an organization’s actions the continuous improvement of processes realized in the organization should be assured. The improvement of processes leads to the modification of the existing state resulting the increased efficiency and effectiveness of the process. The improvement is applied with a view to rationalized the process within a small area of its functioning or to change only some elements of the process. The efficient process management broadens an organization’s capabilities within the scope of forecasting market changes, managing and responding to them. Furthermore, it maximizes the opportunities related to economic activity. The adequate process management may also reduce inefficiency as well as limit the number of mistakes resulting from the excessive amount of business information and related actions. Maintaining a good condition of a company by the economical process management has become an essential factor of keeping the competitive leverage. However, the development of a process management system may be difficult and time-consuming. Moreover, the only effect of such a system is frequently additional workload for some employees (Biazzo & Bernardi, 2003).
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1.9. Bibliography Biazzo, S., Bernardi, G. (2003). Process Management Practices and Quality Systems Standards. Risks and Opportunities of the New ISO 9001 Certification, Business Process Management Journal, vol. 9, No 2, pp. 149-169. Bolland E., Fletcher F. (2014). Problemy biznesowe, Wydawnictwo Naukowe PWN, Warszawa. Bombiak E. (2017). Motywowanie pracowników w przedsiębiorstwie, in: Kardas J. S. i Wójcik-Augustyniak, M. (Ed.), Zarządzanie w przedsię-biorstwie, Difin SA, Warszawa. Bullington, S.F., Easley, J.Y., Greenwood, A.G., Bullington, K.E. (2002). Success factors in initiating versus maintaining a quality improvement process. Engineering Management Journal, No. 14(3), pp. 8-14. Certo, S. (2000). Modern management. Diversity, Quality, Ethics & the Global Environment, Prentice Hall. Chammer, M. Champy, J. (1994). Reengineering the Corporation. A Manifesto for Business Revolution, Harper Business. Drucker, P.F. (2002). Myśli przewodnie Druckera, Wydawnictwo MT Biznes, Warszawa. Drucker, P.F. (2017). Menedżer skuteczny, Wydawnictwo MT Biznes, Warszawa. Flaszewska S., Szymańska K. (2012). Kontrola w organizacji, in: Zakrzewska-Bielawska A. (Ed.), Podstawy zarządzania. Teoria i ćwiczenia, Oficyna, Wolters Kluwer business, Warszawa. Flynn, B.B., Schroeder, R.G., Sakakibara, S. (1994). A Framework of Quality Management Research and an Associated Measurement Instrument, Journal of Operations Managements, vol. 11, pp. 339-366. Glinka, B., Kostera, M. (Ed.). (2012). Nowe kierunki w organizacji i zarządzaniu. Organizacje, konteksty, procesy zarządzania, Warszawa, Wydawnictwo Oficyna Wolters Kluwer business.
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Griffin, R.W. (2008). Podstawy zarządzania organizacjami, Wydawnictwo Naukowe PWN, Warszawa. Hamrol, A., Mantura, W. (2003). Zarządzanie jakością. Teoria i praktyka, Wydawnictwo Naukowe PWN, Warszawa-Poznań. Huber, G.P. (1980). Managerial Decision Making, Scott, Foresman, Glenview. ISO 19011. (2018). Guidelines for auditing management systems, Geneva. Judge, W.Q., Miller, A. (1991). Antecedents and Outcomes of Decision Speed in Different Environmental Context, Academy of Management Executive, pp. 449-463. Karaszewski, R. (2007). Zarządzanie jakością. Koncepcje, metody i narzędzia stosowane przez liderów światowego biznesu, Difin, Warszawa. Katz, D., Kahn, R.L. (1966). The Social Psychology of Organizations, New York: Wiley. Kleniewski, A. (2016). Kontekst organizacji i strony zainteresowane, Problemy Jakości, No. 3. Kostera, M. (2001). Podstawy organizacji i zarządzania, Wydawnictwo Wyższej Szkoły Przedsiębiorczości i Zarządzania im. Leona Koźmińskiego w Warszawie, Warszawa. Koźmiński, A.K., Piotrowski, W. (2005). Zarządzanie. Teoria i praktyka, Warszawa. Krivokapic, Z., Perovic, M.J., Jovanowic, J., Vujowic, A. (2007). QMS Concept on the Base of Process Approach, International Journal for Quality Research, Vol. 1, No. 4, pp. 259-266. Krzakiewicz K., Cyfert S. (2015). Podstawy zarządzania organizacjami, Wydawnictwo Uniwersytetu Ekonomicznego w Poznaniu. Krzakiewicz K., Cyfert S. (2017). Wprowadzenie do nauki o organizacji, Wydawnictwo Uniwersytetu Ekonomicznego w Poznaniu.
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Ludwig-Becker, M. (1999). Quality management principles as top team performance practices ISO 9000 criteria re-interpreted, Team Performance Management, Vol. 5, No. 7, pp. 207-211. Matuszak-Flejszman, A., Pochyluk, R. (2016). Istota kontekstu organizacji w systemowym podejściu do zarządzania, Studia Oeconomica Posnaniensia, vol. 4, No. 10. Mosslam, A.I., Ghoniem, A.M. (2006). A Process Approach-based System for Management System Documentation, Housing and Building Research Center Journal, Vol. 2, No 2, pp. 98-108. Piotrowski, W. (2002). Organizacje i zarządzanie – kierunki, koncepcje, punkty widzenia, in: Zarządzanie: Teoria i praktyka, red. Koźmiński, A.K., Piotrowski, W. Warszawa, Wydawnictwo Naukowe PWN, pp. 615-765. Skrzypek, E. (2000). Jakość i efektywność, Wydawnictwo Marii CurieSkłodowskiej, Lublin. Stoner J. A. F, Freeman R. E., Gilbert D. R. (1999). Kierowanie, Polskie Wydawnictwo Ekonomiczne, Warszawa. Wawrzynek, J. (2003). Idee W.E. Deminga i ich znaczenie w kształtowaniu japońskiej orientacji na jakość, in: Konarzewska-Gubała E. (Ed.), Zarządzanie przez jakość. Koncepcje, metody, studia przypadków, Wydawnictwo AE we Wrocławiu. Whyte, G. (1991). Decision Failures: Why They Occur and How to Prevent Them, Academy of Management Executive, Vol. 8, pp. 23-31. Wysokińska-Senkus A., Senkus P. (2017). Kontrolowanie procesów pracy, in: Kardas J. S. i Wójcik-Augustyniak, M. (Ed.), Zarządzanie w przedsiębiorstwie, Difin SA, Warszawa. Zakrzewska-Bielawska A. (ed.) (2012). Podstawy zarządzania. Teoria i ćwiczenia, Oficyna, Wolters Kluwer business, Warszawa.
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2. SYSTEMS APPROACH TO MANAGEMENT IN AN ORGANIZATION 2.1. Introduction The application of the systems approach to management contributes to the improvement of process realization in an organization. The systems approach to management is realized in organizations thanks to the implemented management systems based on the requirements of international standards. It should be stressed that these standards are applicable to all organizations independently of their character, size or type of activity. Therefore, they can be used in small, medium-sized and large enterprises, which operate within the areas of production and services. Keywords: standardized management systems, quality management system, environmental management system, health and safety management system, ISO 9001, ISO 14001, ISO 45001
2.2.
Essence of the systems approach to management
It is important to define what a system is. The definition proposed by Edward Deming states that a system is a set of functions or actions (sub processes, stages, which are often called “elements of a system”) in an organization which contribute to its objectives (Matuszak-Flejszman, 2016). In the ISO 9000 standard a system was defined as a set of interrelated or interacting elements (ISO 9000, 2015, p. 3.5.1). Consequently, a management system is a set of interrelated or interacting elements of an organization to establish policies and objectives,
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and processes to achieve those objectives (ISO 9000, 2015, p. 3.5.2). It should be stressed that a management system can address a single discipline or several disciplines, e.g. quality management, financial management or environmental management. On the other hand, the management system elements establish the organization’s structure, roles and responsibilities, planning, operation, policies, practices, rules, beliefs, objectives and processes to achieve those objectives. The scope of management system can include the whole of the organization, specific and identified functions of the organization, specific and identified sections of the organization, or one or more functions across a group of organizations (Matuszak-Flejszman, 2016). Therefore, it is important to assure a systems approach to management in an organization. The identification, understanding and management of interrelated processes understood as a management system contributes to increasing the efficiency and effectiveness of actions in an organization. Consequently, it brings multiple benefits. The group of key benefits of applying a systems approach to management include:
merging processes leading to reaching organizational and business effects,
the ability to focus on key processes with the use of support processes,
building partners’ trust through consistency, efficiency and effectiveness of the organization. Assuring a systems approach to management implies (Matuszak-
Flejszman, 2016):
building the structure of a management system which will allow reaching business goals in the most efficient and effective way,
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understanding the relationships between processes within a management system,
a systematic approach to balancing and binding specific processes realized in an organization,
better understanding of roles and responsibilities necessary to reach business goals and reduce barriers between functional departments,
understanding the organization’s potential and limitations linked with resources before undertaking new challenges,
defining the rules of handling,
continuous improvement of the management system on the basis of measurement, monitor, assess, evaluation and result analysis. In order to implement systematic solutions in an organization
the following three conditions should be met (Matuszak-Flejszman, 2016): an organization shall set an objective or objectives, which we plan to realize during the implementation of a management system, an organization shall plan actions (processes, subprocesses), which should be realized in accordance with the accepted rules along with the division of responsibilities and competence assigned to these actions, an organization shall establish rules of cooperation and interrelations between processes and personnel. Hence, it is important that the PDCA model be used within the systems approach in an organization. This model is the basic systematic tool for the continuous improvement of processes in an organization. In order to ensure the systems approach to management four stages of activity are applied. This approach is called the PDCA approach (P – Plan, D – Do, C – Check, A – Act), the Deming cycle or a systems approach to 61
management. It was developed and promoted by one of the biggest authorities on quality – William Edwards Deming. It should be emphasized that the requirement of constant repeating of the cycle is the biggest advantage of the PDCA model. The application of the four-phase Deming approach becomes then an element of an employee’s everyday duties and the organization is able to be more efficient in meeting the individualized customer requirements thanks to the knowledge obtained in the process (Pande, Nauman & Cavanagn 2003, p. 36). The use of the PDCA cycle is an action realized by teams of people from different organizational cells with a view to make effort to improve processes. The barriers, which occur between departments, do not have a positive impact on the pace of introducing changes. All employees should be taught to solve problems together, share experiences and learn from mistakes. If a tool like the Deming cycle is supported by discussions with employees from different departments of an organization, it will allow for scooping the gist of problems and draw constructive conclusions (Lock, 2007). According to Deming, it is wrong to blame employees for mistakes in the realization of processes. He claimed that only 6% of deviations in processes are caused by the mistakes of employees, who realize these processes. Consequently, 94% of problems stem from the flaws of the management system itself (see more: Latzko, Deming & Saunders 1995). According to Deming it is correct to delegate decision-making authority to the cells located at the bottom of the organizational structure so as to make them feel responsible for the organization they work for. The employees should be allowed to take action on their own in order to slightly improve their range of duties. The leadership surely should approve of taking broader actions, which significantly change the way processes are realized or call for
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considerable effort and resources. Such an approach should be conducted along with intense educational activity, which will encourage employees to self-improvement (Łańcucki, 2014). Despite the specific qualifications for the work they do, according to Deming employees should be encouraged to continuously develop their skills. The leadership of the organization should create proper conditions for their employees to broaden their knowledge and skills. The use of the Deming cycle also entails spending related to long-term projects. According to Edward Deming it is wrong to focus on short-term plans, which provide the opportunity to gain considerably rapid results. He thinks it is more important to deeply explore customer needs, and then on this basis to develop permanent objectives in reference to improving quality (Matuszak-Flejszman, 2016). Deming’s views on the necessity to introduce a systems approach to management in an organization are appreciated by the contemporary authorities on management. The Deming principles and the obligatory use of the PDCA approach in the systematic management process in an organization as well as the continuous improvement process have been incorporated in the most popular standardized management systems – the standards published by the International Organization for Standardization (ISO). The use of the approach proposed by Shewart and developed by Deming may as well occur (Konarzewska-Gubała, 2003, p. 55): in the process of continuous improvement, during breaks between project stages, during the implementation of changes, during the implementation of a new solution,
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during the review of the improvement process, in order to decrease total costs through constant elimination of minor mistakes within the accepted technical level. On the other hand, within Six Sigma a five-stage improvement cycle: define–measure–analyze–improve–control (DMAIC) (Pande, Nauman & Cavanagn 2003, p. 36). This requirement of constant repetition of the cycle is its biggest advantage. The cycle then becomes an element of an employee’s everyday duties, and the organization is able to efficiently meet the requirements specified by the customer on the basis on the acquired knowledge (Pande, Nauman & Cavanagn 2003, p. 36). It should be emphasized that the use of the PDCA cycle is a collective action. According to Deming a team of people coming from different cells of the organization should be created with the view to conduct mutual work for the sake of improving quality. Barriers between departments do not have a positive impact on the speed of the introduced changes. All employees should be taught about the collective method for problemsolving. These tools, such as the cycle, supported with the discussion among employees from different departments of the organization will allow an in-depth analysis of the problem and making constructive conclusions (Edge 2002, p. 616). The question of the application of the PDCA cycle was presented in the context of the systemic management of an organization. However, the Deming cycle can be used to solve all kinds of dynamic problems, which are not necessarily linked with the issue of quality management (Matuszak-Flejszman, 2016). It may be as well efficiently used in our everyday lives. It should be noted that an organization can use the extended Deming cycle, which embraces distinguishing more detailed actions at the 64
phase of planning and realization. Such an extension was developed by Kaoru Ishikawa (1998). Within the extended elements related to planning and realization we ought to take notice of defining objectives and tasks, determining methods for achieving actions needed for planning. We also should educate and train the essential element, which assures the efficient implementation of a management system.
In practice meeting
the conditions described above ought to lead to (Tachiki, 2008): formulating strategic and current objectives of the organization, process identification, determining and documenting rules of handling, applied practices and behaviors in reference to the identified processes, defining responsibilities, authority, competence and the scope of duties of people responsible for specific actions embraced by the management system, the identification of interrelations between processes, establishing rules of communication and communication tools, assuring necessary resources to realize the tasks within the system, including system maintenance. A systems approach to management is realized in organizations through the implemented management systems based on the requirements of international standards (e.g. ISO 9001, ISO 14001, ISO 45001, ISO 22000). It should be emphasized that these standards are applicable to all organizations, independently of their character, size and type of activity. Thus, they may be used by small, medium-sized and large enterprises, both production- and service-oriented.
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2.3. Standardized management systems as tools for enhancing work organization A particularly dynamic development of “private standards” took place in late 1980s and early 1990s when the so-called “consortia” and “fora” created industrial specifications, especially within the scope of information technology as well as information and communication technology (ICT). Therefore, a decision was made to create international standards developed by the International Organization for Standardization (i.e. the so-called ISO standards). An international standard provides rules, guidelines or characteristics for activities or for their results, aimed at achieving the optimum degree of order in a given context. It can take many forms. Apart from product standards, other examples include: test methods, codes of practice, guideline standards and management systems standards (www.iso.ch). The international standards related to a systems approach to management, which have been developed since 2013, are based on the High-Level Structure (HLS), which is a standardized way of ISO management system standards. Management in an organization includes inter alia the following areas: quality management, environmental management, occupational health and safety management. Entrepreneurs voluntarily started to implement management systems as early as 1970s. The integration with the general management system of an enterprise is characteristic of these management systems. Furthermore, the integration aims at continuous improvement, which allows a systemic manner of managing processes occurring
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in the organization along with the assurance of the high quality of products and services. Moreover, it all assures the minimized negative environmental impact and safe working conditions for the organization’s employees (Matuszak-Flejszman, 2010). The idea of standards related to a systems approach to management is centered on continuous improvement, which is performed at four consecutive stages: 1. Plan – defining the way of performing actions, which is supposed to result in achieving a specific quality objective. 2. Do – realizing the previously planned actions. 3. Check – analyzing the previously taken actions; checking the level of the realization of the planned objectives (i.e. the ones included in the plan). 4. Act – on the basis of conclusions we improve processes, as well as deliver ideas and solutions, which can be taken into account in the following plans. Figure 2.1. shows the process approach applied to the ISO 9001, ISO 14001 and ISO 45001 standards including the four phases of the Deming cycle. The PDCA concept is an iterative process used by organizations to achieve continuous improvement. It can be applied to a management system and to each of its individual elements as follows: 1) Plan: establish the objectives of the system and its processes, and the resources needed to deliver results in accordance with customer requirements and the organization’s (quality, environmental, safety) policies, and identify and address risks and opportunities; determine and assess occupational health and safety risks, occupational health and safety opportunities and other risks and other opportunities,
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establish occupational health and safety objectives and processes necessary to deliver results in accordance with the organization’s occupational health and safety policy; 2) Do: implement the processes as planned; 3) Check: monitor and measure activities and processes and the resulting products and services against quality, environmental and occupational health and safety policies, objectives, requirements and planned activities, and report the results; 4) Act: take actions to continually improve the quality, environmental and occupational health and safety performance to achieve the intended outcomes. In specific standards, an organization’s surroundings are subjected to changes, whereas an occupational health and safety management system employees play a particularly significant role. In a systems approach to management a stakeholder is the most important subject of an organization, because they perform two functions: first, they define their requirements in relation to a specific product, service or process, next they define the satisfaction level from the realization of a process. A stakeholder can be a customer, an employee or another interested party e.g. an entity interested in an organization’s environmental performance. On the basis of requirements defined by a stakeholder an organization plans a product, a process, or a service. Then the plan is realized, as well as necessary measurements, analysis, evaluation and improvement are performed. The transfer of information for the next planning of the process, product or service realization may be called feedback, which is the basic element of a systems approach to management and, consequently, of the continuous improvement of processes, products and services.
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Figure 2.1. Deming cycle in the process of quality, environmental and health & safety management system improvement Source: own work based on (ISO 9001, 2015; ISO 14001, 2015; ISO 45001, 2018)
The approach, which takes account of quality, environmental and occupational health and safety management systems, encourages organizations to analyze customer requirements, employee needs as well as the requirements of interested parties. Moreover, a management system calls
for
determining
processes
which
contribute
to
achieving
a product/service accepted by the client and keeping these processes monitored in compliance with the requirements related to environmental
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protection and safe and healthy working conditions for employees (Matuszak-Flejszman, 2016). It should take account of continuous improvement of actions aiming at specific performance of the organization. A quality management system, an environmental management system and an occupational health and safety management system may create framework of continuous improvement in order to increase the possibility of satisfying the clients, employees and other interested parties (Lee, Shiba & Wood, 1999). It allows the organization and its clients to trust that it is capable of providing products or services, which consistently meet requirements. The use of a systems approach to management in an organization brings numerous benefits. Management systems can help organizations to increase the level of customer satisfaction, to improve working conditions for employees and rise the satisfaction of interested parties through presenting pro-ecological activity. Clients demand products and services of given characteristics, which meet their needs and expectations. These needs and expectations are expressed in the specifications of the product/service and are collectively called customer requirements. Customer requirements can be specified by the client in a contract or may be defined by the organization itself. In both cases the clients ultimately decides about the possibility of accepting the product/service. Organizations aim to continuously improve their products/services and processes, as the customer needs and expectations are subjected to changes. Another factors in this context are competitive pressure and technical progress. Interested parties, such as the society, local authorities, governmental authorities, ecological groups, demand that an organization minimize its negative environmental impact and aim to reduce pollution.
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Interested parties also include clients who through their demands can add ecological requirements of the product or service. Requirements of the interested parties entail many significant environmental aspects, which have various environmental impacts which, unfortunately, to a lesser or greater extent, may be and often are a burden for them. On the other hand, the occupational health and safety system is necessary in an organization due to the fact that employees call for assuring safe and healthy working conditions, reducing hazards, as well as assuring proper preventing actions (Matuszak-Flejszman, 2016). Despite the fact that the quality management system and the environmental management system are the most popular in the world, it should be stressed that there are also other management systems: food safety management systems ISO 22000 and ISO 22004, occupational health and safety management systems ISO 45001, business continuity management systems ISO 22301 and ISO 22313, security management system ISO 34001, laboratory biorisk management system ISO 35001, road traffic safety (RTS) management systems ISO 39001, quality management for automotive industry ISO/TS 16949, educational organization management systems ISO/NP 21001 or quality management systems in local government ISO 18091, management of security printing processes ISO 14298, quality management systems for medical devices ISO 13485, management systems for sustainable development of communities ISO 37101, innovation management system ISO/AWI 50501,
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energy management systems ISO 50001 and ISO 50004, event sustainability management systems ISO 20121, water efficiency management systems ISO 24526, information security management systems ISO 27001, management systems assuring the accreditation of testing laboratories in compliance with ISO 17025, eco-management and audit scheme (EMAS), environmental programs, e.g. cleaner production or responsible & care related to environmental management. The implementation of various management systems in organizations without the process of their realization, instead of making the operation easier, very often makes it very difficult. That is why an organization’s leadership seeks to integrate separate management systems into one efficient management system. Moreover, ISO standards have been once again modified and now include the so-called high level structure developed to unify the structure. All standards should respect and share a common consistent core (ISO/IEC Directives, 2014): a common general structure (table of contents): identical chapters, article numbers, and chapter, article or clause titles, etc., introductory texts for identical articles, identical wording for identical requirements, common terms and core definitions. The characteristics and requirements specific to each standard are inserted into this structure in the appropriate chapters. This standardization aims to foster compatibility among various management system standards to facilitate their integration and
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implementation by certified organizations. The first standard drafted in compliance with the HLS was ISO 55001 – Asset Management System. Due to the large number of management standards the following part of the present chapter describes three selected systems, which are most commonly applied in organizations: quality management system, environmental management system and occupational health and safety management system.
2.4.
Quality management system according to ISO 9001
A quality management system, like other systems published after 2014, includes the high-level structure as follows: Clause 1 – Scope; Clause 2 – Normative references – includes documents specific for a given area, e.g. quality, environment, safety; Clause 3 – Terms and definitions – includes common terms and definitions as well as terms and definitions specific for a given industry; the ordering of terms and definitions should be in compliance with the system of terminology of each standard; Clause 4 – Context of the organization – includes requirements linked with understanding the organization and its context along with understanding the needs and expectations of interested parties as well as defining the scope of the management system; Clause 5 – Leadership – includes requirements related to leadership and engagement, policy and roles, responsibilities and improvement in the organization; Clause 6 – Planning – includes requirement within the scope of risk 73
and opportunities as well as objectives and plans for achieving them; Clause 7 – Support – includes the issues linked with support, competence, awareness, communication and documented information along with their development, updating and monitoring; Clause 8 – Operation – includes questions related to planning, implementing and monitoring the processes needed to fulfill the standard’s requirements, as well as the implementation of planning, connected with risk, opportunities and the objectives set by the organization through defining criteria for processes, implementing monitoring of processes according to the criteria, and keeping documented information within the scope which allows gaining trust that the processes have been realized as planned; Clause 9 – Performance evaluation – includes requirements linked with monitoring, measurement, analysis and evaluation as well as the internal audit and management review; Clause 10 – Improvement – includes issues related to non-compliance and corrective actions as well as continuous improvement. The adoption of a quality management system according to ISO 9001 is a strategic decision for an organization that can help to improve its overall performance and provide a sound basis for sustainable development initiatives. The potential benefits to an organization of implementing a quality management system based on ISO 9001 are (ISO 9001, 2015): the ability to consistently provide products and services that meet customer and applicable statutory and regulatory requirements, facilitating opportunities to enhance customer satisfaction, addressing risks and opportunities associated with its context and objectives,
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the ability to demonstrate conformity to specified quality management system requirements. A quality management system should be implemented in a way that it takes account of individual requirements of the organization, product or service. It consists of actions through which the organization identifies its objectives as well as it defines processes and resources needed for achieving the desired results. Thanks to a quality management system the organization can manage interrelated processes and resources required to provide value and bring results for significant interested parties. It should also be stressed that a quality management system allows the top leadership to optimize the use of resources by taking account of long- and short-term consequences of their decisions, as well as the system assures resources to identify the actions embracing the planned and unplanned consequences of providing products and services. A properly implemented quality management system has several significant characteristic features. It should be (Matuszak-Flejszman, 2016): consistent – when it is able to react as a whole in a varied way to external stimuli, efficient – defined with the level at which planned actions are realized and planned results achieved, effective – when there is a relation between the achieved results and the relevant resources used, synergetic – a quality management system as a whole is more than a set of individual component actions, preventive – it means that systemic actions should mainly aim at preventing problems and eliminating their consequences.
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The basic reasons for implementing quality management systems are: assuring that products and services meet requirement (legal, technical, clients’ and internal), assuring customer satisfaction. A quality management system consists in the process approach and the risk-based approach. It should be stressed that both terms at present ought to be treated mainly as a requirement that enables a thorough analysis of an organization’s operation, especially in the aspects of quality, environmental impact and ensuring occupational health and safety. It also ought to be remembered that the use of the process approach and the risk-based approach, assuring the stability of processes and then improving them to a large extent influence the efficiency of actions and the organization’s development. Risk-based thinking is essential for achieving an effective quality management system. The concept of risk-based thinking has been implicit in previous editions of ISO 9001 including, for example, carrying out preventive action to eliminate potential nonconformities, analyzing any nonconformities that do occur, and taking action to prevent recurrence that is appropriate for the effects of the nonconformity (ISO 9001, 2015). To conform to the requirements of this ISO 9001, an organization needs to plan and implement actions to address risks and opportunities. Establishing, documenting, implementing and maintaining a quality management system in compliance with the ISO 9001 standard and continuous improvement of its efficiency should include the following actions (ISO 9001, 2015, p. 4.4.1):
76
determining the processes needed for the quality management system and their application throughout the organization, determining the inputs required and the outputs expected from these processes, determining the sequence and interaction of these processes, determining and apply the criteria and methods (including monitoring, measurements and related performance indicators) needed to ensure the effective operation and control of these processes, determining the resources needed for these processes and ensure their availability, assigning the responsibilities and authorities for these processes, addressing the risks and opportunities, evaluating these processes and implement any changes needed to ensure that these processes achieve their intended results, improving the processes and the quality management system. Quality management systems based on the ISO 9001 requirements are the most popular systems in the world and in Poland. In the latest edition of the annual review of the International Organization for Standardization related to the number of ISO 9001 certificates in the world (The ISO Survey, 2017) a significant growth of the issued certificates confirming the compliance of the functioning quality management system with the requirements of the ISO 9001 standard was observed. It has been stated that at the end of 2017 there were 1,058,504 certificates issued which is about 47 thousand less in comparison with 2016 (1,105,937). Decrease in certificates in 2017 due to a change in the manner in which certificates are counted by data providers. The undeniable leader of the number of certificates confirming the compliance of the functioning quality 77
management system with the ISO 9001 standard requirements is China, where in 2016 393,008 certificates were issued. The second place was taken by Italy where by the end of 2017 over 97,600 organizations had been certified. In Poland over 11,846 organizations have a certified quality management system, which means a decrease in comparison with 2016 (12,152 certificates) (The ISO Survey, 2017).
2.5. Environmental management system in accordance with the ISO 14001 standard Organizations make effort to realize the objectives set in the strategy through taking actions aiming at efficient system environmental management. To a large extent, it caused the growth of needs to introduce a systems approach to management in organizations in order to efficiently manage environmental activity, in particular to minimize the negative impact on the environment. Such management is defined as managing the processes of use, protection and shaping the environment integrated with a general quality management. The management includes the organizational structure, planning, procedures, processes and resources to implement and manage a unit in a way that takes account environmental problems (Matuszak-Flejszman, 2016). Environmental management system is defined as: part of the management system used to manage environmental aspects, fulfill compliance obligations, and address risks and opportunities (ISO 14001, 2015). Surely, according to its definition a management system is a set of interrelated or interacting elements of an organization to establish policies and objectives and processes to achieve those objectives. The EMS elements include the organization’s
78
structure, roles and responsibilities, planning and operation, performance evaluation and improvement. (ISO 14001, 2015). But the scope of an environmental management system can include the whole of the organization, specific and identified functions of the organization, specific and identified sections of the organization, or one or more functions across a group of organizations (ISO 14001, 2015). There are many reasons for making the decision to implement an environmental management system in a given organization. Among the premises, it may enumerate among others (Matuszak-Flejszman, 2009; Psomas, Fotopoulos & Kafetzopoulos, 2011): minimizing the negative impact on the environment; preventing pollution; accepted development strategy of the enterprise; improvement of the quality management system; influence of stakeholders on the enterprise’s activity; possibility of increasing the market share; assuring compliance with legislation; willingness to raise proecological awareness of employees; interest of the local community in the enterprise’s activity; improvement of environmental impact. Concern for the environment is seen as one of the most important reasons for implementing an environmental management system. However, in professional literature (Emilson & Hjelm, 2007) we may come across a view according to which the most important and frequently the only stimulus for taking measures with a view to protect the environment is the legal system in force.
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The ISO 14001 standard, similarly to the ISO 9001 standard, is a document which is voluntarily applied, commonly available and accepted by a normalization accreditation unit. This standard specifies the requirements for an environmental management system that an organization can use to enhance its environmental performance and is intended for use by an organization seeking to manage its environmental responsibilities in a systematic manner that contributes to the environmental pillar of sustainability (ISO 14001, 2015). This standard helps an organization achieve the intended outcomes of its environmental management system, which provide value for the environment, the
organization
itself
and
interested
parties.
Consistent
with
the organization’s environmental policy, the intended outcomes of
an
environmental
management
system
include
enhancement
of environmental performance, fulfillment of compliance obligations and achievement of environmental objectives. ISO 14001 is applicable to any organization, regardless of size, type and nature, and applies to the environmental aspects of its activities, products and services that the organization determines it can either control or influence considering a life cycle perspective and does not state specific environmental performance criteria. This standard can be used in whole or in part to systematically improve environmental management (ISO 14001, 2015). ISO 14001 may also be used for internal purposes mainly related to the efficient systems approach to management as well as for external purposes
linked
with
environmental
performance
concerning
the organization which aims at meeting the expectations of the interested parties. That is why the use an environmental management system
80
in compliance with the ISO 14001 standard can amount to the
organization’s
reliable
and
documented
actions
to
which
the organization is obliged due to its environmental policy. The actions are realized through specific environmental objectives. For example, it may apply to the conformity evaluation of a supplier, e.g. by a client of the enterprise and the interested parties. It can also be related to the certification realized by an independent certification body (MatuszakFlejszman, 2015). As a result of a systems approach to environmental management the leadership of an organization can obtain information, which enables long-term success and creates opportunities for adequate contribution to sustainable development through (ISO 14001, 2015): protecting the environment by preventing or mitigating adverse environmental impacts; mitigating the potential adverse effect of environmental conditions on the organization; assisting the organization in the fulfillment of compliance obligations; enhancing environmental performance; controlling or influencing the way the organization’s products and services are designed, manufactured, distributed, consumed and disposed by using a life cycle perspective that can prevent environmental impacts from being unintentionally shifted elsewhere within the life cycle; ISO 14001 communicating environmental information to relevant interested parties.
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The ISO 14001 standard is intended for use in organizations, which make effort to manage its environmental duties in a systematic way. This method is supported by the environmental pillar of sustainable development. In the ISO 14001 standard the basic elements, which should be taken into account during the implementation, maintenance and improvement of the environmental management system in order to obtain environmental effects of an organization’s activity, are enumerated. The most important among them include: environmental protection, including preventing pollution and other specific obligations, which are significant for the organization’s context, commitment to fulfill obligations related to compliance (legislation, codes of conduct, internal regulations, contracts, other internal and external commitments) and environmental aspects in the organization, commitment to continuous improvement of the environmental management system with a view to enhance the organization’s environmental performance. Within the process of planning an environmental management system an organization should: understand the organization and its context and determine external and internal issues that are relevant to its purpose and that affect its ability to achieve the intended outcomes of its environmental management system, understand the needs and expectations of interested parties, determine the boundaries and applicability of the environmental management system to establish its scope, demonstrate leadership and commitment with respect to the environmental management system,
82
establish, implement and maintain an environmental policy, ensure that the responsibilities and authorities for relevant roles are assigned and communicated within the organization, determine the risks and opportunities, related to its environmental aspects, compliance obligations and other issues and requirements, establish environmental objectives at relevant functions and levels, taking into account the organization’s significant environmental aspects and associated compliance obligations, and considering its risks and opportunities. Moreover, the organization shall determine and provide the resources needed for the establishment, implementation, maintenance and continual improvement of the environmental management system. Within the environmental management system, the organization shall determine the necessary competence of persons doing work under its control that affects its environmental performance and its ability to fulfill its compliance obligations and these persons are competent. Is very important to ensure by organization that persons doing work under the organization’s control are aware of the environmental policy, the significant environmental aspects, their contribution to the effectiveness of the environmental management system and the implications of not conforming with the environmental management system requirements, including not fulfilling the organization’s compliance obligations. The organization shall establish, implement and maintain the process(es) needed for internal and external communications relevant to the environmental management system. With an environmental management system planned and adequate
83
resources provided the organization shall establish, implement, control and maintain the processes needed to meet environmental management system requirements and to prepare for and respond to potential emergency situations. After implemented operational control the organization shall monitor, measure, analyze and evaluate its environmental performance and shall determine opportunities for improvement and implement necessary actions to achieve the intended outcomes of its environmental management system. Environmental management systems built on the basis of the requirements of the ISO 14001 standard are becoming more and more popular both worldwide and in Poland. Within the recent period, we observed a significant growth in the number of certificates issued to confirm that the functioning environmental management system complies with the requirements of the ISO 14001 standard (The ISO Survey, 2017). It was stated that by the end of 2017 over 362,000 certificates had been issued. The undeniable leader of the number of certificates confirming the compliance of the functioning quality management system with the ISO 14001 standard requirements is China, where in 2017 over 165,000 certificates were issued. On the other hand, in Europe United Kingdom dominates with as many as 17,559 ISO 14001 certificates, while the following spots are taken by the Italy (14,571), Spain (13,053) and Germany (12,176). Poland is ninth with 2,885 ISO 14001 certificates, which confirm the functioning of an environmental management system in organizations (the certificates are issued by independent certification bodies).
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2.6.
Health and safety management systems
Health and safety management systems have been developed in an evolutionary way. At first it was broadly believed that accidents at work result from bad working conditions, which included equipment and workplace furnishing. The changes in the management style, the introduction of the management-by-objectives conception, and treating the work process as a system have been accompanied by an increase in the engagement of employees in solving the occupational health and safety problems. It has resulted in the emphasis placed on the so-called human factor and its role in the occurrence and prevention of accidents. In 1980s there was a significant change of the attitude to ensuring occupational health and safety. Finally, after the popularization of the comprehensive quality management principles in 1990s the occupational health and safety issues were integrated with other management systems. Moreover, these issues were fully taken into account in the operational strategy for businesses. Due to the fact that occupational health and safety amounts to an integral part of the work process it should comply with the same principles as in other areas of activity e.g. production management, quality management etc. Occupational health and safety systems were created in organizations, which, as statistics shows, significantly reduced the accident and occupational disease ratios, which brings benefits for both employers and employees (Markowski, 1999). A standardized health and safety management system allows organizations to improve results within this scope by: developing and implementing the occupational health and safety objectives and the occupational health and safety policy,
85
creating processes in the organization, which take account of its context, risk, opportunities and all relevant conformity commitments, determining threats related to the occupational health and safety and the organization’s activity, minimizing or eliminating potential results of the detected threats by applying a monitoring hierarchy, introducing operational control, which aims at risk management within the scope of occupational health and safety as well as conformity commitments, increasing employees’ and other parties’ awareness of threats related to occupational health and safety, evaluating the occupational health and safety results and making effort to improve them by taking adequate actions, engaging employees in the occupational health and safety processes by ensuring their active participation in the occupational health and safety issues. Due to the growing awareness and importance of occupational injuries and diseases the International Organization for Standardization developed a plan to create a new standard – ISO 45001. This standard was developed by the occupational health and safety expert committee. ISO 45001 is set to replace the popular OHSAS 18001 standard, with the overall purpose remaining the improvement of occupational health and safety performance. This standard is based on the common elements found in all of management systems standards, assuring a high level of compatibility with the new versions of ISO 9001 and ISO 14001. ISO 45001 require an organization to look beyond its immediate health
86
and safety issues and take into account what the wider society expects of it. The purpose of an occupational health and safety management system is to provide a framework for managing occupational health and safety risks and opportunities. The aim and intended outcomes of the occupational health and safety management system are to prevent work related injury and ill health to workers and to provide safe and healthy workplaces; consequently, it is critically important for the organization to eliminate hazards and minimize occupational health and safety risks by taking effective preventive and protective measures When these measures are applied by the organization through its occupational health and safety management system, they improve its occupational health and safety performance. An occupational health and safety management system can be more effective and efficient when taking early action to address opportunities for improvement of occupational health and safety performance (ISO 45001, 2018). The ISO 45001 standard focuses on the following aspects: reducing the risks to personnel and additional relevant parties, creating a focus of continual improvement so as to constantly seek to improve health and safety standards in the workplace, ensuring that all activities are carried out, along with a company’s health and safety policy are in line with an internationally recognized standard. Among the benefits of implementing an occupational health and safety management system we may enumerate the following: an occupational health and safety management system creates the best possible working conditions across your organization, it identifies hazards and puts in place controls to manage them,
87
it reduces workplace accidents and illness to cut related costs and downtime, it engages and motivates staff with better, safer working conditions, it demonstrates compliance to customers and suppliers. The ISO 45001 standard is intended to help organizations, regardless of size or industry, in designing systems to proactively prevent injury and ill health. All of its requirements are designed to be integrated into an organization’s management processes. ISO 45001 enables an organization, through its occupational health and safety management system, to integrate other aspects of health and safety, such as worker wellness/wellbeing. The ISO 45001 standard calls for the organization's management and leadership to integrate responsibility for health and safety issues as part of the organization's overall plan rather than shift responsibility to, for example, a safety manager. It uses a simple PDCA model, which provides a framework for organizations to plan what they need to put in place in order to minimize the risk of harm. The measures should address concerns that can lead to long-term health issues and absence from work, as well as those that give rise to accidents (www.iso.org). The implementation of an occupational health and safety management system is a strategic and operational decision for an organization. The success of the occupational health and safety management system depends on leadership, commitment and participation from all levels and functions of the organization. The implementation and maintenance of an occupational health and safety management system, its effectiveness and its ability to achieve
88
its intended outcomes are dependent on a number of key factors, which can include (ISO 45001, 2018): top management leadership, commitment, responsibilities and accountability; top management developing, leading and promoting a culture in
the
organization
that
supports
the
intended
outcomes
of the occupational health and safety management system; communication; consultation and participation of workers, and, where they exist, workers’ representatives; allocation of the necessary resources to maintain it; occupational health and safety policies, which are compatible with the overall strategic objectives and direction of the organization; effective process(es) for identifying hazards, controlling occupational health and safety risks and taking advantage of occupational health and safety opportunities; continual performance evaluation and monitoring of the occupational health and safety management system to improve occupational health and safety performance; integration of the occupational health and safety management system into the organization’s business processes; occupational health and safety objectives that align with the occupational health and safety policy and into account the organization’s hazards, occupational health and safety risks and occupational health and safety opportunities; compliance with its legal requirements and other requirements.
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The process and systems approaches to managing an organization provide the leadership with the opportunity for efficient management. The interrelation of elements aiming at meeting customers’ and other interested parties’ expectations taking account of the organization’s context enables the identification of areas which can be well-managed by the leadership. Consequently, it will contribute to the organization’s success through meeting customer expectations, minimizing the negative environmental impact and caring for employees. The ability to manage an organization in the context of process and systems approach will ensure its long-lasting success and the capability of improving actions in each area (Matuszak-Flejszman, 2015).
2.7.
Bibliography
Edge, J. (2002). Doskonałość jakości: nauki dla kierownictwa, in: Lock, D. Podręcznik zarządzania jakością, Wydawnictwo Naukowe PWN, Warszawa, p. 616. Emilsson, S., Hjelm, O. (2007). Managing Indirect Environmental Impact Within Local Authorities’ Environmental Management Systems. Local Environment 12, pp. 73-86. Ishikawa, K. (1985). What is Total Quality Control? Englewood Cliffs, Prentice Hall Inc. Welford, R. (1998). Corporate Environmental Management, Earthscan Publication, London. ISO 14001 (2015). Environmental management systems – Requirements with guidance for use, Geneva. ISO 45001 (2018). Occupational health and safety management systems – Requirements with guidance for use, Geneva. ISO 9001 (2015). Quality management systems – Requirements, Geneva. 90
ISO/IEC Directives (2014). Part 1, Consolidated ISO Supplement. Konarzewska-Gubała E. (Ed.) (2003). Zarządzanie przez jakość. Koncepcje, metody, studia przypadków, Wrocław: University of Economics Press. Łańcucki, J. (Ed.) (2014). Normalized Management Systems, Poznan: University of Economics Press. Latzko W.J., Deming W.E., Saunders D.M. (1993). Four Days with Dr. Deming: A Strategy for Modern Methods of Management, AddisonWesley Publishing Company. Lee T.H., Shiba S., Wood R.Ch. (1999). Integrated Management Systems: A Practical Approach to Transforming Organizations, Hardcover Lock, D. (2007). The Essentials of Project Management, England: Gower Publishing, Ltd. Markowski, A. (1999). Zarządzanie bezpieczeństwem i higieną pracy, Kielce: CIOP. Matuszak-Flejszman, A. (2009). Benefits of Environmental Management System in Polish Companies Compliant with ISO 14001, Polish Journal of Environmental Studies, Vol. 18, No. 3 (2009), pp. 411-419. Matuszak-Flejszman, A. (2010). Determinanty doskonalenia systemu zarządzania środowiskowego zgodnego z wymaganiami normy ISO 14001, Poznań: University of Economics Press. Matuszak-Flejszman, A. (2016). Process and Product Management Economic and Environmental Aspects in Organization, Poznan: University of Economics and Business Press. Pande, P.S., Neuman, R.P., Cavanagn, R.R. (2003). Six Sigma, Warszawa: Liber Press. Psomas, E., Fotopoulos, C., Kafetzopoulos, D. (2011). Core Process Management Practices, Quality Tools and Quality Improvement in ISO 9001 Certified Manufacturing Companies. Business Process Management Journal 17 (3), pp. 437-460.
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Tachiki, D.S. (2008). TQM in Japan Deming, Juran and Ishikawa, JICA Project Briefing Paper. The ISO Survey of Management Systems Standards Certification. (2017) www.iso.ch (accessed: 01 June 2018).
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3. RISK-BASED APPROACH WITHIN PROCESS APPROACH – QUALITY FRAME 3.1. Introduction Each organization realizes economic activities, which may be grouped according to various criteria taking account of the objective of its functioning. From the perspective of realizing planned tasks processes are identified as sets of actions of similar scope and common objective, which allows for efficient management of processes and the organization seen as a whole. Process management aims at planning and realizing actions in a way that enables achieving the goals of particular processes and results in obtaining desirable performance in the whole organization. It is crucial that actions, which are realized in processes, be monitored in order to maintain repeatable quality of products (goods and services) and processes. The implementation of a quality management system, which is frequently associated with the standardized approach in compliance with the ISO 9001 requirements, amounts to a significant support of the aforementioned actions. However, each type of economic activity is run under internal circumstances and in given surroundings, which potentially poses threats and provides opportunities for the activity as well as for the realization of the assumed objectives. The necessity for coordinating numerous economic actions in the process approach, which takes account of quality and risks related to the realization of the assumed objectives, entails organized activities. In this regard the ISO 9001:2015 requirements may prove useful. The aim of the present study is to highlight the questions of process management while taking account of the approach based 93
on risk (RBT – risk-based thinking) within the quality-focused actions in an organization. Keywords: quality, quality management, quality management system, ISO 9001, process approach, risk, risk management, risk-based approach, risk-based thinking, ISO 31000
3.2.
Standardization aspects of quality management
The quality of products (goods and services) amounts to a key element considered by customers while making purchasing decisions. Therefore, quality management takes place in each organization and is focused on assuring proper quality of products. The expression “proper quality” relates to two problems – adjusting the level of goods and services to customer requirements and expectations, as well as obtaining quality repeatability, i.e. maintaining a product’s characteristics at the planned level at all times. Thus, the result-oriented quality management process, which is focused on “proper quality”, is theoretically easy to realize. However, everyday life related to making economic decisions in each organization traditionally reveals the discrepancy between theory and practice as it calls for taking account of variables and external surroundings. The identification of threats and opportunities linked with the realization of the assumed business objectives as well as taking adequate actions may be observed in each type of economic activity. Organizations, which are focused on “proper quality” of products, take account of risk aspects within quality in order to minimize threats and take advantage of opportunities. Risk understood as “the effect of uncertainty on objective” (ISO 31000, 2018, p. 3.1) means that defining objectives in 94
an organization plays a crucial role in risk management. Objectives and associated tasks are adjusted to the specificity of each organization and amount to the basis for management activities at particular organizational levels. The set of these activities adds up to process management, whereas their focus on quality aspects creates a quality management system.
3.2.1. Role of quality management in functioning of an organization It may be observed that quality management has two different types of tasks (Weckenmann et al., 2015, p. 292). On the one hand, it supports the identification and development of solutions to current problems, which relates to the operational (everyday) risk reduction. On the other hand, quality management enables diagnosing and predicting future problems in order to achieve the planned results of a given action. Therefore, quality management is the key (essential, main) success factor in each organization, because, as one of the instruments of improving an organization, it affects the process of obtaining desirable results (Tickle et al., 2016, p. 354). The idea of aiming at the excellence of processes and products lies at the heart of quality-oriented (sometimes called qualityfocused) approach (Lichtarski, 2015, p. 34). Taking account of the qualityoriented approach in managing an organization is also called qualityfocused management of an organization. This term is often interchanged with the expression “quality management” in relation to organizations (Łukasiński,
2013;
Jakubiec,
2017).
While
organizing
actions
within systematic quality management it is necessary to create the architecture of this subsystem in an organization. The architecture shall take account of threats and opportunities, which affect the realization of the planned quality-related objectives. The role of quality management 95
in the functioning of an organization is crucial due to the fact that quality amounts to customers’ basic criterion when making decisions. The only problem poses the question of the appropriate way of grouping relevant elements within quality management in order to focus activities on the proper quality of products.
3.2.2. Elements of systematic quality management Each organization inevitably operates in the context of its surroundings. External surroundings include everything beyond an organization’s boundaries, which may affect it (Griffin, 2013, p. 75). The strength and intensity of the influence of surroundings depend on both macroeconomic (distant surroundings) and microeconomic (close surroundings) issues. External surroundings affect the internal environment of an organization defined as the internal conditions and forces of an organization (Griffin, 2013, p. 75). Therefore, actions taken in each organization result from adjusting available resources to the identified objectives in the context of interaction with surroundings. Focusing actions on given issues (finance, quality, natural environment) creates sets called systems. A quality management system is one of numerous subsystems within the process of managing an organization and amounts to the quality-related part of it (ISO 9000, 2015, p. 3.5.4). A quality management system functions in an organization as a management subsystem along with others e.g. an occupational health and safety management system, an environmental management system, etc. Defining quality management as a quality-oriented aspect of managing an organization is not unambiguous (Rogala, 2012, p. 63). In general, quality management relates to an intuitively understood approach, 96
however, the variety of conceptions within this area makes it very difficult to determine precise criteria, which enable the proper classification of individual elements into the quality-oriented management set in an organization. The broad understanding of the term “quality” in managerial practice, which takes account of an internal customer’s perspective, assumes that virtually every activity of an organization may be considered an element of quality management (Rogala, 2012, p. 64). If we take such an approach, quality management can be understood as all coordinated actions, which shape the quality policy, assure its realization, and lead to ensuring the proper level of quality (Rogala, 2012, p. 66). The identification and standardization of principles have been proposed in probably the clearest form in the commonly known and applied system of 9000 series of quality standards (Lichtarski, 2015, p. 39). The configuration (architecture) of a management system in an organization should contain the range of numerous different focuses based on specific ideas. The architecture should address a configuration of many factors, whose role is played by particular characteristics (features) of an organization’s potential and its relations with surroundings. The factors are important in the context of achieving major objectives and remain in the area of influence (effect) of the application of specific focuses in management (Lichtarski, 2015, p. 102). Within the qualityoriented management of an organization we may distinguish two categories of factors – quality factors and quality management factors. Quality factors refer to attributes of products (goods and services), which are subject to direct evaluation of customers and users at the levels of purchasing and use. On the other hand, quality management factors include actions (procedural elements) performed in organizations and their surroundings, 97
which are focused on assuring the “proper” quality of the final effect (Zapłata, 2018, pp. 16-17). In search of the scope of quality management and its elements two paths may be taken. First, one may analyze professional literature in the area of quality-oriented management of an organization. Second, one may analyze the normative requirements of the ISO 9001 standard, which can amount to the basis of systematic quality management. We may surely indicate that normative requirements in a certain way limit the economic reality by creating the framework of a system according to a specific set of requirements. However, it should be stated that standards are created on the basis of the observation of the economic reality. Therefore, the standards’ content amounts to a limited version of the first approach, i.e. the analysis of professional literature, which describes real actions in organizations. The issue of the functioning of each organization in economic surroundings should also be taken into account. Thus, we may state that among quality management factors there are both external and internal ones. The former originates from an organization’s surroundings, whereas the latter have their beginning in an organization. The internal factors may be shaped with the use of internal decisions within an organization, therefore, the analysis of them is more utilitarian than the analysis of external factors. Obviously, internal decisions are made in reference to factors coming from surroundings, however, the possibility of shaping internal factors with internal decisions allows for direct influence on the results of quality-oriented management in an organization. The analysis of professional literature within the scope of quality management shows that various types of component elements (factors)
98
in this area of management are inherently internal, independently of the way they have been classified. On the basis of the analysis of professional literature related to qualityoriented management in an organization eight internal factors, which shape a quality management system, can be enumerated (Zapłata, 2018, p. 64): 1. Leadership and engagement of top management in quality. 2. Strategic and operational planning. 3. Customer focus. 4. Evidence-base management. 5. Human resource management. 6. Engagement of employees. 7. Process management. 8. Continuous improvement. In professional literature, the abovementioned factors are presented as sets of component elements (constituents), which, to a various extent, affect the functioning of a quality management system and its efficiency, as well as the results of quality-oriented management in an organization. By taking the other analysis path for identifying component elements of quality management – normative requirements – we may take notice of quality management principles, which amount to the basis of the ISO 9001 standard ISO 9001 (ISO 9001, 2015, p. 0.2): 1. Customer focus 2. Leadership 3. Engagement of people 4. Process approach 5. Improvement
99
6. Evidence-based decision making 7. Relationship management Individual quality management principles are presented in a more detailed way in specific requirements included in the ISO 9001 standard. Moreover, the implementation of a standardized quality management system as well as its functioning are focused on fulfilling the normative requirements. The realization of quality management principles is completed automatically, because the standard’s requirements can be grouped and assigned to specific principles. This automaticity in the operational realization of quality management principles is noticeable in the latest update of the ISO 9001 standard. In the current version published in 2015 one of quality management principles was removed (if compared with the 2008 version) – “Systematic approach to management”. Within quality management processes are identified and monitored within operational activities. Processes, understood as sets of interrelated actions, which have impact on one another (ISO 9000, 2015, p. 3.4.1), include all actions undertaken in an organization and in fact amount to its overall functioning (Skrzypek, 2012, p. 172). Process management is a part of quality management in an organization, which is understood as the level of meeting needs and requirements of interested parties (Szczepańska & Bugdol, 2016, p. 11). On the other hand, by managing all processes we create the systematic approach to management, which amounts to a natural part of performing economic activity. We may observe the similarity of issues adding up to systematic quality management independently of the way these elements are identified – by relying on professional literature or normative requirements.
100
Table 3.1. Component factors of quality management Professional literature list Leadership and engagement of top management in quality
Normative requirements for quality management Leadership
Strategic and operational planning Customer focus
Customer focus
Evidence-based management
Evidence-base decision making
Human resource management
Relationship management
Engagement of employees
Engagement of people
Process management
Process approach
Continuous improvement
Improvement
Source own work
The analysis of professional literature leads to the identification of the factor called “Strategic and operational planning”, which has no equivalent among quality management principles. Planning amounts to the basis for realizing actions and their evaluation. It can be stated that actions referring to each quality management principle must be planned and evaluated after having been realized in order to set objectives for the next period. Once the component elements of quality management in an organization are defined it is necessary to determine the relationships between them. Activities in each organization consist of processes, therefore, the process approach amounts to the basic structure within systematic quality management. Each process is performed in stages from planning and realization to verification and undertaking improvement actions resulting from feedback. This constant cycle is deeply rooted in the process approach and the overall functioning of an organization.
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Furthermore, it is distinguished by systematic quality management as the PDCA cycle. Planning is a stage of setting an organization’s objectives, as well as determining the ways of achieving them (Griffin, 2013, p. 9). Within quality-oriented management in an organization quality-related objectives are defined. The objectives are adjusted to the individual organizational circumstances under which each economic activity is performed. In order to realize planned objectives, the ongoing activities are undertaken and monitored. The periodic verification of their realization is a part of efficiency evaluation within a quality management system. The results of the evaluation, which takes account of various circumstances, amount to the basis for improvement actions. Consequently, quality improvement is a set of actions taken in order to obtain extra benefits for an organization, its customers and, generally speaking, stakeholders (Brajer-Marczak, 2015, p. 15). Improvement refers to internal actions focused on end products (goods and services) of an organization. From the point of view of quality management understood as a set of operational actions, process improvement can be highlighted. It aims at enhancing the way processes are conducted in the context of achieving better effects and a higher level of customer satisfaction (Nowosielski, 2008, p. 41). The architecture of quality-oriented management of an organization consists of component elements (factors) and their mutual interrelations. It is also necessary to take account of the PDCA cycle and proper assignment of operational activities to specific factors. The word “proper” means here that the procedure will take account of the specificity of a given organization, i.e. both its internal characteristics and surroundings. We should also remember that an organization’s surroundings as well as its 102
internal component elements are subject to changes in time, which may have two-dimensional impact on its functioning. On the one hand, it may pose threats (potentially undesirable influence on realizing actions) to its functioning. On the other hand, it may provide opportunities (elements, which are potentially beneficial to the functioning of an organization) for obtaining better results. The minimization of negative events and the maximization of market opportunities may be regulated within risk management accompanied by the process approach, especially in the area of quality-oriented management in an organization.
3.3. Process approach in functioning of an organization From the point of view of the process approach an organization is perceived as a multi-dimensional system, within which mutually interrelated functional areas of different processes overlap (Bitkowska & Narojczyk, 2016, p. 57). Coherent and foreseeable results are obtained more efficiently and effectively if actions are understood and managed as mutually interrelated processes, which function as a cohesive system (ISO 9001, 2015, p. 2.3.4.1). World research shows that 13% of organizations indicate the need for risk management as the cause of implementing the process management conception in an organization (Bitkowska & Narojczyk, 2015, p. 57). It shows the importance of the process approach in every organization for performing economic activity while taking account of risk. Risk is defined as “the effect of uncertainty on objectives” (ISO 31000, 2018, p. 2.1), which refers to both positive (opportunities) and negative (threats) impact of various events on an organization’s functioning and its objectives. The process
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approach is combined with risk-focused approach within the functioning of every organization.
3.3.1. Essence and role of process management in an organization Many schools, methods and managerial instruments have appreciated the achievements of the process approach. In all instances when a dynamic approach to organization is important the process approach has already been introduced by other management conceptions. This tendency may be observed in, inter alia, TQM, ISO 9001, logistics, knowledge management, and lean management (Jokiel, 2009, p. 20-21). The process approach assumes emphasis on processes understood as groups of actions in an organization, as well as managing them properly. Proper management means adopting the PDCA cycle in managing processes from planning and realizing actions focused on achieving planned objectives to periodic verification and taking improvement actions. It may be indicated that each organization is a set of interrelated processes. Therefore, the process approach amounts to a point of view on economic activity in each organization, which have been taken anyway. It is so because processes are sets of actions, which transform input into output (the effect of a given activity). Moreover, in every organization there are hierarchical dependencies for each position, which reflect the scheme of the organizational structure. Hence, within the operation of every organization we deal with areas of organizing activities – the functional and process approaches. The functional system stems from the scheme of the organizational structure and relates to e.g. finance, marketing, sales. Within the functional approach each department focuses on the tasks, which are relevant to
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a given organizational level. On the other hand, the process approach refers to considering the value chain in an organization. The chain consists of various actions, which begin with customer requirements and come to an end at the moment of product (goods and/or services) creation. However, in every organization work is performed by employees acting within functional structures, which causes certain overlapping with processes as the former takes a vertical form, whereas the latter a horizontal one. That is why the process approach often becomes a hybrid solution in organization – the functional system is enriched with process solutions. Processes include actions realized by employees, who belong to different organizational levels. It is the most common approach, which is not in accordance with the conception of the process approach, which rejects structural divisions and creates teams of employees within individual processes. Nevertheless, such an approach does not eliminate the need for professional hierarchy, as it is necessary to realize various actions within processes. Work in contemporary organizations should concentrate on processes as opposed to functions, tasks and positions, because focusing on individual elements of a process may lead to obscuring the bigger objective, i.e. providing customers with the final product (Jokiel, 2009, p. 23). Despite all the nuances of the relationship between the process and the functional focus, the process approach recommends holistic thinking about processes, which are understood as interrelated actions. The identification of processes allows for better comprehension of creating value, whereas their enhancement and continuous improvement increase the efficiency of an organization’s functioning as well as internal and external client satisfaction (Bitkowska, 2009, p. 7). The process approach places emphasis on transforming strategic objectives of an organization into process 105
objectives, meeting customer needs, reducing costs incurred by an enterprise, as well as decreasing the time of realizing tasks. Moreover, processes create a dynamic picture of an enterprise, enable the rapid introduction of changes and adopting to the changing circumstances of an organization’s surroundings (Bitkowska, 2009, p. 7). Processes reflect actions taken in an organization. Consequently, altogether they amount to a set of all economic activities. Hence, we should not manage individual processes, but the whole set of them, or the whole architecture of them, which indicates the relationships between individual processes. At a certain level of process maturity of an organization it is necessary to integrate process management in reference to both internal and external processes. The integration of the former is related to determining relationships and hierarchies of projects (the process architecture). The same action applied to the latter entails the integration with an enterprise’s management system (Jokiel, 2009, p. 22). It should also be stated that such a holistic view on processes realized in an organization is closely linked with the systematic approach to management. This principle, in relation to a quality management system, was present in the previous edition of the ISO 9001 standard published in 2008. In the latest standard, which includes requirements for the ISO 9001:2015 quality management system, it is absent. This modification seems natural due to the need to manage all actions within an economic activity, which is equivalent to the systematic approach taking account of the process approach.
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3.3.2. Defining and mapping processes in an organization All processes identified in an organization may be divided into static and dynamic. Not only are there fewer static processes but also, they are regulated by e.g. objective physical laws or more changeable legal requirements. The latter are characterized by a various degree of unpredictability and dynamics (Szelągowski, 2017, p. 283). Defining and mapping processes are performed on the microeconomic scale in every organization within the process approach. It is related to adjusting the process approach to the characteristics of a given organization’s functioning, i.e. to the financial and territorial type as well as scale of activity, the scope of activity, handled entities (b2b, b2c), the type of customers, suppliers. The first step of realizing the process approach in an organization is the identification of main processes. These processes contain actions related to the profile of an organization’s activity. The sequence of them is launched by a customer and their order, and finishes once the order is realized. Therefore, in general main processes are responsible for the realization of a product (goods or services). Next, support processes (also called parallel or side processes) are identified. Actions included in these processes (e.g. human resource management) are crucial for the efficient realization of activities within main processes. Moreover, they support actions focused on creating the final product. Process identification may be bottom-up or top-down. The bottom-up manner relates to the analysis of individual tasks assigned to specific workplaces and then putting them into homogenous groups called processes. It is a time-consuming task in an organization, however, it allows for taking account of all realized activities and grouping them into separate processes. The top-down approach consists in defining processes 107
by name and assigning activities to them, i.e. determining the scope of them. The top-down approach is faster, but, unfortunately, at the same time it intensifies the aforementioned hybridity of the process approach in the context of the functional system of an organization. Therefore, we may observe a tendency to attach the name of organizational levels to processes (e.g. production, purchases) or in a more detailed way – according to functions (customer service, sales, marketing). Relationships between processes, which are linked with the order of their occurrence, are identified independently of the processes themselves. In the simplest approach, it refers to the elements mentioned in the definition of a process – the input and output data. The input data (the so-called process supplementation) may be simultaneously the output data from other preceding processes. For example, production raw materials are the input for the production process and the outcome of the purchasing process. All processes are often presented in the graphical form. Such presentation shows main and support processes as well as the relationships between them, which allows for proper planning of actions within the sequential approach due to the abovementioned dependencies between input and output data in individual processes.
3.3.3. Key elements and participants of process management Besides the graphical presentation, the definition of constituent characteristics for each process is recommended. Every process has its objective for sake of which actions (component elements of a given process) are performed. For example, the objective of the purchasing process is assuring proper materials and raw materials delivered on time in order to realize the production process. Actions included in a process 108
amount to the scope of it. In the case of similar scopes sub processes can be distinguished. While describing each process we should always take account of the following key elements (Skrzypek & Hofman, 2010, p. 57): the process objective, the scope of the process, which depicts individual stages of actions within the process (beginning with the action called “beginning of the process” and ending with the action called “end of the process”), the beginning of the process, i.e. the action, which starts a given process, input data, which indicate all elements necessary to launch actions within the project, the end of the process, which is equivalent to the last action within the process, output data, i.e. the effects of the functioning of the process. The scope of a process is documented in order to maintain the repeatability of actions in time. This repeatability consists in performing individual actions within the process not only in a similar way but also with the focus on the aforementioned aspect – maintaining repeatable quality of products (goods and services) and processes themselves as they create products. Descriptions of processes may take various forms – from maps of individual processes, process cards to procedures and instructions, which are most frequently associated with the issue of documenting actions. In such documents suppliers and process recipients are also indicated. On the one hand, it shows the sequence between processes, in which suppliers provide the input data for a given process. On the other hand, it communicates the information about 109
the process, which is the recipient of a given process’s effects. Suppliers and recipients are also indicated as subjects in the context of input and output data. Clients and recipients belong to the group of the so-called key process participants, which also includes employees of a given organization, as they perform individual actions. Each process has its manager or owner depending on the nomenclature accepted in an organization. Any process needs to be monitored, hence, the person, who plays the role of e.g. a project manager, is responsible for taking tactical actions in reference to the project within the PDCA cycle. The identification of requirements for taking actions in a given process is a necessary element of process planning. Surely, within the abovementioned process documentation it is compulsory to identify general requirements for a given process such as legal regulations, official regulatory requirements, technical standards for products to be taken into account during creating them, as well as infrastructural requirements necessary for the realization of production activities. It may be stated that taking account of the abovementioned issues within process mapping amounts a strategic dimension of planning in an organization. Tactically every process is planned for a given period in the context of identifying its objectives, e.g. number of products, number of clients etc. In reference to the operational perspective within process planning it is necessary to assure input data in the case of initiating actions in a process. Therefore, this operational planning takes place at the moment of initiating process activity – the occurrence of a client (external or internal). Further actions in a process are related to acting at specific stages of the process scope in accordance with detailed procedures and instructions. A process manager 110
periodically conducts the evaluation of how a given process functions. The effects of a process are measured on an ongoing basis or periodically in reference to objectives related to the tactical level of process planning. The level verification of the realization of the planned objectives is equivalent to efficiency evaluation. Each process is supposed to create value added, thus, the verification of a process should also be linked with the issue of effectiveness, which is natural is every commercial economic activity. The relationship between the effects and the workload is a key factor during evaluating any process. It should also be stressed that the benchmarks of a process, according to which the evaluation is conducted, are defined by the process manager as soon as at the stage of process mapping and then at the tactical level, e.g. in reference to one year’s timespan. On the basis of the obtained results improvement action are taken in specific organizational areas. The structure, scope and course of individual activities, as well as the tactical and operational process objectives may be modified. The process approach is an important element of the functioning of every organization. Moreover, actions in individual processes add up to the overall economic activity. These actions are focused on assuring the proper quality of products offered to clients, whose service generates income from sales. Every organization functions in its surroundings, which is changeable. This volatility causes various threats and opportunities related to taking actions in individual processes as well as to the quality of products. Monitoring risk in processes, which is focused on the final outcome, can be supported with the risk-based approach.
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3.4. Risk-based approach in the quality-oriented approach to managing an organization The risk-based approach allows an organization to determine factors, which may cause deviations from the planned results related to processes and a quality management system. Such an approach also enables the introduction of preventive control measures aiming to minimize negative effect and take maximal advantage of occurring opportunities (ISO 9001, 2015, p. 0.1). The volatility of surroundings is predictable to a various extent and can have both positive and negative impact on economic activity. In order to maximize market opportunities and minimize threats risk management is performed in any organization. Risk management is realized in a more or less formalized way in relation to the intuitive approach present in every human being’s activity.
3.4.1. Risk model management in an organization Risk management is a component element of the process of directing an organization in various areas. Furthermore, there is a tendency to consider risk management a subsystem of managing an organization (Kaczmarek, 2010, p. 149). Risk has been defined as the effect of uncertainty on objectives. The determination of objectives allows for the identification of threats and the evaluation of risk, which can hinder their realization (Staniec, 2011, p. 37). It is obvious that it is impossible to talk about the efficiency of realized actions without documenting objectives so as they amount to the basis for the obtained results (Zapłata, 2018, p. 112). Consequently, we may state that risk management is a set of actions, which are constantly realized in an organization within each decision. Risk 112
management consists in the preventive approach aiming at identifying threats and minimizing risks. However, the conceptual version of risk management is observed once the negative effects of a certain risk occur, whereas ongoing risk management is limited to supportive functions with regard to the main objective of commercial economic activity – maximizing profit (Łańcucki, 2013, p. 3). Risk management is a broad term stemming from the spheres of finance and insurance, whose understanding and application depends on many factors characteristic of a given economic activity. Nowadays numerous organizational areas may be regulated by both requirements and normative guidelines. Risk management can also be organized in the context of the procedure for dealing with risk according to guidelines included in the ISO 31000 standard. The process of risk management has been presented in figure 3.1.
risk assessment
Risk identification Risk analysis Risk evaluation
Risk treatment
Figure 3.1. Risk management process Source (ISO 31000, 2018, p. 9) 113
Monitoring and review
Communication and consultation
Scope, context, criteria
Risk defined as the effect of uncertainty on objectives is usually expressed in terms of risk sources, potential events, their consequences and their likelihood (ISO 31000, 2018, p. 3.1). Risk management is defined as coordinated activities to direct and control an organization with regard to risk (ISO 31000, p. 3.2., p. 1). Actions included at stages described altogether as risk evaluation are the core of the risk management process. The first operational activity is risk identification related to creating a list of potential threats, which may have impact on the realization of planned objectives. At the next stage (risk analysis) actions are focused on analyzing threats and describing them in the context of potential consequences. The following activities (coined as risk evaluation) are concentrated on creating a list or a map of risks containing risk gradation with the treatment priorities defined. The priorities are taken into account at the next level, which consists in developing risk treatment plans. The actions defined as input for the risk management process and related to communication and consultation amount to continuous and iterative processes, which are conducted by an organization not only in order to assure, transfer or receive information but also to communicate risk management issues to stakeholders. The final actions presented in figure 3.1. (monitoring and review) close the cycle and refer to the verification of the preceding activities. The risk management model presented above shows individual stages of the general process. In order to adopt this model an organization must accept an individualized procedure for operation, which takes account of its specificity and relevant risk management parameters such as appetite for risk, risk classification criteria, risk minimization methods.
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3.4.2. Risk management process in the area of quality The risk-based approach stems from the questions of risk management, which plays the role of a support instrument for the realization of planned objectives. This support is understood not only as the minimization of threats, which may have a negative impact on achieving planned objectives, but also as the maximization of effects reached thanks to taking advantage of market opportunities. The risk-based approach is by no means new in the practice of quality systems’ functioning as they have always aimed at assuring the quality of products and processes by dint of avoiding nonconformity (Urbaniak, 2016, p. 16). The inclusion of this conception in the guidelines most frequently used in international management standards should cause organizations to become even more focused on making effort to reduce threats (internal and external) and meeting stakeholders’ (clients, owners, employees, suppliers, and the society) expectations to a greater extent (Urbaniak, 2016, p. 16). Traditional risk management places emphasis on avoiding and minimizing losses of resources (Głuszek, 2014, pp. 114-115) and often neglects the external perspective, which leads to omission of many ongoing new risks (Risk Intelligent, 2011, p. 4). Risk management can be characterized by dealing with specific types of risk independently (without seeking interrelations), which is realized by different organizational levels. It also considers risk as a threat and focuses on its easily measurable types, i.e. mainly on the financial risk (Malinowska, 2011, p. 68). The inclusion of the risk-based approach in the ISO 9001:2015 standard could indicate its embedment in actions taken in every organization, which are focused on assuring the proper quality of end products (goods and services). On the other hand, we may state that the abovementioned standard cements 115
the negative approach to the so-called “silo” risk management in organizational activity as it refers “only” to the area of quality. However, the analysis of normative requirements shows that there is a necessity to create an organizational context (ISO 9001, 2015, p. 6.1), which develops interactions between the quality management subsystem and other actions taken within economic activity. Such interactions induce the inclusion of “the atmosphere of risk” in quality management. Nevertheless, it should be assumed that quality is of primal importance for an organization’s functioning on the market. In addition, the role of each employee is to manage their actions properly at their organizational level. This everyday intuition amounts to the know-how for specific organizations, whereas flexibility in such an approach has been taken into account during developing normative requirements for systematic quality management. An organization should plan its activities in the context of risks, however, there are no requirements related to formal methods or documented risk management processes (ISO 9001, 2015, p. A.4). Therefore, we may assume that the risk-based approach is a general intention of the ISO 9001 standard. On the other hand, the issue of specifying organizational actions, planning and performing at the autonomous level is very broad, as it consists of all elements of management realized in an individualized way in accordance with a given organization’s specificity. It should also be noted that in reference to the negative approach to risk the ISO 9001 standard introduces activities from two perspectives – threats and opportunities (ISO 9001, 2015, p. 6.1). From the point of view of managing quality in an organization the riskbased approach is essential for developing an efficient quality management system (ISO 9001, 2015, p. 0.3.3). This observation implies the first step, 116
as in order to be able to talk about efficiency it is necessary to define objectives, which can be benchmarks for comparing results and establishing the extent to which plans have been realized. Therefore, the first step consists in the identification and practical interpretation of planning requirements. One of the potential advantages of implementing a quality management system in an organization is the ability to take account of threats and opportunities related to its context and objectives (ISO 9001, 2015, p. 0.1). Hence, in the second step of the analysis it is crucial to identify risk-related requirements in the ISO 9001 standard (the positive ones referring to opportunities and the negative ones linked with threats), which have impact on the realization of the established objectives. The third (and final) step of the analysis consists in comparing normative requirements related to planning and risk. It is necessary to integrate these two dimensions within a quality management system in the context of threats and opportunities. Taking account of both threats and opportunities is the basis for improving the efficiency of a quality management system and results as well as for preventing negative impact (ISO 9001, 2015, p. 0.3.3). The issue of planning quality objectives and evaluating the efficiency of a quality management system is complex (Zapłata, 2009, p. 42-61). Planning is generally the first stage of management. It also begins the actions included in the Deming cycle (the PDCA cycle). On the basis of the analysis of normative requirements for systematic quality management in compliance with the ISO 9001:2015 standard we may indicate the following clauses referring to planning at various organizational levels:
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1. At the strategic level planning relates to developing the Quality Policy (ISO 9001, 2015, p. 5.2), which creates framework of defining quality objectives; the Quality Policy is paramount in the cascading planning in the area of systematic quality management. 2. In reference to a shorter time horizon (the tactical level) we may indicate planning changes in a quality management system (ISO 9001, 2015, p. 6.3), which are related to an organization’s development and medium-term internal changes of economic activities. 3. The ongoing planning is realized at the operational level, which, in reference to the ISO 9001 normative requirements, relates to planning and achieving objectives (ISO 9001, 2015, p. 6.2). The technical planning of product quality may also be discussed here. In the tactical time perspective, it is linked with the issues of design and development works (ISO 9001, 2015, p. 8.3] in the product-and-service offer of an organization. In reference to the ongoing production and service provision planning and monitoring operational activities can be enumerated (ISO 9001, 2015, p. 8.1). However, technical issues will not be discussed in isolation within the cascading planning and risk management. They are surely significant questions in light of the aforementioned importance of the quality of final products for generating income from sales. However, production issues amount to one of the sets of actions, which must occur in an organization in order to realize the main objective of a given economic activity. These sets of actions add up to processes, whose management is central for the process approach within systematic quality management. These processes are usually grouped into main and support ones. It means that production is one of processes, which are located at the level of process perspective. Consequently, individualized 118
objectives and internal actions focused on their realization are assigned to all of these processes. Despite the fact that the future of an enterprise is hardly ever foreseeable and external factors may hinder the realization of even the bestdevised plans, unexpected events are usually taken into consideration (Koźmiński & Piotrowski, 2005, p. 215). Therefore, it is necessary to take various preventive actions for the sake of achieving planned objectives. On the basis of the analysis of normative requirements of systematic quality management in accordance with the ISO 9001:2015 standard the following clauses related to quality in the context of risk may be enumerated: 1. At the strategic level, it is essential to act within the area of “the atmosphere of risk”, which refers to the understanding of an organization and its context. It is related to fulfilling normative requirements – defining external and internal factors, which are important for the objective and strategic direction of an organization’s operation. Moreover, within its quality management system an organization should determine the factors, which have impact on its ability to obtain the planned results (ISO 9001, 2015, p. 4.1). The identification of processes in a quality management system and the determination of their expected consequences as well as risks and opportunities may be located within the part of the strategic level adjacent to the tactical one (ISO 9001, 2015, p. 4.1.1 a, f). 2. In reference to a shorter time horizon (the tactical level) we may take notice of planning actions related to risks and opportunities. While planning a quality management system we should consider factors (identified at the strategic level) as well as define risks and
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opportunities in the context of achieving planned objectives (ISO 9001, 2015, p. 6.1). 3. The ongoing planning is realized at the operational level, which, if combined with risk and opportunities of the realization of objectives, refers to the normative requirements included in clause 8.1 of the ISO 9001 standard. In the general regulations (ISO 9001, 2015, p. 0.1) it has been stated that the process approach enables an organization to plan processes and interrelations between them. The PDCA cycle (along with actions realized at its specific stages) allows an organization to assure sufficient resources for its processes, proper management, as well as the identification and inclusion of opportunities for improvement. Not all processes of a quality management system pose the same risk level in the context of an organization’s ability to fulfill its objectives. Moreover, the consequences of uncertainty are not the same for all organizations (ISO 9001, 2015, p. A.4). Consequently, actions are approached from two different perspectives – threats and opportunities. These elements may have various impact on the functioning of an organization and the realization of planned objectives. Traditionally actions related to the risk-based approach tend to focus more on minimizing negative events than seeking opportunities. It is natural due to the fact that economic activities performed in an operational way at a certain pace are the source of potential threats. It can be observed in the definition of operational risk, which is understood as the possibility of losses stemming from maladjustment or unreliability of internal processes, people and systems or external events (Radomska, 2017, p. 37). The overall impact of individual factors on operational risk is divided between: processes 65%, people 26%, external events 7%, systems 120
2% (Matkowski, 2006, p. 25). It justifies combining the risk-based approach with process management in an organization in the context of assuring proper quality of products.
3.5.
Process measurement in an organization – quality evaluation through the prism of risk
Due to the fact that quality is one of the criteria of customers’ purchasing decisions it plays an important role in every organization. Moreover, it relates to the realization of processes and the final effect – a given product. On the other hand, every action is accompanied by risk, which means that quality and risk are parameters of all organizations’ functioning. Within process management it is necessary to monitor processes. Monitoring quality- and risk-related parameters belongs to this activity. It may be stated that risk management is a key aspect of quality management in organizations (Lisiecka, 2012, p. 557), as it exerts influence on specific stages of the PDCA cycle with organizational processes. The selection of key performance indicators (KPIs) is an important element of any organization. These indicators allow units to determine the extent to which their strategic objectives and plans are realized. As KPIs include a set of individually selected financial and/or nonfinancial measures they become an instrument for managerial control, which enables quick detection of problems at the early phase of occurrence, quick response and process improvement in a given unit (Grycuk, 2010, p. 28). A useful set of KPIs in a unit should meet the following conditions (Grycuk, 2010, p. 29):
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indicators should relate to issues, which are significant for a unit, i.e. are defined in the unit’s strategy or directly support its realization; indicators are suited to the current situation and specificity of the sector within which a unit operates; the number of indicators should not be too big as the measurement should be focused on monitoring key processes, as opposed to measuring all processes; each indicator must have a defined benchmark (norm) for a given period, for example it may be results obtained by the unit in previous years; benchmarks should be updated (increased) in order to encourage improvement; the indicators should include only parameters, on which employees have a real impact; the majority of indicators should be focused on processes of meeting customer needs and measuring customer satisfaction; the costs of data collection cannot be higher than the benefits of the application of KPIs. Measuring results with the use of KPIs aims at obtaining knowledge of the results of activities as well as at improving them. The knowledge of correct functioning of specific areas of functioning may cause the modification of an organization’s strategy, its processes and detailed procedures (Rydzewska-Włodarczyk & Sobieraj, 2015, p. 340). In reference to the title of the present part it is worth noting that the measurement of processes includes both quality and risks. The definition of measures for functioning of processes should be
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correlated with the identification of objectives as monitoring processes is related to the ongoing operation, but with the focus on the planned objectives. Moreover, as pointed out above, objectives are linked with the quality of processes and products. The realization of objectives can be interfered in a negative way by threats and in a positive way by opportunities. Therefore, monitoring indicators should take account of various issues in order to allow for accurate process evaluation, the ongoing adjustments and long-term improvement actions. The proper risk treatment is a comprehensive approach, which takes account of risk and risk treatment in the whole organization, at its different organizational levels, in reference to both threats and opportunities in a systematic and documented way. However, it should be noted that actions within the area of risk management in organizations are frequently performed in a selective and intuitive manner (Bezpieczna Firma, 2010). This approach is often associated with the incorrect, less efficient activity than actions realized in a systematic and documented way. Furthermore, we should not automatically assume that this approach is bad, because the intuition, which is used on a regular basis, amounts to the know-how of some organizations (Zapłata, 2016, p. 81). In the process of organizing activity within this area the ISO 9001 standard, which contains the normative requirements for systematic quality management, may prove useful. This standard includes new (in comparison with its previous editions) new requirements linked with the risk-based approach. Relevant normative requirements are novel, but the practical approach itself is not. It can be explained by the fact that this approach is automatically taken into account in everyday activities within the scope of quality management. Furthermore, the process approach, which groups organizational actions 123
into processes, has been present in the normative requirements of a quality management system for years. These processes must be managed. In addition, it is crucial to identify threats and opportunities for their functioning and the realization of the objectives, which are planned for a given period. It should also be stressed that the abovementioned issues take different forms in specific organizations.
3.6. Bibliography Bitkowska, A. (2009). Zarządzanie procesami biznesowymi w przedsiębiorstwie, Wyższa Szkoła Finansów i Zarządzania w Warszawie, Warszawa. Bitkowska, A., Narojczyk, D. (2016). Przesłanki implementacji zarządzania procesowego w organizacjach, in: Bitkowska, A., Weiss, E. (Ed.) Metody i koncepcje podejścia procesowego w zarządzaniu, Wyższa Szkoła Finansów i Zarządzania w Warszawie, Warszawa. Brajer-Marczak, R. (2015) Doskonalenie zarządzania jakością procesów i produktów w organizacjach, Wydawnictwo Uniwersytetu Ekonomicznego we Wrocławiu, Wrocław Głuszek E. (2014) Techniki i narzędzia zarządzania ryzykiem reputacji przedsiębiorstwa w ramach ERM, w: Stabryła A., Małkus T. (Ed.), Strategie zarządzania organizacjami w społeczeństwie informacyjnym, Mfiles.pl, Kraków. Griffin, R.W. (2013). Podstawy zarządzania organizacjami, Wydawnictwo Naukowe PWN, Warszawa. Grycuk, A. (2010). Kluczowe wskaźniki efektywności (KPI) jako narzędzie doskonalenia efektywności operacyjnej firm produkcyjnych zorientowanych na lean, Przegląd Organizacji No. 2. ISO 31000 (2018). Risk management – Guidelines, International Organization for Standardization, Geneva. 124
ISO 9000 (2015). Quality management systems – Fundamentals and vocabulary, International Organization for Standardization, Geneva. ISO 9001 (2015). Quality management systems – Requirements, International Organization for Standardization, Geneva. Jakubiec, M. (2017). Projakościowe zarządzanie przedsiębiorstwem, Difin, Warszawa. Jokiel, G. (2009). Podejście procesowe w zarządzaniu – geneza i kierunki rozwoju koncepcji, in: Nowosielski, S. (Ed.) Podejście procesowe w organizacjach, Prace Naukowe Uniwersytetu Ekonomicznego we Wrocławiu nr 52, Wrocław. Kaczmarek, T.T. (2010). Zarządzanie ryzykiem. Ujęcie interdyscyplinarne, Difin, Warszawa. Koźmiński, A.K., Piotrowski, W. (Ed.). (2005). Zarządzanie. Teoria i praktyka, Wydawnictwo Naukowe PWN, Warszawa Lichtarski, J. (2015). Praktyczny wymiar nauk o zarządzaniu, Polskie Wydawnictwo Ekonomiczne, Warszawa. Lisiecka, K. (2012). Zarządzanie ryzykiem – determinanta jakości zarządzania przedsiębiorstwem, Zarządzanie i Finanse, R. 10, No. 3 Łańcucki, J. (2013). Aspekty regulacyjne zarządzania ryzykiem w sektorze ubezpieczeń, Prawo Asekuracyjne, No 2(75). Łukasiński, W. (2013). Proces kształtowania projakościowego zarządzania organizacją, Zeszyty Naukowe Uniwersytetu Ekonomicznego w Krakowie No. 915, Kraków. Malinowska, U. (2011). Charakterystyka kluczowych koncepcji zarządzania ryzykiem w przedsiębiorstwie, in: Kasiewicz S. (Ed.), Zarządzanie Zintegrowanym Ryzykiem Przedsiębiorstwa w Polsce, Wolters Kluwer, Warszawa. Matkowski, P. (2006). Zarządzanie ryzykiem operacyjnym, Wolters Kluwer, Kraków. Nowosielski, S. (Ed.). (2008). Procesy i projekty logistyczne, Wydawnictwo Uniwersytetu Ekonomicznego we Wrocławiu, Wrocław. 125
Radomska, J. (2017). Ryzyko operacyjne w procesie realizacji strategii przedsiębiorstw, Wydawnictwo Naukowe PWN, Warszawa. Risk Intelligent view of reputation. An outside-in perspective. (2011). Deloitte, Risk Intelligence Science, No. 22. Rogala, P. (2012). Tożsamość zarządzania jakością wybrane zagadnienia, Zarządzanie i Finanse, R. 10, No. 3. Rydzewska-Włodarczyk, M., Sobieraj, M. (2015). Pomiar efektywności procesów za pomocą kluczowych wskaźników efektywności, Zeszyty Naukowe Uniwersytetu Szczecińskiego nr 864, Finanse, Rynki Finansowe, Ubezpieczenia No. 76. Skrzypek, E. (2012). Uwarunkowania pomiaru i doskonalenia procesów w organizacji, w: Sikora T., Giemza M. (Ed.), Praktyka zarządzania jakością XXI wieku, Uniwersytet Ekonomiczny w Krakowie, Wydawnictwo Naukowe PTTŻ, Kraków. Skrzypek, E., Hofman, M. (2010). Zarządzanie procesami w przedsiębiorstwie, Wydawnictwo Wolter Kluwer, Warszawa. Staniec, I. (2011). Uwarunkowania skuteczności zarządzania ryzykiem w organizacjach, Wydawnictwo Politechniki Łódzkiej, Łódź. Szczepańska, K., Bugdol M. (Ed.). (2016) Podstawy zarządzania procesami, Difin, Warszawa Szelągowski, M. (2017). Co dzisiaj znaczy zarządzanie procesami biznesowymi, w: Bitkowska, A., Weiss, E. (Ed.). (2017). Perspektywy rozwoju podejścia procesowego. Szanse i zagrożenia, Wyższa Szkoła Finansów i Zarządzania w Warszawie, Warszawa Tickle, M., Mann, R., Adebanjo, D. (2016). Deploying business excellence–success factors for high performance, International Journal of Quality & Reliability Management, Vol. 33, No. 2. Urbaniak, M. (2016). Wykorzystanie koncepcji zarządzania ryzykiem w doskonaleniu systemów jakości, Problemy Jakości, No 6. Weckenmann, A., Akkasoglu, G., Werner, T. (2015). Quality management – history and trends, The TQM Journal, Vol. 27, No. 3. 126
Zapłata, S. (2009). Zarządzanie jakością w przedsiębiorstwie. Ocena i uwarunkowania skuteczności, Wolters Kluwer, Warszawa. Zapłata, S. (2016). Miejsce systemowego zarządzania jakością w zarządzaniu ryzykiem w organizacji, Studia Oeconomica Posnaniensia, Vol. 4, No. 12. Zapłata, S. (2018). Wpływ wewnętrznych czynników na sukces projakościowego zarządzania w organizacji, Wydawnictwo Uniwersytetu Ekonomicznego w Poznaniu, Poznań.
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4. SELECTED ASPECTS OF THE HUMAN RESOURCE MANAGEMENT PROCESS IN AN ORGANIZATION 4.1. Introduction The foundation of the company is the proper management of human resources because employees are the superior resource of each company. Hence, the process of recruitment and selection of personnel belongs to the main area of resource management in the organization. Entrepreneurs strive to employ the "best" employees in the shortest possible time and at the lowest possible financial outlay, therefore the recruitment and selection process must be properly planned and carried out. The following chapter outlines the nature of selection and the instruments for selecting candidates for staff. It also discusses the process of employment decision making and presents the most common mistakes in the recruitment process, so that entrepreneurs can make an optimal choice of recruitment and selection methods of employees for specific and unfilled positions. Keywords: human resource management, human resource, recruitment process, employment decision-making
4.2. The nature and concept of human resource The backbone of any company is the proper management of its activities and human resources. Employees are the basic component of each company. Therefore, the recruitment and selection of personnel is one of the main parts of human resource management process. Entrepreneurs
want to get the best possible employees, within the shortest time possible and at the lowest cost possible, so it is very important that this process is planned and carried out properly. All these factors contribute to the success of the company, as well as to increasing its competitiveness on the market.
Table 4.1. Evolution of personnel functions model Personnel function model
Human stereotypes
Traditional model (end of the 19th century and beginning of the 20th century)
Economic human (homo oeconomicus)
Model of cooperation (1930s-1940s)
Social human (homo socjalis)
Behavioral and human-oriented model (1950s-1960s)
Other-direction man and self-actualizing man
Human resources model (1960s-1980s)
Complex man
Human capital model (end of the 20th century and the beginning of the 21st century)
Learning and knowledge-sharing man
Source: own work based on (
2007, p. 36)
The concept of human resource can be defined as organisation's activities in attracting, developing and maintaining effective workforce. In fact, the resources are not the people, but what the people have: knowledge, skills and experience. Human resources are seen as an asset for the company. However, it should be remembered that when a company
signs a contract with an employee, the entire human being 1is at its disposal. Moreover, what is important is not only the implementation of the tasks assigned to the employees, but also communicating with them, making them identify themselves with the organization, attracting and motivating people. To sum up, in each organization there is a number of functions that have to be taken care of to fulfil specific goals and tasks. Functions which are aimed at planning, motivating and controlling employees are called personnel or human resources management (Penc, 2000, p. 80). Traditional model of personnel management emerged in the period of industrial revolution which required employing a large number of qualified workers which were hard to find. The main author of this model was an American engineer F. Taylor who described a number of rules for scientific management, including ( &
-Warsewicz
08, pp. 19-20): pick workers in such a way so that every one of them does the job he is best suited for, allow continuous training and development of the workers, aim for direct and friendly cooperation between the management and the workers. oncepts had many supporters, including F. and L. Gillberth,
a married couple, who carried out a motion study which involved studying movements and fatigue.
1
The sources point to employing an entire human being, not just his/her hands or mind (as it happens in the case of white-collar work), or his/her physical strength (as it happens in the case of physical work).
Gantt created a chart which compared actual work to planned work. He developed and implemented a motivating task and bonus system which was a basis for wages. Adamiecki focused on streamlining team work which led to the creation of the so-called schedule (Polish: harmonogram) which was a graphic presentation of team work analysis and planning. Scientific organization of work assumed that economic effectiveness is based on positive incentives and a system of penalties which are negative incentives (strict rules, atmosphere of fear). The traditional homo oeconomicus stereotype assumed that the worker has no higher-level needs. Human relations model was first created by Bernard who noticed how important informal organizations are, i.e. a network of informal relations and roles which influence the functioning of the formal structure. The theory of human relations movement emerged as a result of studies carried out in Western Electric corporation where it was noted that work conditions and material incentives where not a main source of increased work efficiency. An incentive for increased efficiency was the pride shown that both in large companies and small enterprises absence, workforce turnover, bad moods and reduced work efficiency can be solved by strengthening group interactions and activities. The studies have shown that: work is a team activity, the need to be appreciated, to feel confident and part of a group has greater impact on the mood of the worker than actual work conditions, informal groups at work have great social impact on the habits and attitudes of the workers,
relations in a group are not accidental; relations need to be planned and developed. Mayo shifted the attention to the workers and taking care of them (so called living machines), as well as the necessity to replace the stereotype of homo oeconomicus with the notion of homo socialis. Technical, economical and formal concerns gave way to good atmosphere at work, mutual kindness, lack of conflicts, trust and willingness to work in harmony. Behavioural and human-oriented models rely on external factors to interpret human behaviour. Humans are other-oriented and their behaviour is influenced by positive (award) and negative external (penalties) stimuli. In his theory of reinforcement Skinner shows that human behaviour, interpersonal relations and activities depend on the genetic makeup and physical and social environment. According to such view humans are completely controlled by external events, whereas personality and attitude do not control behaviour. Maslow and Rogers hypothesized that the basic driving force for humans is the desire for self-actualization and identifying their potential. Behavioural and human-oriented models shaped personnel function at that time by emphasising the human dimension of employment and work organization;
other emphasized
phenomena
included
employ
participation in decision-making, self-control, work satisfaction, fighting absence at work and workforce turnover. All of this was supposed to be supported by motivation systems which took into account personal
characteristics of the employees, their varied needs and experiences. Personnel function included using psychological tests in the recruitment process, ensuring better work organization and protection, as well as employee training. The human resources model is closely related to the idea of treating employees as a vital resource of the company. Drucker stressed the need to take good care of the human resources as a basis for increased effectiveness. Miles is considered to be an author of the human resources management phrase in which he underlined the need to view people in an enterprise in a comprehensive way and to develop a system to manage the personnel. The human capital model
in the 20th century by Noble Prize winners,
Schultz and Becker reflected upon the human potential and came up with the human capital theory.
depends on the human knowledge, and not only land, machines or energy. Human capital can be described as: characteristics of humans such as: intelligence, energy, reliability, commitment, ability to learn: mind receptiveness, imagination, creativity, reason, motivation to share information and knowledge: team spirit and being target-oriented. Becker has shown that people decide to get married and have children because they perceive it as an improvement of their quality of life, increased income and usability, despite increased life cost and the effort of raising children.
Human capital is a collection of specific characteristics and features like: knowledge, skills, health and motivation for work, which make up humans. Hence, what is most important in this model is combining two contradictory tasks: company effectiveness and knowledge management in the company. The main tasks include: gaining and retaining employees with required knowledge, encouraging others to share knowledge with their colleagues, increasing the chances of gaining and creating knowledge. Managers are required to be proactive in the learning field (coaching, mentoring) and to be oriented towards creating and implementing personnel strategy (controlling, benchmarking). As a result, one of the criteria for accepting the position by an employee may be/is the possibility of education and learning, a s well as training, additional lessons, gaining professional licences. Human capital model also involves: the concept of career portfolio which illustrates frequent changes of positions which can be either a result of necessity or seizing new opportunities; : loyalty of the employee in exchange for the stability of employment and keeping oneself and the enterprise competitive, providing that the employee has a chance to develop; fighting the reluctance to share knowledge with young/new employees.
4.3. The nature of human resource planning The success of any organisation depends to a large extent on assurances and maintenance of an adequate number of competent and motivated employees and managers. An optimal structure of employment depending on the right decisions and actions is called human resources planning. Human resource planning is the process of setting objectives and the means by which they will be implemented. The aim of human resource planning is to identify the future organizational tasks faced by the personnel to eliminate the differences between the current and a desired number of employees. In a narrow sense, human resource planning covers determining the demand for human resources, determining the supply of these resources and employment planning in terms of quantity and quality. of employment planning: zero-based forecasting
involves collecting information about
the current and future employment state, its evaluation and introducing changes depending on the current or future employment needs; managerial judgment
managers attempt to forecast employment
needs on the basis of objectives and tasks for each job taking into account company business plans; delphi method
a group of experts prepare their opinions with regard
to demand and supply of human resources; benchmarking method (comparisons) helps define employment needs on the basis of employment in the significant companies with similar business profile.
Other planning methods based are as follow: production and/or service norms; ratio-trend analysis, computer simulation method, as well as scenario forecasting.
4.4. Preparation of the recruitment process Recruitment is a process of finding and attracting an adequate number of candidates to be selected for free job positions. It is a communication process between an organization and the internal or external job market. The process should be tailored in such a way so that it encourages suitable candidates and eliminates those who do not meet the criteria defined by the employer (Figure 4.1). Recruitment should fulfill the following three functions: information it gives a wide range of information on who and for what purpose is needed for a vacancy; motivation it should attract those candidates who are willing to work; preliminary selection
it should attract those candidates who are
appropriate for a vacancy. Before commencing the recruitment process an analysis of the employment plan should be carried out to decide whether job vacancies could be filled within the company. Screening involves inviting as many candidates as possible to select those who best fulfill all the requirements and meet expectations of the employer so that the organization gests the best employees. This model ass
i.e. valuable
employees. There is no place left for poor employees in the organization.
Recruitment of human resources Alternatives to recruitment Defining requirements for the employees Decision on beginning the recruitment
Choice of recruitment source and methods Internal recruitment
Choice of recruitment source and methods
External recruitment
Job offer preparation Offer made available on the market Collecting applications and information about the candidates
Methods: Announcement on in the press, on the radio, TV Recommendations of other employees, Labor offices Specialized companies, Schools and universities Candidates previously rejected, Independent applications
Methods: Announcement on the intranet, newsletter HR additional personnel List of successes Closed competitions
Selection
Figure 4.1. Schemes of the recruitment process of the human resources Source: own work.
Selection is a process in which a candidate must fulfill basic requirements of the selection procedure to be admitted to another stage of the selection process.
There are two types of recruitment process: in-house recruitment and external recruitment
-Chmielewska & Bator, 2017).
In-house recruitment (from within the organization) involves internal appointment of an employee and often involves personnel retraining so that employees can perform new tasks. An open recruitment (open competition)
information about job vacancies is made available to all
employees in the organization in the form of internal announcements or closed competition. Each employee who thinks that he or she has the qualifications mentioned in the announcement or in the competition rules may apply for a vacant position. A closed recruitment (closed competition) information about the vacancy is not made available to all employees. A small number of decision-makers decide about the rules, criteria and potential candidates for the job. It is to remember that internal recruitment may cause domino effect in which another vacancy is created. External recruitment involves analysis of the external job market and attracting candidates. Direct recruitment: is carried out by the organization itself with the help of its own recruitment specialists. Outsourced recruitment: means using recruitment companies to search for employees. It is often new companies which do not have experience with recruitment process that use services of such companies, as well as organizations which are looking for specialists with rare qualifications or professional aptitude. Succession plan a plan of succession which is created to satisfy future human resources needs which may arise as a result of people leaving the organization, transfers or temporary absences of employees.
4.5. The nature and concept of selection Selection the best one from the point of view of requirements of a given position According to McKenna and Beech (1999), during the selection process, candidates who may be potential employees are selected, and specific methods are used to determine their usefulness, as well as to choose the candidate with the best qualifications for the vacant position. By determining professional suitability, one of two strategies can be chosen. The first one is called a positive strategy in which suitable candidates are selected, and the others are protected from rejection. This is a riskier strategy and evaluation skills need to be improved. Each strategy can be implemented in specific situations. The positive strategy works when a company is not looking for a ready-made employee, but for people with a new approach and high potential, who, with appropriate resources, will develop at work and bring profits to the company. This strategy allows employers to carefully analyse the profile of the candidate and his or her suitability for the job. The second strategy is called a negative strategy which consists in rejecting unsuitable candidates. It is formal, simple and safe. This ensures that the company does not employ the wrong candidate. The negative strategy works if the candidate's education is of more interest to the employer than his or her personality traits and potential. This strategy prevents the company from accepting an average candidate.
4.6. Chosen instruments of selection process in an organisation The selection process consists of the following steps: 1. A human resources manager should familiarise him/herself with the applications submitted and conduct a preliminary selection. The offers should be divided into three groups. The first one consists of potentially attractive applications, the second, and the third group consists of the applications which are not accepted. Only the selected candidates are invited for an interview. 2. Initial interview with the applicant
the purpose of the interview is to
get to know the candidate, assess the first impression made by him/her, and his/her competences. In general, such a conversation is brief. 3. Verification of information about the candidate
this usually happens
when employers contact those who submitted references from the former employer as well as the supervisor or tutor of the year. 4. A competence test and a decisive interview during which the skills, competences and personality traits relevant to the vacant position are verified. This is an important selection step and should be carried out conscientiously. The interviewer should listen carefully to what the candidate has to say, so that it can be determined what he/she is talking about directly or what (topics) he/she is avoiding. 5. Medical examination
a statement of the can
general health
condition and of whether there are any contraindications to the job position.
6. Hiring the selected candidate
information about the positive decision
and recruitment. However, the applications of the most promising candidates remain in the database in case of another vacancy (Kostera,
Table 4.2. Characteristic of different employee selection methods 1. Document analysis
Is the most common technique used for making a preliminary selection of candidates because CV/resumes, cover letters and certificates of employment are uniform in nature and hence, facilitate the process of comparing numerous candidates. The aim of document analysis is to obtain and review as much information concerning a candidate as possible in order to preliminarily verify whether he/she, indeed,
2. Interview
Is a discussion between a recruiter and job seeker? Interview aims at supplementing and verifying information obtained in the course of document analysis and acquiring new insights concerning of the potential employer (employment and remuneration conditions).
3. Job samples and simulations
Give a candidate a chance to perform standard tasks
4. Selection tests
Make it possible to assess particular traits of a candidate or employee, skills, psychological or physical predispositions. By means of tests comprising sets of tasks and questions one may ascertain whether specific traits are present in an individual and how pronounced they are.
5. Psychological tests
Are used for examining specific psychological traits, such as: intellect and personality traits, temperament or motivation system.
6. Knowledge tests
Measure the level of knowledge necessary for performing a job on a given position. High diagnostic value is the advantage of such tests. Their disadvantage is low prognostic value concerning the behavior of the subject in a particular situation, since the fact of having some knowledge does not guarantee that one can apply it in practice. Another drawback associated with such tests is that they need to be updated and adjusted to suit particular persons.
7. Medical tests
Are conducted to examine general health and fitness of an individual. They are a prerequisite for commencing work by a candidate /employee.
8. Assessment Center
9. Unconventional methods
aptitude? Its main objective is to select one person who best fulfills established requirements from among a group of people applying for the same position. Are rarely used as their usability in examining applicants for the job has not been established (graphology, biorhythm analysis, polygraph, that is "lie detector" tests).
Source: own work
Selection methods are a key element in the selection process. Selection methods must be chosen carefully but even the best ones will not be enough to omit following errors, such as: an inadequate profile of the candidate and the specificity of the vacant position or insufficiently matched means of submitting the vacancy notice. Selection methods should be selected on the basis of certain criteria, such as: clear requirements for a vacancy, the amount of time spent recruiting and selecting candidates, the amount of money spent on carrying out these processes and possible selection methods. In the recruitment and selection process, the basis for the decision to hire a candidate are education, skills and experience which have to be
set out in advance in the candidate's profile. The set of such competences varies depending on the type of position and depends mainly on the company itself. In Figure 4.2 there are presented all selection methods in the whole process starting from diagnosis of human resources up to recruitment decision. Diagnosis of HR Job description
Selection of recruitment methods External recruitment Selection of candidates
Internal recruitment
Internal mobility
Independent recruitment
Out-sourced recruitment
Choice of search method
Data banks
Internet source
Press advertisement
Direct search
Final assessment CV evaluation, telephone interview, job interview, psychological tests, group methods, assessment center, verification of references and credentials Recruitment decision
Figure 4.2. Presentation of the process of selection with the selection methods Source: own work
Induction is a process of adapting a new employee to his/her new job and working environment (Pocztowski, 2008). Its objective is to ensure that an employee will function smoothly both in professional as well as in social dimension. Internal mobility is the process of movement of employees which takes place between the jobs in sections, departments or divisions of the organization. Internal mobility skill and requirements with the requirements of the job and those of the organization continuously. The main objectives of internal mobility are: to improve organizational effectiveness, to eliminate structural defects and unwanted positions, to improve employee effectiveness by putting his knowledge, skills and abilities to better use, to adjust to changing business operations, to ensure discipline, to correct wrong placements and job assignments. Internal mobility can take any or more of the form of promotion, demotion, transfer. Employee promotion covers all changes in the form and employment conditions (qualification-related promotion) and remuneration conditions (pay-related promotion) to more beneficial ones. Employee downgrading is a change of form and employment conditions (position-related downgrading) and remuneration conditions to less beneficial ones. Transfer (organizational shift) is a horizontal translocation of an employ-yee to a different position without changing his/her workplace in organizational hierarchy.
Table 4.3. Comparison of selection methods Selection method Documents
Form standard personal data forms; CV drawn up by the candidate;
Information
Presentation of results
personal details, education, acquired qualifications, professional career, hobbies; relevant facts; professional career history.
References
written or oral; confidential or provided by the candidate.
description and evaluation of skills obtained from previous employers; relevant facts; professional career history.
Assessment Center
multiform examination distributed in time and conducted by a team of qualified observers
establishing career development prospects of candidates; consistent profile of their psychological, social and professional functioning;
written, multiform ; point scores for particular tasks; ranking list of candidates.
Application
Limitation
basis for pre-screening of applicants; ease of comparing candidates if personal data, forms follow one standard; basis for preparing interviews with selected candidates.
information presented in abbreviated form; it is difficult to accurately
if the credibility of the person/ company issuing references is established they are taken into consideration when making employment decision.
credibility of references may not be verified; they cannot be exclusive basis for making decisions; if they evaluate a candidate rather than describe him/ her, do not provide objective inform.
in long-term development strategy and employee training (rather middle and top management)
high cost and timeintensity necessity to prepare an evaluation team alongside with information analysis and selection methods
competencies; subjective nature of information provided by the applicant himself/ herself.
Selection method
Form
Job interview
interactive form interview with a candidate conducted and led representative.
Career aptitude tests
filling in test forms individually or in groups under standard and controlled conditions (prerequisite for method credibility)
Information
Presentation of results
Application
Limitation
expanding knowledge about candidat history; getting to know his/her working style and social interactions; relevant facts; professional career history.
written profile.
combined with analysis of documents it may form a basis for determining whether a candidate will be suitable for the job; it allows the interviewer to convey a positive image of the company and benefit from the climate of mutual trust.
assessment is subjective; one learns the way the candidate acts indirectly by interpreting his/her answers.
intellectual potential; personal predispositions; preferred style of working and acting; competencies, professional ability of candidates; data concerning candidates is interpreted against specified; norms or standards (credibility criterion); basis for predicting actual behaviour in working environment.
psychological profile of professional predispositions, quantitative and descriptive indicators
always applied as one of the elements of the selection procedure; gives insight into such fields of human activity which could not be explicitly determined by other methods; particularly useful when candidate pool is large.
used rather for negative selection; require a complicated methodological preparation; may be used only by trained persons (psychologists)
Source: own work based on (Suchar 2008, pp. 80-82)
abilities.
Looking for external employees too frequently is indicative of improper HR policy which may suffer from inefficient employee career development and promotion schemes! Explain when looking for external employees is necessary. Out-sourced recruitment is a form of business process outsourcing where an employer transfers all or part of its recruitment processes to an external service provider. Recruitment Process Outsourcing can provide its own or may take over the company's staff, technology, methodologies and reporting. In all cases, RPO differs greatly from providers such as staffing companies and contingent/retained search providers in that it assumes ownership of the design and management of the recruitment process and the responsibility for the results (https://www.hudsonrpo.com/what-is-rpo-recruitment-processoutsourcing, accessed on 20.07.2018). Job interview is the most important selection tool and it has been extensively described on numerous occasions. It is to remember that job interview should not be treated like an ordinary talk, as it is a specific selection tool with distinct features such as: eliciting answers to posed questions, clearly defined roles of the recruiter and respondent, the fact it is prepared and should not be improvised, and that the fact that discussing private life details should be limited (Mazin, 2011, pp. 17-38).
Table 4.4. Examples of questions in a job interview to practice Typical questions I. Current job situation Describe a typical day at work. What belongs to your duties? What do you find most interesting in your job? What is the most time-consuming activity? Achievements What do you consider your biggest achievement? What job-related goals would you like to achieve this year? How will you benefit from it? Which of your plans did you manage to fulfill? Motivation What gives you most satisfaction? What is most pro-development in your current job? Attitude to work How much time do you spend at work? Why are you still working in this company? What would necessarily need to change so that you could continue working there? What is your view on the marketing policy pursued by the company you are working for? Business contacts What is, in your view, the most effective way of dealing with subordinates? How would you characterize an ideal boss? II. Plans and intentions Why are you applying for this position? What would you still like to learn? How should your career develop in the future? Family situation Have you considered the possibility of moving to another city? How would your family react? How would your wife/husband react to your frequent absences at home? Education Why did you decide to follow this course of study? Which courses or training contributed mostly to your development? Have you ever thought of expanding courses or training would you still like to complete? Previous business experience What Why did you decide to change jobs? What were your main duties? W attention to experience which directly relates to the position the candidate applies for.) Which of Source: own work based on (Armstrong & Mitchell, 2008, pp. 27-43)
cular on level of preparedness for a given interview, ability to ask questions and listening skills, ability to create atmosphere conducive to relative openness in communication, familiarity with principles of psychology and skilful avoidance of perception errors, ability to register and interpret interview results as well as ability to come up with an opinion in relation to a particular person. It is very important to outline that in practice, the way the interview is arranged is always determined by the position one applies for and information presented by the candidate. It cannot be explicitly said how such an interview should be planned or how much time should be devoted to specific topics and in which order they should be brought up. It is, however, possible to distinguish four most common methods of conducting a job interview. There are four different methods in conducting a job interview, which are: analysis of critical events, analysis of current professional situation, biographic model, and checking a list of criteria. Analysis of critical events consists on focusing on turning points and situations usually makes it possible to establish the most characteristic action methods and motivation type exhibited by a given person. successes or defeats (promotion, downgrading, sudden change of private or professional plans), situations when a candidate needs to take a decision of paramount personal significance (changing work, choosing a course of study, decisions made in emergency situations),
non-standard, untypical, emergency social situations (e.g. the way one acts in case of closure of the employment establishment, natural disaster). Analysis of current professional situation consists on referring In such an instance recruiter touches upon such issues as: 1) current jobs (professional tasks, fulfillment of tasks and achievements, motivation, attitude to work and employer, professional contacts and interpersonal relations; 2) plans and intentions; 3) family situation; 4) education and vocational training; 5) employment history (reasons for changing places of employment, specific experiences, held positions, type of performed tasks). Biographic model is probably the most common method of conducting in which he/she presents the most important professional life events from the point of view of the offer (or own career). Job interview focuses, then, on subsequent events, beginning from the present-day situation and going back in time or the other way around. Border points for the conducted analysis are usually: current place of employment and the time of commencing (completing) education. When conducting an interview following this model, it is worth concentrating more in professional career which are of importance from the point of view
Checking a list of criteria. In this case, the basis for conducting a job interview is a precise description of the job and selection criteria derived
from this desc information which will make it possible to decide whether a given candidate has specified qualifications and personality traits and hence meets particular selection criteria. This method of conducting a job interview consists in asking questions which directly check traits and skills
Table 4.5. Presentation of stages of a job interview Stage of a job interview
Goals and objectives
Actions
Introduction to the session
Establishment of goals and meeting principles Establishment of relations between participants Breaking the ice and creating friendly atmosphere Creating climate for a substantive and concrete discussion
Greeting introduction of meeting participants Information about the goal of the meeting, its duration and interview organization Presentation of the offer: essential facts about the company and position for which the candidate applied Candidate's questions concerning the job offer
Questions and
Clarification of inconsistencies
Questions referring to: professional career letters of reference knowledge and skills personal views, beliefs
responses
Providing missing information. Eliciting information professional experience. professional qualifications and assessment of psychological work aptitude Confirmation of interest in the offer
Stage of a job interview
Goals and objectives
Actions
expectations associated with the offer Establishing time when a candidate can commence work in the new company End of session Meeting closure and establishment of follow-up actions
Summary of the interview Providing information concerning further recruitment stages
Source: own work based on (Armstrong, 2000; Suchar, 2008, p. 94)
It is to be noted that the effectiveness of an interview f. ex. depends on getting ready for a specific conversation correctly, the ability to ask the right questions and listen to the right answers, creating a good atmosphere for open conversation, as well as the ability to correctly interpret and evaluate the interview in relation to the candidate (Suchar, 2008, pp. 93-94). Selection interviews can be divided by the number of interviewers into the following types: individual (interviewed by one recruiter and one candidate) and panel or panel (interviewed by more than one recruiter). Interviews with committees are positive because they avoid subjective evaluation. Therefore, such an interview is more effective than an individual interview. During the interview, it is a good idea to divide the questions which the candidate is being asked into different types. Basing on that division, four types of interviews can be distinguished:
situational
during this interview, the recruiter will check the candi-
date's behavior in certain situations, in which they must react; behavioral
this is an interview during which the recruiter collects
information about the professional experience gained by the candidate; psychological
during this interview, the interviewer tries to assess
what personality traits dominate in the candidate. The so-called "stressful" interviewer conducts the interview in a way which makes it possible to assess the candidate's reflections, reactions in crisis situations, in difficult and unpredictable situations, and his/her emotional stability (Listwan, 2004, p. 88; Holland, 1985, pp. 35-45).
4.7. Employment decision-making The main objective of the evaluation is to answer the following questions Why do we conduct the evaluation? What do we want to achieve by carrying out the assessment? By creating a system of employee evaluation try to take into account the expectations and needs of the evaluators and the evaluated employees! According to the typology of the assessment by McGregor (1960) there are three objectives: administrative the assessment results are written down in the personnel documents; informative
to obtain knowledge on the execution of tasks assigned
to the employees and learn about their characteristic behaviours. In addition, the assessment provides feedback on the expectations
of the employers towards employees (and vice versa) and the strengths and weaknesses of the employees; incentive
may be a consequence of obtaining feedback from
the employees about the results of their work and desired behaviours and used to motivate the employees to work more efficiently. Assessment (evaluation) is a value judgment occurring as a result of comparing the characteristics, skills, behaviors and / or results of the particular employee in relation to other employees or to a fixed pattern (standard). The employee assessment system is a set of deliberately targeted and interrelated components aimed at increasing the effectiveness of current and strategic HRM in the context of the mission and goals of the organization. It is a conscious way in which the rules, criteria, methods, techniques and procedures are to be used to evaluate There are two kinds of assessments. On-going assessment is performed the immediate supervisor or manager of the company. In its nature, it is continuous and situation-dependent. As a rule, the evaluation criteria are not formalized as their goal is to select the most appropriate people for specific tasks or project teams. Periodic assessment is performed according to a specific time-table; it is formal in character and can be compared against certain fixed principles, tools and procedures. The final evaluation of the candidates in the recruitment process is not a comprehensive assessment of their professional potential, but a relative evaluation resulting from the comparison of the presented characteristics (attributes, skills, qualifications) with the requirements of an employer. Such an assessment is relative in two ways
as it is done by
comparing a person to other candidates and to the employer
expectations. Although a candidate has been chosen for the position, it does not mean that other candidates are worse. It simply means that they do not meet the needs and expectations required by that particular employer.
4.8. Avoiding errors in the process of recruitment and selection Beware of psychological errors that may occur when performing s evaluation. The evaluators are likely to make psychological errors which do not result from malice or negligence but the specific nature of human perception. The most frequent assessment errors include: central tendency error
it means that an assessor tries not to harm any
of the assessed candidates and not assess them as neither good or bad. In most cases candidates get average score; context mistake exaggerated because the candidates are in sharp contrast with the expectations, background, or stereotypes. For example, a person at the age of 30 in the environment of 20-years-old candidates, is perceived as the old one; angel halo effect (Galatei effect, nimbu effect)
it means that
an assessor may assign personality traits based on the positive impression. For instance, if a man is thin, he is surely kind, openminded, etc.; satanic halo effect (Golema effect)
it means that an assessor may
assign personality traits based on the negative impression. For instance, if a man is fat, he is surely mean, close-minded, etc.
Assessment involves the difficulty of evaluating the quality of the assessing process translated into a quantitative assessment. Transforming words into numbers is only possible by using scales that are able to assess the examined person. The last stage of the recruitment process is to decide on the selection
Below are presented the rules of the selection decision (Nosal 2000; Beck 2000): one rule criteria
a decision is based on a single criterion,
e.g. education; multiple rules criteria
a decision is based on several criteria,
e.g. education and work experience; rule of domination the choice of a candidate is based on who is better than the others, in terms of one characteristic, but not inferior in terms of other features; rule of combining the weights and strength of specific characteristics the best candidate is the one who gets the highest score compared to others.
4.9. Assessment of the recruitment process effectiveness from the point of view of an organization To sum up, selection is the process that an organization uses to determine which job applicant will be most successful in meeting the requirements of the job or which one will fit well into the existing work groups and the culture of the organization. Poor selection procedures and processes lead to various unnecessary costs in the organization.
In the recruitment process, an organization hires the most suitable and qualified candidate to fill a job vacancy. To keep the recruitment process effective, which means to set the goal of hiring an appropriate person for a vacant position at a reasonable cost, a few rules need to be taken into account (www.smallbusiness.chron.com accessed on 17.07.2018; Stedt 2010, pp. 60-64): Reduce the number of applicants
It is no secret that recruitment
attracts many applicants to a particular job, which may prove difficult to manage, but selection reduces the number of applicants so that it becomes manageable. Candidates who have applied for a job during the recruitment stage are screened in the selection stage. Those who prove suitable for the job are selected, and unsuitable candidates are rejected. Assess behavior of each candidate
selection gives managers
an opportunity to assess potential employees' character and personality. This ensures that only an employee with the most suitable personality traits and skills is given the job. The organization draws particular attention to the personal flexibility and adaptability of a candidate, which ensures that such an individual can quickly adjust to the tough requirements of the job. Try to keep employee turnover low
appropriate selection procedures
applied in the recruitment process ensure that only the most qualified individual is chosen to fill a vacancy. Recruiting employees who are satisfied with their jobs results in a low employee turnover rate. Employee retention is important to an organization, as the costs of hiring and training new employees are very high.
Set and save the time
a good selection procedure saves time
in the recruitment and orientation processes because the applicant is expected to have been introduced to some aspects of the organizational culture, such as the dress code. The recruiter time trying to inculcate various aspects of the organization's culture and norms in the new candidate. The employee is given an adequate picture of what the new job entails, thus unnecessary chores that are not included in
job description are eliminated.
4.10. Bibliography Armstrong, S., Mitchell, B. (2008). The Essential HR Handbook. Career Press. Beck, U. (2000). The Brave New World of Work. Malden. Blackwell, pp. 139-153. Organizacja przebiegu procesu kadrowego, in: .). Organizowanie, planowanie, motywowanie, kontrola. Warszawa: Agencja Wydawnicza Placet. Holland, J. (1985). Making vocational choices: A theory of vocational personalities and work environments. New Jersey: Englewood Cliffs, Prentice Hall, pp. 35-45. https://smallbusiness.chron.com/importance-selection-recruitmentorientation-process-17372.html [accessed: 17.07.2018]. Kostera, M. (1994).
e personelem. Warszawa: Wyd. PWE. -
organizacji i Warszawa: Wyd. SGGW.
Podstawy
T Wyd. Naukowe PWN.
.
Listwan, T., Kawka T. (2004). Warszawa: Wyd. C.H. Beck
Warszawa, in. Listwan T. (Ed.).
Mazin, R. (2011). The Employee Benefits. Answer-book. An Indispensable Guide for Managers and Business Owners. Pfeiffer. Mc Gregor, D. (1960). The Human Side of Enterprise. New York. McKenna, E., Beech, N. (1999). Warszawa: Wyd. Felberg.
.
-Chmielewska, A., Bator, P. (2017). Rekrutacja , in: Tauber, R.D., MuchaSzajek E. (Ed.). Turystyka, hotelarstwo, gastronomia w teorii i praktyce. . Nosal, C. (2000). , Vol. 43, No. . Penc, J. (2000). Kreatywne kierowanie Pocztowski, A. (2008). Wyd. Naukowe PWE.
. .
Stedt, J. (2010). Talent balancing: staffing your company for long-term success, Santa Barbara, CA, USA: Praeger Publisher, pp. 60-64. Suchar, M. (2008). Rekrutacja i selekcja. Warszawa: Wyd. C.H. Beck.
5. LIFE CYCLE BASED METHODS FOR PRODUCT AND PROCESS ASSESSMENT
5.1. Introduction Numerous initiatives related to promoting Life Cycle Management (LCM) in the economic area have been launched in the last several years. They can be observed as a part of more and more intensive activity made by various institutions (legislative, consulting, research, scientific) for the sake of supporting entrepreneurs in the application of the life cycle based methods in practice. The concept of LCM serves as an example of bringing life-cycle thinking to business in the specific fields of organization, product and service management to ensure a proper balancing of production and consumption. The chapter presents two pillars of Life Cycle Management: environmental included in Life Cycle Assessment analysis (LCA) and economic represented by Life Cycle Costing accounting (LCC). LCA enables to identify and assess the environmental aspects and their potential impact on environment associated with the whole product’s life cycle. LCC is a method for cost calculation carried out in any and all phases of a product’s life cycle to provide input to decision makers. The main aim of this chapter is to bring readers closer to the terms and application of LCA and LCC. Special focus is placed on the methodologies that should be of interest to product managers as well on integrated LCA/LCC tool that can be used to even more holistic process and product
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assessment and improvement. Finally, the case study covered eco-efficiency analysis is presented. Keyword: Life Cycle Assessment, Life Cycle Costing, Eco-efficiency
5.2. Life Cycle Assessment – basic information 5.2.1. Terms and applications of Life Cycle Assessment Life Cycle Assessment (LCA) is an analytical tool that can be applied in many areas of environmental management. According to the ISO Standard LCA involves “compilation and evaluation of the inputs, outputs and the potential environmental impacts of a product system throughout its life cycle” (ISO 14040, 2009, p.10). Therefore, LCA addresses the environmental aspects and potential consequences of releases to environment in the whole life cycle. The above-cited definition emphasizes two main features of the LCA. First of all, it is an “input” – output” approach to environmental assessment that takes into account used materials, energy and generated emission to air and water as well solid waste related to the functioning of a product system. Secondly, the environmental aspects and potential environmental impacts (negative and positive) are considered in terms of life cycle: from raw material acquisition
and
processing
through
production
of
components,
manufacturing of product, use of product into its end-of-life treatment/reincarnation.
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Figure 5.1. Schema of the life cycle Source: Own work
LCA, because of its potential, has a wide range of applications from macro-scale sector analyses or uses within the public sector, to micro-scale – in context of a single organization, regardless of its size and operation’s activity (Lewandowska, 2011). To public policy applications where LCA can be used directly or indirectly belong, for example: Eco-labelling systems (ISO 14020, ISO 14021 and ISO 14025), Inclusion of environmental aspects in product standards (ISO Guide 64), Quantification, monitoring and reporting of facilities and projects relating to emission and absorption, validation, verification and certification of greenhouse gases (ISO 14064), Creating social policy, Integrated Product Policy, Green Public Procurement, Policy and regulations.
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Appendix A of the ISO 14040 Standard recommends the use of LCA in various company related applications: Development and improvement of products, Strategic planning and Eco-Marketing, Design for environment (ISO 14062), Environmental communications (ISO 14063), Environmental management systems and assessment of effects of environmental activities (ISO 14001, ISO 14004 and ISO 14031). Environmental management that strongly focuses on the effects of manufactured goods occurring in the life cycle becomes more and more popular. So-called Product-Based Environmental Management System (PBEMS) or Product-Oriented Environmental Management System (POEMS) often refer to LCA and promote its use in widespread aspects of product and process management. The updated requirements of ISO 14001 Standard seem to be compatible with these trends. First of all, an increasing significance of eco-design should be emphasized. The integration of environmental aspects of life cycle into product design is a recommended approach to organisation’s environmental activity development. Beside eco-design, which is a classic area of LCA application, it is worth to stress that LCA seems to be an important tool in the context of building the single market for green products based on Environmental Footprint of Product (EFP). EFP is a general method to measure and communicate the potential life cycle environmental impact (environmental performance) of products (Commission Recommendation, 2013). It is actually an important core of discussion in European Union. To current stimulants of LCA application in business practice belong, among others, promotion of new approaches to public procurement. 164
The inclusion of non-price criteria of bid assessments, with regard to the awarding of public procurement contracts, is becoming more and more popular. What more, the criteria include more often the life cycle perspective and are applied to an increasing number of products.
5.2.2. Methodology of Life Cycle Assessment LCA methodology is described in ISO 14040-44 Standards. As the most important ones should be considered ISO 14040:2009 Environmental management – Life cycle assessment – Principles and structure and ISO 14044:2009 Environmental management – Life cycle assessment – Requirements and guidelines. According to indicated above standards the full LCA study consists of four phases (Fig. 5.2). Plan of the study must include the goal and scope. It is important to determine a function, functional unit and reference flows. Functional unit is defined as „quantified performance of a product system for use as a reference unit” (ISO 14040, 2009, p.16). Reference flow is treated as „measure of the outputs from processes in a given product system required to fulfill the function expressed by the functional unit” (ISO 14040, 2009, p.16). When it possible, functional unit should include four aspects: What? How much? How well? How long? For example, if you consider life cycle environmental impacts of a vacuum cleaner, the functional unit could be described as maintenance of cleanliness in room with an area of 100 m2 during a period of 10 years. Then it is necessary to answer much more questions concerning, for example, the intensity of use of the vacuum cleaner and its lifespan. Based on this information, the reference flow could be defined. In the presented case, it is a number of a vacuum cleaner which is needed to fulfill the function expressed by the functional unit – maybe 1, 165
maybe 2 or maybe 0.5. Fractions of reference flow are quite unconventional but in LCA it is typically to compare products which differ in durability or even to compare objects that fulfill the same function in a different way (vacuum cleaner/broom). Therefore, it happens that the reference flow presents only „part” of a product that is analyzed.
GOAL AND SCOPE DEFINITION
INTERPRETATION
LIFE CYCLE INVENTORY ustalenie procedur kalkulacji oraz alokacji
LIFE CYCLE IMPACT ASSESSMENT wybór kategorii wpływu, wskaźników kategorii
Figure 5.2. Stages of an LCA Source: (ISO 14040,2009)
During the first stage of LCA it is also necessary to define the system boundary, at hence unit processes which are part of an analyzed product system. A unit process is the “smallest element considered in the life cycle inventory analysis for which input and output data are quantified” (ISO 14040, 2009, p18). Dividing the product system into the unit process is a crucial aspect of life cycle inventory (LCI). It is the second stage of LCA – the most time-consuming one. It is very helpful to draw a process flow diagram showing the unit processes and their interrelationships. All processes should be described in term of input and output data. The first group includes primarily energy inputs, raw material inputs, ancillary inputs and other physical inputs. The second one covers products,
166
co-products, solid waste and other releases to environment (to air, water and soil). The third stage of LCA is called life cycle impact assessment (LCIA). It is the most important phase during LCA study that aims at “understanding and evaluating the magnitude and significance of the potential environmental impacts for a product system throughout the life cycle of the product” (ISO 14040, 2009, p. 12). From the scientific point of view, the environmental impact modeling under LCA consists in transforming inventory data and calculating environmental category indicators. The LCA study enables therefore to recognize the potential environmental consequences resulting from the consumption of given resources and the emission of certain substances. What's more, it allows to answer the question, what types of environmental problems (e.g. in the field of human health, climate change, natural resources) potentially can be caused by the analyzed product/processes and what are the reasons for that? In other words, the LCA study gives a "photo" of processes and product’s elements that exert the influence on environment and shows to what extent they affect the environment. Life cycle impact assessment is characterized by very difficult methodology. There are a lot of software that support the realization of LCIA. They are intended for both universal (Sima Pro, Umberto, Gabi) as well for specific application (i.e. waste management – IWM-PL, construction – ATHENA, processes related with transport and energy – GREET Model). The software includes scientifically acceptable LCIA methods (i.e. Impact 2002+, Eco-indicator99, CML, ReCiPe, etc.) that cover environmental mechanisms linking the life cycle inventory analysis results to category indicators and then to category endpoints. 167
This topic is such complex that it is impossible to explain LCIA in a short manner.
Table 5.1. Impact and damage categories used in Impact 2002+ Impact category
Unit of impact category
Carcinogens
kg C2H3Cl eq
Non-carcinogens
kg C2H3Cl eq
Respiratory inorganics
kg PM2.5 eq
Ionizing radiation
Bq C -14 eq
Ozone layer depletion
kg CFC-11 eq
Respiratory organics
kg C2H4 eq
Aquatic ecotoxity
kg TEG water
Terrestrial ecotoxity
kg TEG soil
Terrestrial acid
kg SO2 eq
Land occupation
m2org.arable
Aquatic acidification
kg SO2 eq
Aquatic eutrophication
kg PO4 P-lim
Global Warming
kg CO2 eq
Non-renewable Energy
MJ primary
Mineral extraction
MJ surplus
Damage category
Unit of damage category
Human health
DALY
Ecosystem quality
PDFm2yr
Climate change
kg CO2 eq
Resources
MJ primary
Source: (Jolliet et al. 2003)
However, it is worth to point out that one of the LCIA method that is representative for European conditions is Impact 2002+. Impact 168
categories, corresponding with them damage categories and appropriate units are presented below (Table 5.1). Results obtained in particular units of damage categories are then normalized and presented as Single Score in so-called environmental points (Pt). 1 Pt means the annual impact on environment generated by average European. The obtained LCA results have to be interpreted. The interpretation phase should include identification of the significant issues and an evaluation that considers completeness, sensitivity and consistency checks. It is also time to explain all limitations and draw conclusions and recommendations. Based on LCA study the directions for improvement of the organization's activity or its products should be defined, which are then verified in terms of other criteria, e.g. economic, social, technological, etc. Due to the fact that LCA includes only environmental aspects, it is recommended to integrate LCA with other life cycle based methods and techniques. It is a topic of the next paragraphs.
5.3. Life Cycle Costing – basic information 5.3.1. Terms and applications of Life Cycle Costing Life Cycle Costing (LCC) is referred to as the logical counterpart of LCA for economic assessment, however, LCC has a longer tradition and wider context. Cost calculation based on particular phases of the product’s life cycle has well-grounded roots going back to the second decade of the previous century. LCC is not yet standardized, except for very special purposes. The general approach to this concept is presented in the PN-EC 60300-3-3:2006 Dependability Management: Application Guide – Life Cycle Costing. According to abovementioned standard Life 169
Cycle Costing is a “process of economic analysis to assess the life cycle cost of a product over its life cycle or a portion thereof” (PN-EC 60300-33, 2006, p.12). Life Cycle Costing should not be confused with the Life Cycle Costs. These terms have the same acronym (LCC), but they differ in definitions. Life Cycle Costs is treated as “cumulative cost of a product over its life cycle” (PN-EC 60300-3-3, 2004, p.12). Therefore, it is an indicator that is calculated in life cycle costing. In this monograph, an abbreviation LCC is used in the context of a process of cost’s estimation. Among approaches to cost calculation based on LCC idea few types of LCC can be identified: conventional LCC (business LCC, c-LCC), environmental LCC (LCA-based LCC, e-LCC) and social LCC (s-LCC). Special focus was placed on the first type of LCC and then on environmental LCC. Traditionally LCC was used to determine whole costs of physical (from conception to final disposal) or marketing (from the introduction on the market to decline) product’s life cycle in order to assess its profitability or competitiveness. Typically, LCC was also applied in investment effectiveness calculation to rank different alternatives of modernization/ replacement investments. Therefore, applications of LCC analysis are as follows (Kawauchi & Rausand, 1999): evaluation and comparison of alternative design; assessment of economic viability of projects/products; identification of cost drivers and cost effective improvements; evaluation and comparison of alternative strategies for product use, operation, test, inspection, maintenance, etc.; evaluation and comparison of different approaches for replacement, rehabilitation/life extension or disposal of aging facilities; 170
optimal allocation of available funds to activities in a process for product development /improvement; assessment of product assurance criteria through verification tests and their trade-offs; long-term financial planning. SETAC Group (Society of Environmental Toxicology and Chemistry) has been developing environmental LCC that differs in some aspects from conventional LCC. First of all, it is shaped based on the structure of LCA presented in ISO 14040-44 – hence LCA-based LCC – and should be integrated parallel with LCA. According to the definition of e-LCC proposed by SETAC it is “an assessment of all costs associated with the life cycle of a product that are directly covered by any one or more of the actors in the product life cycle (supplier, producer, user/consumer, EOL-actor) with complimentary inclusion of externalities that are anticipated to be internalized in the decision-relevant future” (Swarr et al., 2011, p. 54). The scope of an e-LCC is presented below.
Figure 5.3. Scope of an e-Life Cycle Costing Source: (Swarr et al., 2011) 171
The abovementioned definition includes the term that needs to be explained. Externalities are consequences of activity which aren’t reflected in market prices and affects parties that don’t cause them, i.e. environmental pollution. Costs imputed to such externalities that are linked to the product during any life cycle stage are defined as external costs. They should be considered in the frame of LCC and provided in monetary value. It is quite difficult to measure external costs. A lot of methods are available for these purpose (i.e. willingness to pay), but their use creates doubts. In e-LCC accounting it is unnecessary to include external costs because doing so would mean double counting the environmental impacts that already are quantified in the life cycle impact assessment (LCIA) component of LCA in physical units. In this context, the important application of such analysis is worth to underline (in addition to the previously mentioned areas of application), namely identification of win-win situations and trade-offs in the life cycle of the product in term of two pillars of sustainability. E-LCC combined with LCA should be called integrated life cycle assessment and may be a base of eco-efficiency analysis. This topic is presented in the last part of the chapter, after shortly explaining the LCC methodology.
5.3.2. Methodology of Life Cycle Costing There are six major life cycle phases of a product: concept and definition, design and development, manufacturing, installation, operation, maintenance and disposal (PN-EC 60300-3-3, 2006). In a general way, the total costs incurred during the above phases can be divided as below: 172
LCC = acquisition cost + ownership cost + disposal cost
Acquisition costs generally include the purchase price of a product and other costs that are related with the acquisition, i.e. cost of transport, insurance, installation cost etc. The ownership costs are not readily visible and it is difficult to predict them. These costs occur during use of a product and relate the operation and maintenance phases. Disposal costs concern and of product’s life and involve waste treatment operations including disassembly as well revenues that can be reached due to recovery of recyclable materials. Figure 5.4 shows the life cycle phases of a product and the chosen issues which because of their potential importance should be considered in the cost calculation.
Figure 5.4. Issues that should be considered in life cycle study Source: (PN-EC 60300-3-3, 2006)
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Elements of LCC can be much more extensive depending on study’s object. For engineering systems, it was proposed to calculate life cycle costs using formula (Blanchard & Fabrycky, 1991):
LCC = Cic + Cin + Ce + Co + Cm + Cs + Cenv+ Cd
where: LCC – Life Cycle Costs Cic – initial costs Cin – installation and commissioning Ce – energy costs Co – operating costs Cm – maintenance costs Cs – down time, loss of production Cenv – environmental costs Cd – disposal costs As was already pointed LCC consists in identification and evaluation of the costs that occur during the whole product’s life cycle. Steps of such analysis should cover (PN-EC 60300-3-3, 2006): life cycle costing plan (including definition of life cycle costing objectives); LCC model selection or development; LCC model application; life cycle costing documentation; review of life cycle costing results; analysis update. 174
Abovementioned steps are similar to the previous approach presented in the literature (Picture 5.5). The focus should be placed on LCC modeling that includes, among others, cost breakdown structure (CBS). It is a life cycle oriented way of cost classification linking different costs that should be considered in LCC. Based on CBS cost categories are defined and the data collected. Application of LCC model is a crucial point of LCC study. LCC model should enable to reflect “reality” of product’s life cycle and extract the important features of the product in order to translate them into cost estimating relationships. It should be simple enough to be easily understood and should allow for its timely use in decision making, future update and modification (PN-EC 60300-3-3, 2006).
Figure 5.5. Procedure of Life Cycle Costing Source: (Kawauchi & Rausand, 1999)
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Money spends in the future has a different value than the same amount spends today. That is why a significant element of LCC procedure is discounting. It is a process of calculating the present (current) value (PV) of future costs. The discount rate is the rate of return that is used to compare expenditures of different points in time. It is generally determined by the investor’s minimum acceptable rate of return and depends on various factors, i.e. risk involved. European Commission recommends to use a real discount rate amounted to 5%. In the life cycle some costs occur regularly each year and can be aggregated to an annual expenditure whereas some costs occur so infrequently that they must be treated as single cost element. In case of constant yearly costs the current value of future costs can be determined with the use of discount factor that is given by the formula: 1
𝑑 = [1+(𝑖−𝑝)] 𝑛
(1)
where: i – nominal discount rate p – inflation rate n – number of years
In practice, the current value of future costs occurring every year can be calculated by multiplying discount factor (d) and the sum of costs that are constant for each year. In table 5.2 the discount factor is tabulated as a function of real discount rate (nominal rate minus inflation rate) and number of years.
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The present cost (Cp) of a single cost element, Cn paid after “n” years can be calculated as follows: 𝐶𝑛
𝐶𝑝 = [1+(𝑖−𝑝)] 𝑛
(2)
Table 5.2. Discount factor for constant yearly costs Real discount rate No. of years 1 2 3 4 5 6 7 8 9 10
1
2
3
4
5
0.99 1.97 2.94 3.30 4.85 5.80 6.73 7.65 8.57 9.47
0.98 1.94 2.88 3.81 4.71 5.60 6.47 7.33 8.16 8.98
0.97 1.91 2.83 3.72 4.58 5.42 6.23 7.02 7.79 8.53
0.96 1.89 2.78 3.63 4.45 5.24 6.00 6.73 7.44 8.11
0.95 1.86 2.72 3.55 4.33 5.08 5.79 6.46 7.11 7.72
Source: (Frenning et al., 2001)
Abovementioned principles for Life Cycle Costing apply also for conducting an e-LCC. However, it needs to be clearly pointed that e-LCC is shaped based on LCA and should be consistent with its methodology. That is why the procedure of e-LCC is as follows (Swarr, 2011): goal and scope definition, economic life cycle inventory, interpretation, reporting. 177
E-LCC has to be conducted with regard to the same as in LCA functional unit and in equivalent system boundary. These decisions flow directly from the goal and scope definition. Thanks to the consistency of LCA and e-LCC these methods can be used in eco-efficiency analysis and serve the two-plane assessment of products and processes. Terms, applications and methodology of eco-efficiency assessment is indicated in the next point of this chapter. Finally, a case study is presented.
5.4. Eco-efficiency analysis – basic information 5.4.1. Terms applications and methodology of eco-efficiency assessment Eco-efficiency is defined as „aspect of sustainability relating the environmental performance of a product system to its product system value” (ISO 14025, 2012, p. 5). Product system value should be understood as worth or desirability ascribed to a product system that may encompass different value aspects, including functional, monetary, aesthetic, etc. Eco-efficiency assessment can be applied for (ISO 14025, 2012): product development and improvement, strategic planning – budgeting – investment analysis, public policy making, marketing – supply chain management, awareness raising, sustainability assessment.
178
The methodology of eco-efficiency assessment is presented in Picture 5.6. The main point is how to combined environmental assessment represented by LCA and product system value assessment calculated in LCC in order to determine an integrated indicator that is easy to interpretation and communication. Based on the determined environmental impact indicator and LCC index that represents the discounted stream of life cycle costs and shows the cost corresponding to the functional unit adopted in the LCA, the eco-efficiency coefficient could be determined as follows: 1
𝐸𝑐𝑜 − 𝐸𝑓𝑓𝑖𝑐𝑖𝑒𝑛𝑐𝑦 = 𝐿𝐶𝐶𝑥𝐿𝐶𝐴
(3)
Object characterized by a lower value of the eco-efficiency index should be considered less eco-efficient one.
Picture 5.6. Stages of eco-efficiency assessment Source: (ISO 14025, 2012)
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5.4.2. Eco-efficiency analysis – case study The company “X” is a leading producer of a wide range of lighting systems. In the portfolio there are, among others, fluorescent lighting profile adapted to individual consumer’s requirements. In face of an increasing ecological awareness of society, top management has decided to redesign the abovementioned key product in order to reduce its environmental impact during life cycle. One of the opportunities for
environmental
improvement
of
fluorescent
lighting
profile
is the application of more efficient light source what results in lower energy demand during its use. To promote the change from a basic product (Product A) to an alternative one (Product B) the difference in ecoefficiencies between these two products were presented.
5.6.2.1. Assumptions of the case study The basic and alternative products are characterized by the similar power supply (55 W). However, product B has a significantly higher luminous efficacy (122.3 lm/W) and longer lifespan (50,000 hours). The analyzed lighting profiles differ also in other aspects (certain components and few production processes), but due to the sensitivity of these data, they could not be detailed presented. The main aims of the study were a comparative assessment of the potential environmental impacts occurring in the life cycle of analysed lighting profiles and assessment of the total costs associated with these products. Environmental assessment was conducted with the use of Impact 2002+ LCIA method. Costs were assessed with the use of LCC model based on acquisition, ownership and disposal costs (discount 180
rate 5%). The purchase costs were calculated based on the traditional cost calculations that are used in order to determine the unit cost of production. All costs were calculated regarding defined functional unit and for consistent with LCA system boundary. Use Costs were discounted by multiplication the constant yearly costs and discount factor presented in Table 5.2 (here: 6.46). Single cost elements (replacement in case of product A after 4. year of use and disposal cost) were calculated in according to formula 2. The function of the analysed products is to illuminate by supplied electricity. Accordingly, the functional unit was defined as ensuring proper lighting of the room with an area of 30 m2 during a period of 8 years. Reference flows were stated as: 1. one fluorescent lighting profile (one replacement of lighting source during a period of 8 years), 2. one lighting profile with an innovative light source (without replacement). The system boundary included the production processes realized in the plant, upstream processes for which data has been collected from Ecoinvent database and downstream processes that occurred during the usage stage (based on the abovementioned functional unit) and final disposal (based on scenario representing polish conditions).
5.6.2.2. Results of the case study Life cycle of product A in relation to the functional unit affects the environment at the level of 0.896 Pt. The most significant is the impact in the climate change category (about 40 % of the total Single Score). 181
Environmental impact includes also interventions that contribute to human health disability and then natural resources depletion (33% and 29% of the total Single Score). In terms of environmental harmfulness, the usage stage definitely dominates. Environmental impacts generated by this stage is almost 0.894 Pt, representing about 99% of the total Single Score. Life cycle of product B in relation to the functional unit affects the environment at the level of 0.12 Pt. As a result of energy efficiency improvement, the total value of the calculated eco-indicator has decreased by 86.6%. It is worth to notice that a significant increase in environmental impacts generated by the production stage of an alternative product has been observed but it is completely compensated by the reduction of environmental burdens caused during the use of the lighting profile. LCA indicator of comparative products as well discounted life cycle costs and quantification of eco-efficiency are presented below. Table 5.3. Statement of the calculated life cycle indicators Indicator
Product A
Product B
LCA [Pt] LCC [PLN] Eco-efficiency indicator [1/Pt*PLN]
0.896
0.12
1,542
1,344
7.24E-04
6.20E-03
Source: Own work
As shown in table 5.3 discounted life cycle costs of product B are by 13% lower than in the case of product A (calculated per functional unit). It means that the definitely higher purchase cost of product B (almost three times) associated with the implementation of a new and cost-intensive 182
production
process
is
compensated
by
the
savings
occurring
at the stage of its use. Product B is more beneficial not only in term of environmental aspects but also taking into account costs, what results in higher eco-efficiency indicator obtained for product B. Based on the integrated analysis, it is recognized that the proposed redesign of the lighting system aimed at improving energy efficiency, brings clear environmental effects and is also economic justified.
5.5. Bibliography Blanchard B.S., Fabrycky W. (1991). Life-Cycle Cost and Economic Analysis. Englewood Cliffs: Prentice-Hall. European Commission, (2013). Commission Recommendation of 9 April 2013 on the use of common methods to measure and communicate the life cycle environmental performance of products and organisations, 2013/179/EU. Official Journal of the European Union. Frenning, L., Hovstadius, G., Alfredsson, K., Beekman, B., Angle, T., Bower, J., Hennecke, F.W., McKane, A., Doolin, J., Romanyshyn, G. (eds.) (2001). Pump Life Cycle Cost: A Guide to LCC Analysis for Pumping Systems. Brussels: Europump and Hydraulic Institute. ISO 14040. (2009). Environmental management – Life cycle assessment – Principles and framework. ISO 14025. (2012). Ecoefficiency assessment of product systems – Principles, requirements and guidelines. Jolliet, O., Margni, M., Charles R., Humbert S., Payet, J., Rebitzer G., Rosenbaum R. (2003). IMPACT 2002+: A new life cycle impact assessment methodology. International Journal of Life Cycle Assessment, 8, pp. 324-330.
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Kawauchi, Y., Rausand, M. (1999). Life Cycle Cost (LCC) Analysis in Oil and Chemical Process Industries. frigg.ivt.ntnu.no/ross/reports/lcc.pdf [accessed: 10.06.2018] Lewandowska, A. (2011). Environmental Life Cycle Assessment as a tool for identification and assessment of environmental aspects in environmental management systems (EMS). Part 1 Methodology. The International Journal of Life Cycle Assessment, 16(2), pp. 178-186. PN-EN 60300-3-3. (2006). Dependability Management: Application Guide – Life Cycle Costing. Swarr, T.E., Hunkeler, D., Klopffer, W., Pesonen, H-L., Ciroth, A., Brent, A.C., Pagan, R. (2011). Environmental Life Cycle Costing: A Code of Practice. New York: SETAC.
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6. MANAGING THE NEW PRODUCT DESIGN AND LAUNCH PROCESS
6.1. Introduction The aim of this chapter is to outline the stages of planning for and launching a new product on the market, with a focus on the key decisionmaking areas in the company which are crucial for the effectiveness of the entire project management. Given the multitude of viewpoints on the process of new product development which are described in the literature by various authors (Table 6.1), this synthetic analysis takes a staged approach in which seven distinct stages have been distinguished. It should be borne in mind, however, that this is only one approach to the process and should therefore be treated as a reflection of the authors’ views. The sections of this chapter correspond to the successive stages of the discussed process and the initial one covers the subject of searching for ideas for a new product, with areas worth exploring clearly indicated. The second section focuses on selected techniques of generating ideas and the next one outlines a number of methods of evaluating and selecting ideas, in order to identify the ones with the greatest market potential. Section four stresses the significance of creating value for customers with the new product, as a key market success factor. The fifth section is devoted to the discussion of the basic outcomes of the economic and financial analysis which is performed in different dimensions throughout the entire process of new product development and is the source of rationale for the go or no-go decision at every stage of the product launch process. Section six highlights the importance of test marketing, 185
from the product conceptualisation stage, through evaluation of prototypes, to the testing of all elements of the new product launch strategy. The final section of this chapter presents the most important actions to be taken by the company in connection with the development and implementation of the new product commercialisation strategy. The strategy consists mainly of solutions and recommendations for the activities aimed at the development of a broadly understood business model which will create opportunities for the new product’s market success. The presented structure of the considerations on the subject reflects the approach adopted by the authors who are well aware of the fact that the process of new product development can be analysed in many different ways and from many different perspectives, depending on the product type and the specificity of the industry. Key words: new product, value for customer, forecasting, test marketing, commercialisation
Table 6.1. The process of new product development according to various authors Authors Booz, Allen, Hamilton, 1982
Stages of the process 1. New product strategy 2. Idea generation 3. Screening and evaluation 4. Concept development and testing 5. Business analysis 6. Product development and testing 7. Test marketing 8. Commercialisation/ market launch
186
Crawford, 1994
Cooper, Kleinschmidt, 2000
Fuller, 2005
Rafinjead, 2007
Trott, 2008
1. Strategic planning of the product 2. Concept generation 3. Pre-technical evaluation 4. Technical development 5. Market assessment 6. Commercialisation 1. Initial screening of ideas 2. Preliminary technical and market assessment 3. Detailed market study 4. Business and financial analysis 5. Product development (prototypes) 6. Product testing (alpha, beta) 7. Test marketing 8. Trial production and business plan 9. Production start-up 10. Marketing plan 1. Assessment of market needs 2. Generation of ideas 3. Screening of ideas 4. Product development 5. Trial production 6. Consumer testing 7. Test marketing and assessment 1. Market exploration & analysis of opportunities 2. Design the product and its characteristics 3. Prototypes and consumer evaluation 4. Commercialisation 1. Generation of ideas 2. Screening of ideas 3. Concept testing 4. Business analysis 5. Product development 6. Test marketing 7. Commercialisation 8. Market monitoring and assessment
Source: (Sojkin & Małecka, 2011 p. 153; Rafinejad, 2007)
187
6.2. Searching for new product ideas The company’s market position depends to a high extent on its flexibility and ability to supply customers with products which satisfy their needs and expectations. Consumer needs keep evolving all the time so, on the one hand, the supplier’s offer must be constantly adapted to the changing needs and, on the other, new products must be developed providing new values to market participants (not only consumers) to enable enhancement and expansion. The starting point to searching for new product ideas being the first stage of the process of novel product design and launch is to precisely define the term “new product”. The published sources offer numerous interpretations and classifications of the new product, responding to the variety of approaches and purposes, both on the side of the business enterprise and consumers. One of the approaches most commonly referred to in the publications presenting different new product classifications is the approach proposed in 1982 by the consulting firm Booz, Allen & Hamilton. Their classification is based on two dimensions: how new is the product to the company and how new is it to the marketplace. Based on the two criteria, they have identified six categories of new products (Booz, Allen & Hamilton, 1982, pp. 12-20): products new to the world which create entirely new markets, new product lines with which the company enters established markets for the first time, additions to existing product lines to supplement established products, improvements
to
existing
products
or perceived value to customers, 188
offering
higher
quality
repositioned products i.e. existing products targeted to new markets or selected market segments, products offering cost reductions i.e. new products ensuring similar performance at a lower cost. The classification presented above can be used as a platform for discovering new product ideas, keeping in mind that there many areas which should be covered during the search. At the stage of searching for ideas to develop new products to be offered, companies resort to numerous sources which can generally be broken into external and internal ones. Companies using internal sources rely on information available inside the organisation e.g. production, maintenance or customer service departments. The experience and knowledge of employees in different areas of the company gathered while working in various roles and capacities are valuable resources which should be utilised when searching for new product ideas. Additionally, many companies carry out market and marketing research, the results of which are often the main source of knowledge and the rationale for actions to be taken. External sources, on the other hand, include customers (existing and prospective), competitors, scientific and research institutions and various industry exhibitions and conferences. The crucial external inspiration for the company, however, comes from consumers and the micro- and macroenvironment in which they live. Thorough observation and analysis of demographic, socioeconomic and cultural changes, both on a global and regional and local scale, may help to spark new product ideas responding to the identified changes. The data showing the gradual aging of our population or a steady increase in the number of one-person and two-person households can serve 189
as a trigger for the development of a new product offer aligned with the current and future expectations of those consumers. The successive generations of consumers (known as the BB, X, Y or Z generations) with very different value systems arising from different life expectations and needs set new trends which, in turn, can inspire businesses to look for opportunities to expand their market offers. The growing affluence of people which drives the development of the luxury goods market, the globalisation or internationalisation are all trends in our environment which tell us important things about the contemporary consumers, their lifestyles or their new and still unmet needs and expectations. In addition to sociodemographic changes, new market trends are a valuable source of inspiration for companies wanting to expand the range of marketed products. Expecting a personalised product offer, shopping for safety, wellbeing, disloyalty and curiosity, buying time or the ecoapproach are examples of 21st century trends. A thoughtful review and interpretation of such trends can open up new expansion opportunities for the company. Apart from trends, the knowledge of consumer behaviours and decisionmaking factors can provide a valuable input. According to the results of research in the area of behavioural economics and neurosciences, consumers are more often driven by emotions than rational arguments when making their purchase decisions (Kahnemann, 2012; Ohme, 2017), which is a finding of great significance for the choices made at the shop shelf where consumers pick a particular product. It is thus worthwhile to reach for the state-of-the-art consumer insight and use it to generate ideas for new products which can be offered to customers.
190
The examples above clearly demonstrate that the knowledge of consumer behaviours cannot be overestimated while searching for new products ideas. Good consumer insight which requires thorough and in-depth analysis of customers’ motivations, expectations and desires is of paramount significance. We need to explore the world of our consumers, accompany them in everyday life and try to understand how they arrive at the decisions they make. This is often a new, reliable and relevant source of knowledge about consumers and their needs, also the unconscious ones, and ultimately a source of new ideas for products which respond to the identified needs. Another vital source of inspiration is the research of competition, including both direct and indirect competitors, and above all the critical ones. The monitoring of competitive activities and product offering and learning lessons from competitors’ successes and failures can create new opportunities for the expansion of the product range, entry into new markets and identification of market niches to capitalise on. New knowledge fostering the search for new product ideas can also come from scientific institutions and research and development centres, including universities and industry organisations. Thanks to their resources and technological capabilities they can investigate new solutions and test the outcomes of their studies. Presentations of the research output of such institutions during all kinds of exhibitions, fairs or industry events is a chance for businesses to identify new development opportunities. And technological development is certainly one of major areas where ideas for new products should be sought. The implementation of modern, advanced solutions in the company, upgrading production lines
191
and deployment of the latest technological achievements are the ways to improve the product offer and launch new products on the market. While gathering information coming from both internal and external sources for the purpose of discovering new product ideas, the accuracy, credibility and usefulness of the collected data should be verified. Additionally, the methodology of analysing the data must be determined, in particular including the evaluation criteria and key selection factors. In order to collect the data for future use the same methods should be used as the ones employed in market research and marketing studies.
6.3. Generation of new product ideas The collected information about the current market trends, customers’ needs and expectations, activities of the competition and sociodemographic and economic data changes is a starting point for the generation of ideas for a new product. This is a stage of inventive and creative work, of particular importance for the future stages. A number of publications devoted to ‘design thinking’ are available in the source literature which describe how to initiate, develop and exploit the process. Further on, a number of selected well-known techniques of generating ideas will be discussed, the purpose of which is to produce as many new product ideas as possible, including brainstorming and a variation of the technique called 635 Brainwriting, the SCAMPER technique and the Four Actions Framework. The results show that the more ideas are put forward at this stage, the higher the chances that the one which is unique and unparalleled will among them (Lawley & Schure, 2017, pp. 67-68).
192
Brainstorming is one of the better known creative techniques originated by Alex Osborn. It is a pleasant and, at the same time, exceptionally productive way of generating multiple ideas. The first step is to precisely define the goal of the planned session, the number of its participants and the duration. There are two stages of the process: the stage of generating ideas and the stage of preliminary review of the proposed ideas. During the first stage, members of the team (between 5 and 8 persons) present their ideas connected with the agreed goal and consistent with the four guiding principles of brainstorming: each emerging idea is good and there are no judgments at this stage; all ideas are written down, even the wildest and most absurd ones; each idea can be improved, modified or transformed by other members and turned into another idea; the goal is to have as many ideas as possible and quality does not matter. When the predefined session time is up, the second stage begins during which ideas are grouped together and initially reviewed. The ideas can be classified according to any agreed criteria (e.g. ideas for now, ideas for the near future and ideas for the distant future) which helps to identify and eliminate duplicated ideas and choose the ones with the highest development potential. A variety of the traditional brainstorming is a technique called 635 Brainwriting. The main difference is that ideas are written down. Each participant of a 6-person team receives a sheet of paper with the problems (session goals) listed and has five minutes to write down three solutions to resolve them. When time is up, each person passes their sheet of paper to the person sitting next to them, on the left or on the right, and receives
193
his/her neighbour’s sheet of paper. Then another 5-minute round takes place during which each person adds three new ides to the ideas already written down by the previous person. The new ideas can elaborate on the ideas of the previous person or can be completely new solutions. Then comes another 5-minute round with swapping the sheets of paper and the whole session ends when each participant gets back his/her original notes. When all ideas are collected, there comes the time for their preliminary verification. The advantage of this technique is that it generates relatively many ideas within a short period of time and encourages involvement of all team members without concerns about more active participants taking control over the creative session (which often happens during the traditional brainstorming). SCAMPER is a creative technique with more rigid rules compared to classic brainstorming which is used to generate more precise ideas rather than toss them around. The team’s task is not to come up with new product ideas but to try to reinvent or modify existing products and, as a result, arrive at new concepts. The tool was proposed by Bob Eberle who relied on Alex Osborn’s list of idea-spurring questions as the basis for his problem-solving technique (Schmidt, 2013, pp. 253-255). When the goal is defined – in our case “to find ideas for new products” – a list of main characteristics (attributes) of the product is developed. Then, each of them is analysed according to the SCAMPER model in terms of possible modifications or improvements (Table 6.2). Going through the steps one by one and using the supporting questions (Table 6.1) ideas are being generated for new (improved) products.
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Table 6.2. SCAMPER Substitute
What can be substituted? What else instead? Who else instead? What other ingredients, materials, processes, functions, components? What other approach can be used?
Combine
Bring together/ Mix with something? Combine functions, objects, ideas? Two-in-one/ Three-in-one?
Adapt
What else is like this? What other idea does this suggest? What could be copied/ replicated?
Modify, Magnify, Minify
What can be improved? Change shape? Change colour or smell? What to add? More time? Greater frequency? Make it thicker/ expand? What to remove/ make smaller/ shorter/ weaker? What to exclude?
Put to other uses
Use for other purposes? Other functions?
Eliminate
What to remove/ reduce? Redundant/ unnecessary things?
Rearrange, Reverse
Think of the reverse. Change position? Put upside down? Change direction/ Rearrange?
Source: own work based on (Schmidt, 2013, pp. 253-255)
The Four Actions Framework is a research technique developed by Kim and Mauborgne as part of the Blue Ocean Strategy (Kim & Mauborgne, 2018, p. 81). Its usefulness in the process of generating new product ideas has been widely recognised (Lawley & Schure, 2017, pp. 67-68). The matrix used consists of four fields (Figure 6.1). The category of the product for which we are generating new ideas must be placed in the middle of the matrix. In each of the fields the session participants write down suggestions for removing, reducing, raising or creating features/ attributes which will distinguish the new product from the existing products offered by the company.
195
Reduce -
Eliminate Product X Raise -
Create -
Figure 6.1. Four Actions Framework Source: own work based on (Lawley & Schure 2017, p. 68)
The selected idea generation techniques presented above are most useful for developing the product concept, but we should bear in mind that the list is not exhaustive and that there is still a whole range of other techniques and tools supporting creative processes in the company. The decision about selecting a particular technique depends on the expectations, the specificity of the satisfied need and the potential of a given company.
6.4. Evaluation and selection of ideas Once the list of ideas for a new product is ready, the next step is to evaluate the proposed ideas and to identify and select the ones which seem to be the best strategic choices for the company and which deserve to be analysed further at the following stages of the product development process. In the course of evaluation and selection of ideas, the decisions of persons engaged in the process of designing a new product should be based on three sets of variables (Urbaniak, 2003, p. 221): 196
external variables beyond the company’s control (such as legal regulations, regulatory requirements, socio-demographic and political changes); external variable which the company can influence and shape (such as the volume of target customer segments, the use of existing distribution channels); variables which the company controls (such as the effectiveness of production and distribution, profitability analysis, making use of available technologies). The adopted criteria are used to analyse all collected ideas and the best ones are selected for further research. While defining the selection criteria, decision makers should take into account the following factors (Gorchels, 2007, p. 188): degree of alignment with the company’s current offer, threat of substitute products from the competition, conformance with the company’s strategy and goals, acceptable period of return on investment, opportunities for future development of the product, available resources, possibility of selling the product in existing distribution channels, company’s financial means, availability of raw materials. The list of evaluation criteria should be developed independently, prior to commencement of the selection stage, and take into account the factors which are of crucial importance for the company, bearing in mind its core
197
business, the specificity of the market (industry) in which it operates and the development trends on the market. During the idea selection stage, attention should be paid to ensure that the decision-making process is neither too rigorous nor too easy-going. The former approach can result in rejecting good ideas (DROP-errors) and the latter one in accepting bad ideas (GO-errors) (Urbaniak, 2003, p. 219). The stage of idea evaluation and selection can be handled in many different ways, from using a very simple 0-1 evaluation, through a more complex scoring system, to methods which take into account the significance (weight) of each factor in the group of factors considered relevant. The first step is to define a checklist of criteria which each new product has to meet and carry out the selection process based on that list. Another approach involves drawing up a list of criteria and evaluating each idea according to the list in the 0-1 system. The ideas with the highest scores are selected. It is also possible to take advantage of available methods of idea assessment and make the final choice based on the outcomes. The source literature contains numerous descriptions of methods of evaluating new products with a varying degree of complexity. Depending on the needs and possibilities, persons involved in the process can use a number of methods one after another to carry out a multi-step selection of ideas from the overall pool. The preliminary assessment of the proposed new product ideas can be carried out using the ”Checklist of Questions” which helps to evaluate ideas from four different perspectives, such as (Urbaniak, 2003, p. 225):
198
alignment with the company’s goals, resources and capabilities, analysis of the external environment aspects, conformance with
the
requirements
and
economic potential
of the target buyers, degree of competitiveness. For each of the abovementioned areas, a list of questions is drawn up (see the example in Table 6.3). Each idea is evaluated based on the answers to the questions (usually on a dichotomous scale of yes/no). Subsequently, the results of the evaluation are analysed and the ideas with the highest number of positive answers are selected. After the evaluation, a scoring methodology can be used to further assess the selected ideas. One of such methods is the scoring model developed by J.T. O’Meara Jr. in which four major classes of variables are used to evaluate a concept: Marketability, Durability, Productive Ability and Potential. Within each of the categories mentioned above a number of factors have been defined with scores reflecting the value of each criterion. The first step is to analyse the impact of the groups of factors determining the market success of the new product and to assign weights to each group corresponding to the degree of its influence on the ultimate success. Then, the impact of each factor in a given group is assessed and the final rating is assigned.
199
Table 6.3. Checklist of questions – an example New product idea vs. the company’s goals, resources and capabilities
New product idea vs. the company’s environment
New product’s target customers
Competition
Is the new product concept consistent with the company’s goals? Will the new product make the company’s offer more attractive? Is the current level of resources sufficient to put the new product idea into effect? Does the company already have substitute products on offer? Will the new product generate new costs? Is the new product environment-friendly? Does the new product conform with legal requirements? Does the new product respond to current trends/ fashion (e.g. with regard to its design or functions)? Does the new product fill a market niche? Will the new product increase customer satisfaction? Is the target group sufficiently big to achieve the expected sales volume? Will the new product enhance customer loyalty? Can the company grow its market share by launching the new product? Do competitors offer a similar product? Can the new product be an element of competitive advantage?
Source: own work based on (Urbaniak, 2003, p. 225)
The last step is to compare the scores of all ideas which are the totals of the results of multiplying all factors by their weights corresponding to the impact on the market success of the new product (Urbaniak, 2003, pp. 227-232). When the scoring and selection process is over and when 200
there are a number of ideas which have been positively assessed, a comparative analysis can be used to directly compare the evaluated ideas. Each idea is scored according to the adopted criteria and the total score is the basis for accepting or rejecting the idea. In another approach, selected ideas can be compared using the weighted total score method in which the respective evaluation criteria are assigned weights in accordance with the company’s goals and potential. Each idea is scored and then the score is multiplied by the weight of each factor and the results are summed up. Finally, the results of calculations for each idea are compared and the winning idea for the new product is selected.
6.5. Creating new product value In the process of designing a new product, one of the key tasks of the project team is to define the key values of the product. Leaving aside the variety of approaches to and definitions of the ”product value”, the term is most often understood as the difference between the benefits obtained as a result of purchasing the product and the costs incurred to buy it. In this case, the costs incurred include not only tangible financial costs but also the intangible ones such as, for instance, the time spent to get to the shop and buy the product or the energy used up to do it, etc. (Rutkowski, 2011, p. 44). The value for customer is most often viewed in the context of the product attractiveness perceived by the buyer. The assessment usually involves a comparison of the company’s product offer with the offer of another company. If the benefits arising from buying a certain product are greater than the benefits from buying a competitive product, 201
in the customer’s eyes that product will have a higher value. As the product value perceived by the consumer is subjective, the process of creating value for the new product is more difficult. The product value perceived by the customer may be associated with many different areas, such as, for example (Mruk, 2013, pp. 16-17): understanding the value as a package deal, recognising implicit needs of consumers and responding to them with a new product, building a relationship with the customer throughout the entire selling process, comparing the product quality versus its price, perceived benefits arising from buying the product versus its price, enrichment of the product by offering additional services, reducing or eliminating the risk related to purchasing the product. In the case of creating value for a new product, they may refer to features related with its functionality and quality, to hedonistic or symbolic aspects or to the costs. While creating a new product value, the company may resort to its internal resources (employees, own experience, other products) or
draw
inspiration
from
the
external
environment
(existing
and prospective customers, competition) and use the knowledge gained to choose the best solution. The process can be initiated by employing, above all, the observation method which offers a great support in making final decisions. The company’s observations may include: observation of customer behaviours, observation of competitors’ activities,
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observation of companies which are successful on different markets (benchmarking), participant observation. Valuable inspiration can be found in all kinds of information gathered from existing or former customers, such as inquiries, complaints and grievances, untypical orders, reasons for withdrawal from purchase, opinions, etc. Another, more advanced strategy for customer involvement in the process of creating value for a new product is to invite customers to co-create the value. Highly informative are also ethnographic studies conducted in the consumers’ natural environment during which researchers enter the consumers’ world and look for the answers to such questions as who the consumers really are and what needs, desires and motivations they have. Based on the results of the observations and using additionally selected creative thinking techniques, attempts are made to identify and select the most important values of the new product. It is important to remember that the search for the values should not be restricted only to the features or attributes of the new product but should focus mainly on the benefits which the product can offer to the buyer (Mruk, 2013, pp. 27-32). The market success of a new product is to a high extent dependent on the created product value offer which is difficult to copy for the competition and well-aligned with the company’s capabilities and resources. It is worth noting here that the creation of the product value is not only a stage in the process of designing and launching a new product on the market. It is actually a decision-making process in the company referred 203
to as the customer value management which consists of four distinct stages: identification, creation, communication and delivery of the value to customers. Different concepts of customer value management rely on various methods and tools which can be used effectively in companies’ business practice (Rutkowski, 2011, pp. 45-48).
6.6. Economic and financial analysis of the new product The stage of selection and evaluation of new product concepts ends when the best idea is finally selected. Prior to getting down to the prototype development stage, an economic and financial analysis must be carried out. Its results should provide a rationale for the decision to continue (or discontinue) the work on the development of the selected concept. The financial and economic analysis should include: forecast of the sales volume and future profit, cost estimation. In the process of launching a new product on the market, the estimated future sales volume is a forecast of the predicted product sales on a selected target market (markets) within a specific time horizon. Another approach which can be taken is to use the innovation diffusion model called A-T-R or A-T-A-R (Awareness – Trial – Repeat/ Awareness – Trial –Availability - Repeat). In accordance with this model, if customers are to purchase a new product, they must know about it. The awareness of the existence of a new product may lead to a trial purchase and then to a repeat purchase of the product provider the customer was satisfied and accepted the product on the first occasion. In the abovementioned model, the volume of sales is calculated according to the following formula: 204
Sales volume = number of market participants x percentage of the participants knowing the product x percentage of the participants who make a trial purchase x percentage of the participants who want to repeat the purchase x average number of purchases per year.
The value of sales can be estimated by multiplying the calculated sales volume by the unit price of the product (sales, wholesale or retail price). In addition to the market-driven method of calculating the sales value, there are also numerous statistical and economic methods of sales volume estimation, however, in the case of a new product their application is more difficult due to the unavailability of detailed historical data. The following things are worth keeping in mind while forecasting the sales of a new product (Dittmann, 2017): the company does not have exhaustive information about the potential buyers, their needs and the urgency of satisfying them; competitors’ activities and the cannibalisation effect (when products offered by the same company compete against each other for the resources of the same buyers) can reduce the actual sales performance of the newly launched product; unforeseen changes in the macroeconomic can significantly affect the accuracy of the sales forecast. The most important part of the economic and financial analysis is the estimation of costs of introducing a new product to the market. Such estimation should include all costs on the part of the company incurred at all stages of designing and launching the new product. The costs may be related, for instance, to conducted research, development 205
and testing of concepts and prototypes, test marketing or development of the production technology. Of crucial significance at the first stage of cost estimation is the precise breakdown of the costs into fixed and variable and determination of the degree of variability. Fixed costs are the ones which do not rise when the production volume changes, for instance, the general administration costs of the company or depreciation charges. Variable costs, on the other hand, are the ones which are correlated with the production volume, including wages or the raw material costs (Krajewska, 2005, p. 130). Depending on the selected product cost calculation model and the methods of economic and financial analysis, the new product concept can be analysed primarily using the following approaches: traditional approach, cost-volume-profit (CVP) analysis, activity based costing system (ABC model), target costing. Each of the methods mentioned above has its advantages and disadvantages but the main goal of the analysis is to identify the value of the estimated costs versus the forecasted sales. The traditional method involves a detailed analysis of all planned selling expenses and the forecasted costs of goods sold. Two costing systems are used for this purpose: full costing or variable costing. The former approach takes into account the breakdown into direct costs (associated with the manufacturing of the new product) and indirect costs (common for many or all products from the company’s portfolio). The latter one,
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on the other hand, focuses on the distinction between fixed and variable costs. The cost-volume-profit (CVP) analysis is a more elaborate and complex analytical tool, also referred to as the break-even analysis. This method looks not only at costs but also revenues and allows for the estimation of the value of profit. The break-even point is the level of sales (measured by quantity or value) at which the sales revenues match the costs incurred to generated them. The main underlying assumptions in this approach include: breakdown of costs into fixed and variable, equal sales and production volumes, flat prices. The break-even analysis allows for the identification of the correlation between the volume of sales and changes in the prices and costs. The breakeven point can be calculated in terms of the sales quantity or the value of sales. The former approach will provide information about the quantity of the product which the company should sell in order to cover the costs incurred, while the latter will result in the determination of the value of the sales revenues corresponding to the total costs. Apart from traditional methods, it is worthwhile to try out other management accounting techniques, such as the activity-based costing or target costing. The activity-based costing system (also known as the ABC Model) is a method based on a different perception of the rules of calculating indirect costs (i.e. the costs which cannot be charged directly to manufactured products), in which the costs are calculated per one unit 207
of the product following the analysis of the activities carried out in order to manufacture it. The main principles of the ABC method are as follows: identification and recognition of the crucial activities conducted by a given company (associated with the manufacturing of a product or providing a service); determination of measurement units of the volume and cost of each activity; allocating the costs of activities to a single unit of the manufactured product (products); calculation of the product unit costs based on the rates assigned to particular activities and costs charged to respective product types; allocation of indirect costs to individual products (both the ones which increase and do not increase the product value). An effective approach to the economic and financial analysis of a new product is to use target costing, a market-driven method which focuses on the estimation of costs versus the retail/ sales price acceptable to the buyer (Nita, 2015, pp. 159-172). The main characteristics of the approach which warrant its application include: analysis of the purchasing power of the customers or market prices (i.e. the prices set by the market participants); production costs are an independent variable at the time of defining the product requirements; possibilities of taking various approaches to the product and its manufacturing processes in order to achieve the predefined target cost.
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The very procedure of target costing consists of three main stages: determining the acceptable cost of the product, determining the target cost of the product and determining the cost of target product components. For the purpose of calculating the acceptable target cost, the starting point is the target sales price (unit cost + unit profit). The price is determined on the basis of a thorough, multi-dimensional analysis of the product market in connection with the predicted lifecycle of the product. In this context, it is important to take into account the level of the price acceptable for the buyers which may be of significance for the subsequent diversification of the product characteristics (enhanced product). The next stage is to find out the acceptable cost, understood as the unit cost of the product which will allow for the achievement of the planned profit taking into account the predefined price and the current costs. This value will show the required degree of cost reduction which will be a task for all parties involved in the product design process, in such areas as the technology, organisation, supply and finance. This stage provides highlyadvanced analytics of the manufacturing process and additional activities complementing the manufacturing process. The third stage consists in the disaggregation of the target cost at the level of the product, its components and supplies. The overall target cost is broken down into individual processes, such as production, marketing, logistics and finance and the main activities focus on the analysis of various product solutions associated with the manufacturing and marketing processes. The results of the analysis help to model the costs of manufacturing the product and launching it on the market. Generally speaking, the target costing method is a very useful tool due to its market-driven perspective which takes into account the product lifecycle and the use of available analytical tools 209
(function and value analyses) with an aim of reducing the costs. Thanks to the performed analysis, costs can be planned at the level ensuring the expected degree of profitability throughout the entire lifecycle of the product. The methods discussed above are the basic types of economic and financial analysis used in the case of new product concepts. Whichever method the company will use, it is important to remember that the analyses should be performed regularly, as their results will provide the basis for estimating the economic and financial consequences of the potential failures.
6.7. Test marketing of the new product Product testing consists in exposing various products to specially structured and planned trials conducted for a strictly defined purpose. The potential objects of tests include product ideas, preliminary concepts, prototypes, final versions of products at the time of their market launch, as well as marketed products at different stages of their lifecycle. Test marketing is one of the test types used, in addition to technical, laboratory or expert tests of the product (Andruszkiewicz, 2000, p. 110). The selection of the suitable form depends on numerous factors, such as the company’s possibilities, needs and expectations concerning the tested product. This section focuses on the testing of new product concepts and prototypes. At this stage of the process of new product development and market launch, it is important to have a good knowledge of test marketing methods and techniques and the ability to accurately select the right research tools and properly define the expectations regarding 210
the test results (Kuźniak, 2018, p. 185). During marketing tests of new products (their concepts or prototypes), different elements of the analysed product, its specific values and main features are evaluated. Tests can be performed for the product as a whole or for selected elements only. The persons invited to participate in such tests are usually potential buyers or users of the new product. In the course of the tests, their opinions about individual aspects of the tested concept or prototype are gathered. As a result, the company receives information to what extent the new product can satisfy their expectations and perceptions related to the examined characteristics of the product. At the stage of the new product concept, tests are most often carried out in order to: (Andruszkiewicz, 2000, pp. 117-118) choose the best product concept out of a number of available alternatives; define the optimum set of the product characteristics; evaluate the product concept as a whole and the impression it made on the potential buyers; estimate the market opportunities of the new product. The detailed elements of the product concept which can be evaluated by the future buyers include (Ankiel-Homa, 2012, p. 48): product category or type, method of purchase, perceived features and properties of the product, product brand, product packaging concept, estimated price of the product, 211
potential distribution channels of the new product, consumers’ concerns regarding the raw materials, technology or production methods. The evaluation of the new product is usually performed using traditional test marketing methods and techniques, in which an important aspect is the two-way communication (direct or indirect) between the researcher and the test participants, using research tools with a varying degree of standardisation (Haffer, 2000, p. 148). For the purpose of testing a new product concept, the most frequently chosen method is an interview and the selection of the appropriate technique (direct, in-depth, group or individual interview) depends on the aim of the study, the research problem statement, the available resources and the time the company can invest in executing the tests (see more: Mazurek-Łopacinska, 2016). In addition to the interview method, preference testing techniques are also used to test the product. Being relatively easy to carry out, preference tests are frequently applied for the purpose of testing new product ideas. Different types of preference tests are available, including ranking tests the goal of which is to arrive at a hierarchy of the analysed properties and valuation techniques in which specific values (numbers or other symbols) are assigned to the characteristics of a new product. Other tests can also be used to test new product concepts, for instance (Sudoł, Szymczak & Haffer, 2000, pp. 211-240): listing tests which help to compare the features of tested product concepts; recall tests showing whether the product concept was remembered by the study participants and which of its features have been remembered particularly well; 212
projective tests based mainly on psychological techniques making us of the projection phenomenon i.e. projecting internal, subjective human perceptions on the reality. Based on the results of the new product testing, the persons involved in the process of designing and launching a new product should receive the following information (Rutkowski, 2011, p. 277): extent to which the information about the new product concept has reached the customer, size of the gap between the new product concept and the existing products on the market, new product value perceived by the future consumers, overall degree of acceptance of the new product, intention to purchase the product, target buyers of the new product, circumstances in which the product is used and the frequency of purchasing, urgency of the need, degree of satisfying the need. When the new product concept has been tested and the economic and financial analysis has been completed, there comes a time to develop the product prototype (prototypes) which will undergo further testing. In the first stage, laboratory tests of the prototype are performed (alpha-testing), followed by tests of the product readiness for use involving consumers (beta-testing) (Ankiel-Homa, 2012, p. 49). The most important purpose of beta-tests is to find out whether, and to what extent, the features, properties and attributes of the prototype will satisfy the conscious and unconscious needs and wants of the potential users (Szymczak, 2003, 213
p. 279). The procedure usually takes a form of comparative tests during which the potential consumers evaluate a number of (minimum two) product prototypes which are close substitutes. As a result of the tests, the company gathers opinions about the differentiating characteristics of the prototypes versus: other prototype versions, previous versions of the same product (when the new product is a modification of the existing product), substitute products offered by the competition (Ankiel-Homa, 2012, p. 49). The results of prototype testing serve as the basis for a decision to continue the development and commercialisation of the new product or to discontinue the process.
6.8. New product commercialisation Commercialisation is the last stage of the process of designing and launching a new product, during which final decisions are made concerning both the product and the marketing strategy. In general, the outcome of commercialisation is the marketing of the product. The actual implementation and course of the commercialisation process are determined by a number of factors, including: ultimate alignment of the final version of the new product with the customers’ needs, selection of the target market segments and audience for the new product, selection of the product positioning strategy, 214
selection of the pricing strategy for the new product, choice of the distribution channels for the product, financial planning and analysis, flexible production management, defining the communication strategy. The key objective of the new product commercialisation and market launch strategy is to plan marketing activities and choose the right marketing communication tools (see more in Chapter 8). The most important tasks of the project team coordinating the entire process fall into three categories: final test marketing and assessment of the market, drawing up the strategy of introducing the product to the market, defining the range of marketing activities (marketing plan). The purpose of test marketing is to obtain the buyers’ conclusive opinions about the perceived characteristics and values of the new product, their willingness to buy it and their assessment of the selected elements of the market launch strategy prepared for the product. The testing involves typical market tests, the purpose of which is to estimate the expected sales and to choose appropriate technological and marketing solutions. Usually, four kinds of tests are employed: standard test marketing, controlled test marketing, simulated test marketing and virtual simulated test marketing (Mazurek-Łopacińska, 2016). The results of the tests are intended to inform the final decision on launching the new product on the market and provide guidelines for the development of the strategy of introducing the product to the target market.
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The main objective of the new product market launch strategy is to trigger the development of a market for the new product. The most important elements of the strategy which need to be addressed during the commercialisation process are specified in Table 6.4 below.
Table 6.4. Elements of the market launch strategy of a new product
Product
Price
Features, properties, attributes Degree of innovativeness Unit and collective packaging (form, shape, materials) Signage and labelling Brand identifiers Product related services
Price positioning Pricing strategy (suitable for each segment, distribution channels, target audiences) Price discounts (types, terms of application)
Distribution
Promotion (marketing communication) Merchandising
Geographic reach of distribution activities Distribution channels with selection and evaluation criteria Distribution strategy integrated with the sales strategy Outsourcing of distribution activities (types, scope) Commercial terms Goals and tasks Tools (adjusted to the nature of the product and its buyers) Promotion to consumers and sales promotion Strategy (flexibility, measurement of effectiveness) Outsourcing of promotional activities Tools used in distribution channels Outsourcing of merchandising activities (product category management)
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Timing
Timing of the new product launch on the market bearing mind seasonal sales variation Active implementation of the product strategy
Time and place of the actions to be taken Responsibility for execution of the tasks Control indicators Degree of satisfaction of distribution channel participants
Effectiveness and efficiency evaluation criteria
Return on sales as the key indicator Knowledge of the product/ brand recognition Degree of product availability
Strategy implementation timetable
Source: own work based on (Sojkin, 2012, p. 176)
Once all assumptions of the new product market launch strategy have been defined, it is time to proceed to the next part of the commercialisation stage which is drafting the marketing plan. The plan is a document containing a list of activities which must be taken in order to achieve the adopted strategic, economic, marketing market-related objectives. In order to prepare a marketing plan for a new product, final decisions must be made in the following areas of activity: setting the marketing objectives (economic, financial and imagebuilding), identifying the pricing strategy and the related factors, including alternative scenarios, defining the terms of distribution and choosing the right distribution channels, formulating the assumptions and selecting the tools for the promotional strategy.
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In the context of a new product, educational activities play a particularly important role. Their major goal is to present the new product to consumers, focusing on the values which make it stand out on the market and differentiate it from the products of the competition, and give consumers an opportunity to try it out. At the stage of commercialisation, consumers have an important role to play as they will finally decide about the success of the new product market launch. At the beginning of the stage under review they often participate in the planning and verification of the strategy of launching the product on the market and the detailed marketing activities associated mainly with the underlying assumptions of the product, its distribution channels, pricing strategy and market communication. During the final phase of the commercialisation process, it is consumers who make the ultimate decision about buying the product, repeating the purchase and recommending (or not recommending) the new product to their friends. The closing of the commercialisation stage and of the entire process of new product market launch requires assessment of its effectiveness. To this end, the company can use a number of different metrics. The ones which are used most often are listed below (Ankiel-Homa, 2012, p. 51): number of acquired distribution channels measured by the availability of the brand on the market, salespersons’ willingness to recommend the product to customers, degree of brand recognition, degree of satisfaction and loyalty on the part of product buyers and users, size of the new product’s market share (by quantity and value), and
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profitability of the new product. The majority of the metrics mentioned above are related with the degree of awareness and acceptance of the new product by consumers which is an ultimate confirmation of the fact that it is the consumer who eventually decides about the success of the entire new product design and commercialisation process.
6.9. Bibliography Andruszkiewicz, K. (2000). Istota i formy testowania produktów. in: Sudoła, S., Szymczak, J., Haffer, M. (Eds.), Marketingowe testowanie produktów, Warszawa: PWE, pp. 109-126. Ankiel-Homa, M. (2012). Konsument jako czynnik warunkujący proces komercjalizacji produktów żywnościowych. in: Sojkin B. (Ed.), Komercjalizacja produktów żywnościowych, Warszawa: PWE, pp.43-53. Booz, Allen and Hamilton. (1982). New product management for the 1980’s. New York: Booz, Allen & Hamilton, Inc. Dittmann, P. (2012). Prognozowanie w przedsiębiorstwie. (5th ed.) Warszawa: Wolters Kluwer. Gorchels, L. (2007). Zarządzanie produktem. Gliwice: Helion. Haffer, M. (2000). Metody marketingowego testowania produktów oparte na indagacji. in. Sudoła, S., Szymczak, J., Haffer, M. (Eds.), Marketingowe testowanie produktów, Warszawa: PWE, pp.147-191. Kahnemann, D. (2012). Pułapki myślenia. Poznań: Media Rodzina. Kim, W.Ch., Mauborgne, R. (2018). Strategia błękitnego oceanu. Warszawa: MT Biznes Sp. z o.o.
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Krajewska, A. (2005). Produkcja i koszty w przedsiębiorstwie. in: Milewski, R., Kwiatkowski, E. (Eds.), Podstawy ekonomii, 3rd ed., Warszawa: PWE, pp.107-142. Kuźniak, K. (2018). Innowacje a zarządzanie produktem-jak budować produkty odnoszące sukces na rynku. in: Styś, A., Dejnaka, A. (Eds.), Innowacje w biznesie. Warszawa: Difin SA, pp. 166-185. Lawley, B., Schure, P. (2017). Product management for dummies. Hoboken: John Wiley& Sons, Inc. Mazurek-Łopacinska, K. (ed.). (2016). Badania marketingowe. Metody, techniki i obszary aplikacji na współczesnym rynku. Warszawa: Wydawnictwo Naukowe PWN. Milewski, R., Kwiatkowski, E. (eds.). (2005). Podstawy ekonomii. Warszawa: PWE. Mruk, H. (2013). Wartość – jej istota i postrzeganie z perspektywy rynku międzynarodowego. in: Mruk, H., Stępień, B. (Eds.), Tworzenie wartości dla klienta z perspektywy konsumentów i przedsiębiorstw Warszawa: PWE, pp.13-39. Mruk, H., Stępień, B. (Eds.). (2013). Tworzenie wartości dla klienta z perspektywy konsumentów i przedsiębiorstw. Warszawa: PWE. Nita, B. (2015). Międzyorganizacyjny wymiar rachunku kosztów docelowych, No. 224/2015 Studia Ekonomiczne. Zeszyty Naukowe Uniwersytetu Ekonomicznego w Katowicach. Katowice: Uniwersytet Ekonomiczny. Ohme, R. (2017). Emo sapiens. Wrocław: Bukowy Las. Rafinejad, D. (2007). Innovation, Product Development and Commercialization, J. Ross Publishing. Rutkowski, I.P. (2011). Strategie produktu. Warszawa: PWE. Schmidt, K.J. (2013). Trening kreatywności. Gliwice: Helion. Sojkin, B. (ed.). (2003). Zarządzanie produktem. Warszawa: PWE.
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Sojkin, B. (Ed.). (2012). Komercjalizacja produktów żywnościowych. Warszawa: PWE. Sojkin, B., Małecka, M. (2011). Komercjalizacja innowacji produktowych na rynku żywności. in: Walczycka, M., Duda-Chodak, A., Jaworska, G., Tarko, T. (Eds.), Żywność projektowana, vol. I, Kraków: Uniwersytet Rolniczy w Krakowie, Polskie Towarzystwo Technologów Żywności. Styś, A., Dejnaka, A. (Eds.). (2018). Innowacje w biznesie. Warszawa: Difin SA. Sudoł, S., Szymczak, J., Haffer, M. (Eds.). (2000). Marketingowe testowanie produktów. Warszawa: PWE. Szymczak, J. (2003). Testowanie prototypów / serii próbnej nowego produktu. in: B. Sojkin (Ed.), Zarządzanie produktem Warszawa: PWE, pp. 278-297. Szymczak, J.M., Haffer, M. (Eds.), Marketingowe testowanie produktów Warszawa: PWE, pp.109-126. Urbaniak, M. (2003). Selekcja idei nowych produktów. in: Sojkin B. (Ed.), Zarządzanie produktem Warszawa: PWE, pp. 218-241. Walczycka, M., Duda-Chodak, A., Jaworska, G. Tarko, T. (Eds.). (2011). Żywność projektowana, vol. I, Kraków: Uniwersytet Rolniczy w Krakowie, Polskie Towarzystwo Technologów Żywności.
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7. MARKETING RESEARCH PROCESS IN PRODUCT AND BRAND MANAGEMENT 7.1. Introduction The chapter aims at presenting the essence of the marketing research process and selected research methods. First, the importance of marketing research (understood as one of the pillars of a marketing information system in enterprises) has been discussed. Moreover, the essence of the marketing research process has been presented along with various classifications of marketing research. In addition, the relevant factors, which should be analysed while making the decision to realize such research, have been familiarized. In the following part of the chapter the emphasis has been placed on describing the stages of the marketing research process. The crucial factors of defining a research problem have also been indicated. Furthermore, the terms of research hypothesis, research population, research sample, sample unit, research subject and research scope have been explained and discussed. Random and nonrandom methods of selecting the research sample have also been presented. Next, the basic types of methods of data collection from primary sources as well as the types of measurement instruments have been described. The following part of the chapter has been devoted to qualitative and quantitative marketing research methods. Keywords: marketing research, qualitative research, quantitative research, marketing research process, product research, brand research
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7.2. Essence of marketing research and its importance in managing an enterprise The starting point of the discussion about the importance of marketing research in managing an enterprise is the notion of information. From the point of view of the present chapter’s scope of problems management information plays an essential role as it relates to the realization of management functions (i.e. planning, organizing, leading and controlling). Management information has crucial impact on the decisionmaking process in an organization due to the fact that at specific management levels it leads to the reduction of uncertainty. Management information includes marketing information, i.e. the information used by decision makers within marketing activities (Popławski & Skawińska, 2012). Therefore, information is a resource, which should be treated as a potential source of competitive leverage (Mazurek-Łopacińska, 2016). Constant changes in surroundings (both in the distant and close ones) make organizations own proper information resources allowing for the efficient and effective realization of the planned objectives and (if necessary) adjusting their (organizations’) actions to the changing market conditions (Sojkin, 2009). Thus, information, similarly to other resources in organizations, should be appropriately managed. A marketing information system enables organizations to do so, as it embraces people, equipment and procedures, which aim at collecting, organizing, analysing, evaluating and providing up-to-date precise information for marketing decision makers (Kotler & Keller, 2012). The system should also meet the information needs of decision makers related to solving both present and future problems. 224
Marketing research is one of the pillars of this system (Sojkin, 2009). It may be defined a systematic and objective process, which includes the diagnosis of information needs of an organization, the selection of variables, as well as the collection, analysis, interpretation and presentation of data in order to make a specific marketing decision (Mazurek-Łopacińska, 2016; Kędzior & Karcz, 1996). We should place emphasis on several issues mentioned in this definition. First, marketing research is a process, which allows for presenting it in the form of consecutive repeatable stages. Second, it is a systematic process, which means that within a well-designed marketing information system marketing research should amount to its integral and constantly used part. Third, marketing research is objective – it should be designed in a way that allows for providing decision makers with information based on impartial research (Kędzior & Karcz, 1996). Fourth, marketing research is conducted in order to provide decision makers with information, which will enable or/and support a specific marketing decision, or, in other words, will help to solve a decision-making problem. Therefore, the importance of marketing research is difficult to overestimate in the context of managing an enterprise. We should remember that marketing research also aims at evaluating the consequences of the decisions that have already been made. It may amount to the basis for verifying the level of the realization of an enterprise’s objectives. On the basis of selected criteria, we may enumerate several types of marketing research. According to the time criterion we distinguish: historical research (it relates to phenomena and processes, which occurred inside and outside an organization in the past); current research (it relates to the ongoing phenomena and processes); 225
forecasting research (forecasting phenomena and processes most often based on the observed tendencies). In reference to the size of research population we may enumerate: exhaustive research (it includes the whole known and determined population); non-exhaustive research (it includes a part of the population, i.e. a research sample). In the case of research subject criterion, we may distinguish: market research, marketing mix element research – product research, price research, advertising research and distribution research. According to the measurement unit criterion we distinguish: quantitative research, qualitative research1. Marketing research can be also classified as: constant research, which is conducted in a systematic way; periodical research – conducted on a regular basis at certain intervals in order to subject a specific phenomenon to measurement; sporadic research – conducted at irregular intervals. In professional literature, we may also come across the following division of marketing research: exploratory research, descriptive research,
1
Quantitative and qualitative research has been presented in more detail in one of the following parts of this chapter. 226
cause-and-effect research. The first group is focused on the identification of unknown problems, searching for ideas, finding new solutions and explaining the analysed problems. The second group aims at determining the frequency of occurrence and shaping different variables. Consequently, the third group is concentrated on defining the cause and effect relations between variables (Kaczmarczyk, 2011)2. In the context of the considerations presented in the first chapter it should be emphasized that the realization of marketing research helps decision makers to understand surroundings within which a given organization operates (Kaczmarczyk, 2011). We may study both the close surroundings (microsurroundings) and the distant ones (macrosurroundings). Making the decision about realizing marketing research should be preceded by the assessment of its predicted usability. This situation calls for taking the following four crucial factors into account: (1) the amount of time available for a decision maker before making the decision, (2) the availability of needed information, (3) the character of the decision itself, (4) the value added of information in relation to the costs of its acquirement. First, while performing their work managers must constantly make various types of decisions. Some of the problems call for immediate reaction; therefore, the insufficient amount of time may exclude, or – rule out, the validity of conducting marketing research. Second, it may turn out that the realization of marketing research is not necessary as the information needed for making a proper decision is already available – it may be supported by a properly created and functioning marketing 2
We should take account of the fact that the classification presented above includes only selected types of marketing research. 227
information system. Third, the validity of conducting marketing research depends on the nature of the decision as e.g. in the case of routine decisions the most important circumstances and the impact mechanism on a specific phenomenon or process are known. Fourth, marketing research generates certain costs. That is why it should be considered if and to what extent it is possible to produce returns, if the information obtained on the basis of the research will justify the incurred costs (Mazurek-Łopacińska, 2016).
7.3. Stages of the marketing research process As mentioned above, marketing research is a process, which consists of specific stages. Table 7.1. presents selected approaches to marketing research stages of different levels of detail proposed in professional literature.
Table 7.1. Stages of marketing research Stages of marketing research according to P. Kotler and K. L. Keller (2012): 1. Determining a research problem and research objectives 2. Developing the research plan 3. Data collection 4. Analysis of information 5. Presentation of results 6. Decision-making Stages of marketing research according to S. Kaczmarczyk (2011): 1. Analysis and definition of the research problem 2. Selecting the research sample 3. Selecting data collection methods 4. Selecting measurement instruments 5. Selecting the data analysis method 6. Planning the research and defining its costs 7. Defining the value of information obtained from the research 228
8. Developing research proposals Stages of marketing research according to K. Mazurek-Łopacińska (2016): 1. Defining the research problem 2. Formulating hypotheses 3. Developing a research plan (selecting the type of research, selecting variables for observation and measurement, selecting information sources) 4. Selecting methods and subjects for data collection 5. Data collection - primary data collection - secondary data collection 6. Registering and processing data 7. Analysis and interpretation of results 8. Developing the research reports The marketing research procedure according to Z. Kędzior, K. Karcz (1996): Stage I - Preparation 1. Formulating the research problem and objectives 2. Referring the research problem to the present state of knowledge 3. Establishing the research scope (in the context of research subject, research object, space and time) 4. Establishing the research hypotheses 5. Selecting data collection methods in the direct and indirect mode 6. Defining research units, the size of research sample, and the research sample selection method 7. Developing research tools and support materials 8. Introductory arrangements related to the directions and methods for analysing the collected data 9. Verifying and evaluating research assumptions (a pilot research) 10. Formulating the final version of the research problem, hypotheses and developing research tools Stage II – Realization 1. Organizational and technical preparation for direct research: selecting the team for realizing field research, checking the circumstances of conducting direct research, selecting the research sample, trainings for interviewers 2. Collecting information in the direct and indirect mode 3. Controlling the work of direct research realizers 4. Formal and evidence-based verification of the collected data 5. Coding information and typing it into a computer 229
Stage III – Analysis and interpretation 1. Analysis of the collected information 2. Developing working and result tables 3. Statistical calculations 4. Qualitative analysis 5. Interpretation of the acquired results and verification of hypotheses Communication/report 1. Written presentation of research results 2. Oral presentation of research results 3. Formulating conclusions for further research Source: own work based on (Kędzior & Karcz, 1996; Kaczmarczyk, 2011; Kotler & Keller, 2012; Mazurek-Łopacińska, 2016)
The marketing research process begins with formulating the research problem resulting from the previously defined decision-making problem. At this stage, a decision maker should closely cooperate with a researcher by sharing their knowledge of the decision-making problem and the circumstances under which it occurred, as well as the information and the scope of information expected as a result of the research. It is very important to differentiate between a real problem and its symptoms, as well as to verify the real scope of desirable information at this phase. In this regard, a researcher should play a special role by taking notice of certain aspects overlooked by a decision maker and, consequently, indicating new implications, which might result from potential symptoms. Once the essence of the decision-making problem has been understood and precisely defined the research problem should be formulated (Kotler & Armstrong, 2012; Kaczmarczyk, 2011, Mazurek-Łopacińska 2016; Kędzior & Karcz, 1996). In order to transform a decision-making problem into a research problem one should distinguish the types of data necessary for satisfying a decision maker’s information needs. The presentation 230
of these data in the form of research questions is a good solution (Kaczmarczyk, 2011). Research questions should amount to a sufficient basis for setting research objectives. If we assume that a research problem is the identification of causes of book sales decrease in bookshop X within the period of Y, and one of the research questions refers to the fact whether marketing communication channels used by bookshop X are appropriate, one of the research objectives may be formulated in the following way – establishing the most preferable3 marketing communication channels for potential clients. The next step in the research procedure should be centred on the formulation of research hypotheses. They ought to be based on the available knowledge within a specific discipline, the existing theories, a leader’s experience, or the results of previously realized research. In the case of the unavailability of information crucial for supporting a hypothesis, it may be deducted with the use of a simple method of speculative considerations. A hypothesis is an assumption, an uncertain statement concerning the occurrence, size, frequency of a specific phenomenon, as well as its relations to other phenomena or
relations
between
phenomena
(Mazurek-Łopacińska,
2016).
A hypothesis referring to an exemplary research question and objective might take the following form: social media are the most preferable marketing communication channel for potential clients. This assumption could be verified in a positive or negative way on the basis of the information obtained from the relevant marketing research.
3
or the most frequently used 231
Another particularly important stage of the discussed process is the proper definition of the research population (including sample units and the research subject) and the research sample selection method. Research population is a finite set of elements, which have common features and about which a researcher wants to obtain specific information for the purposes of solving the research problem (Kędzior & Karcz 1996). A sample unit is a unit selected to be researched. We may distinguish simple units (e.g. an individual consumer) and complex ones (e.g. a household). A research subject (element) is a person expressing their opinions in the research on behalf of a sample unit. In this part of research the sample unit may simultaneously be the research subject. It occurs in the case of simple units when e.g. an individual consumer is both a sample unit and a research subject (Popławski & Skawińska, 2012). In the case of complex units, we ought to precisely define the research subject – e.g. if a sample unit is a higher education facility, the research subjects may be rectors of these schools. The spatial scope of research, i.e. the area within which a research is to be conducted, and the time scope of research, i.e. the timespan of research conducted on a given population, should also be determined. In the case of small and very small population exhaustive research may be conducted. Such research assumes the measurement of all units within a given population. Due to the size of population the vast majority of researches are non-exhaustive, i.e. only a part of the population (called the research sample) is subjected to research (Kaczmarczyk, 2011). Marketing research is conducted in order to explore a given population and determine its characteristic features. Therefore, the appropriate selection of the research sample is crucial for allowing a researcher to draw 232
conclusions describing the whole population as precisely as it is possible relying on the results conducted on a given sample under specific circumstances. The next step in the procedure is determining the size of population so as to enable drawing conclusions of specific accuracy and level of uncertainty on the basis of the research results (Kaczmarczyk, 2011). Once the issue of the size of population has been decided the method for population selection should be chosen. The sample selection methods may be divided into random and non-random ones. The random sample selection consists in mechanisms for sampling units in a way that chance decides about the units being selected for the sample. In the case of individual units, the selection is considered random if each unit of the population has a positive, known and identical probability of being selected. On the other hand, in the case of sets of units within a population the probability of including the whole set in the sample may be established for each of them, but it is not necessary that the probability is identical for all sets. It often happens that each set of population units has a different probability of being selected (Szreder, 2010). In the random sample selection, the sampling mechanism is required. It is a list of all units within the population, to which specific identification symbols (usually – numbers) are attached (Popławski & Skawińska, 2012). The random research sample selection methods have been presented in table 7.2.
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Table 7.2. Selected random research sample selection methods Simple individual sampling – the most basic scheme of simple drawing of the sample. It consists in random selection of units from a sampling mechanism until the planned size of the sample is reached. We may distinguish returnable (independent) and non-returnable (dependent) samplings. In the first case a unit, which has been selected for the sample, returns to the population and can be drawn again. In non-returnable sampling a unit, which has been selected for the sample, does not return to the population. Hence, it is not possible that it is drawn again. Systematic sampling – it is performed at three stages. First, the sampling interval (k) must be calculated – the quotient of the size of the researched population (N) on the size of the sample (n), k=N/n. It allows for establishing the intervals at which individual units should be searched for. From the first interval, we successively draw one unit, which amounts to the first unit within the sample. Next, the following units from the mechanism are indicated according to the rule: a unit selected from the first interval + the size of sampling interval. For instance, if N = 10000, n = 450, then k = 10000/450 = 22, (2) = 22. We draw the first unit from the first interval (the first 22 units) – e.g. 12. The second unit will be person with number 34 attached (12+22), the third person – number 56 (34+22), the fourth person – number 78 (56+22) etc. Stratified sampling – it consists in dividing the population into subpopulations – into homogenous strata (groups) according to specific criteria. The division should be made in a way that allows for the situation in which every unit of the population belongs only to one stratum. Next, within each stratum the sample elements are drawn in a probabilistic manner. In order to determine the number of units, which should be selected in specific strata, the so-called sample allocation is performed. The so-called proportionate allocation is most often used as it assumes that the share of each stratum in the sample is to be proportionate to the share of a given stratum in the population. We may also mention balanced allocation – from each stratum the same number of units are selected (independently of the size of specific strata) – and optimum allocation, which takes account of the varied costs of researching elements of individual strata.
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Multistage sampling – the hierarchical division of the researched population is the starting point. The sampling procedure takes the following form: 1. We distinguish the 1st tier sampling units within the overall population – e.g. if the overpopulation consists of households in Poland, then the 1st tier sampling units may be voivodeships. 2. Among the 1st tier sampling units (voivodeships), from the sampling mechanism, i.e. the list of voivodeships, we draw a specific number e.g. 15% 3. Among the sampled (15%) 1st tier units (voivodeships) we distinguish the 2nd tier sampling units (e.g. municipalities), and then we draw a certain number (e.g. 15%) of the 2nd tier sampling units (with the use of the sampling mechanism for the 2nd tier sampling units, i.e. in the proposed example – a list of municipalities located in the previously selected voivodeships). 4. Among the sampled (15%) 2nd tier units (municipalities) we distinguish the 3rd tier sampling units (e.g. city districts and villages), and on the basis of a proper sampling mechanism, i.e. a list of city districts and villages in the previously drawn municipalities, we sample a certain number of the 3rd tier sample units (e.g. 15%), etc. 5. Among the sampled (15%) 3rd tier units (city districts and villages) we may distinguish the final tier units, i.e. (in the proposed example) households, a certain number (e.g. 15%) of which are drawn from the 3rd tier units. Source: own work based on (Popławski & Skawińska, 2012; Szreder, 2010; MazurekŁopacińska, 2016)
In the non-random sampling methods, the empirical sample is created on the basis on subjective reasons and a researcher’s decisions as opposed to the objective chance used in random sampling. In general, we can state that the non-random sampling methods are applied when it is impossible to use the random sampling methods or/and because of costs (MazurekŁopacińska, 2016). Selected non-random research sampling methods have been presented in table 7.3.
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Table 7.3. Selected non-random research sampling methods Accidental sampling – the essence of this method is the fact that units become a part of the sample by chance (but not randomly), e.g. because they happened to be at the place of research realization e.g. in a shopping centre. The possibility of being sampled is limited to some part of the population. Accidental sampling is fast and cheap in realization, as it does not require having a sampling mechanism. However, it does not ensure the representative sample for any specific population and cannot be applied in research, which includes elements of statistical inference. Accidental sampling is used in the case of the total lack of knowledge of a given population. Deliberate sampling – it consists in a researcher indicating units to be included in the sample, which according to them (on the basis of their knowledge of the population) are “representative” of the population, or “appropriate” for other reasons. Past experiences or relevant expert opinions may be the source of a researcher’s knowledge. Typical unit sampling – the selection of an empirical sample of units considered typical/ordinary for a given research situation. Snowball sampling – it consists in reaching a small group of people from a population, who are interviewed first; next, the respondents are asked to indicate the people they know within the population, who might be subjected to research. This request is repeated in relation to the next group of respondents by the time the assumed size of the sample has been reached. This method is applied in the case of poorly explored populations. Quantitative sampling – it is realizable only if a researcher knows the structure of the population (analysed in specific contexts) very well. The sampling process consists in dividing the researched population into subpopulations according to given characteristics, establishing the share of the distinguished subpopulations in the overall population, and calculating the composition of the sample, which should be proportionate to the share of individual subpopulations in the researched population. This method assumes that the research sample is representative for the whole population only in the context of specific control characteristics (e.g. age, sex, place of residence, income etc.). Therefore, in order to use quantitative sampling one must have good knowledge of the composition of the overall population. Elimination sampling – it consists in a researcher’s focusing on specific units (subsets), within which the main portion of relevant features is concentrated, whereas the less important units are eliminated. Source: own work based on (Popławski & Skawińska, 2012; Szreder, 2010; MazurekŁopacińska, 2016)
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The determination of the research population and the choice of research sample selection methods are followed in the research procedure by the selection of a data collection method. We may distinguish four basic methods for data collection from primary sources: indirect survey, direct survey, non-survey methods and experimental research (Kaczmarczyk, 2011). Indirect survey methods consist in asking questions in a written and oral form, but without the direct contact between a researcher and a respondent. The communication is realized with the use of media or other channels (e.g. a telephone, a packaging). Direct survey methods consist in collecting data during the direct contact between a researcher and a respondent or a group of respondents. Non-survey methods consist in gathering data about people, objects, phenomena and events with the use of various measurement instruments. The basic methods within this scope include observation, registration and listing as well as monitoring, physiological measurements (e.g. brain wave measurement, eyeball movement measurement, skin sensitivity measurement) and others such as neuromarketing, sensory and ethnographical methods. Experimental research is focused on performing a specific scientific experiment, which aims at determining the impact of a given factor (an independent variable) on a given phenomenon (a dependent variable). It should be stated that the former is shaped by the person conducting the research (Kaczmarczyk, 2011; Popławski & Skawińska, 2012). The next task of a researcher is to prepare an adequate measurement instrument. There are two groups of measurement instruments used in marketing research – natural measurement instruments (i.e. senses – vision, hearing, taste, smell and touch) and artificial measurement instruments (conventional and mechanical). The conventional instruments 237
include e.g. a questionnaire, a diary, a script, a simulation model, a morphological table, a check sheet, a dialog panel, an Internet table, a product configuration tool etc. The group of mechanical instruments embraces e.g. a telemeter, a video camera, a polygraph, a tachistoscope, testers, a scanner, a bar code scanner, an RFID reader, a palmtop, a webcam etc. (Kaczmarczyk, 2011). The next stage is related to the selection of the data analysis method. The decision to choose a method, which is going to be used in order to transform the data into descriptive statements and conclusions linked with the interrelations between the analysed variables, depends on the previously accepted method for selecting the research sample, the measurement instrument used as well as the methods for collecting and measuring data (Kaczmarczyk, 2011). Within the following preparatory actions research schedule and cost estimate should be created. The latter ought to include expenditure related to work, materials, transportations, general costs and many others. It should be stated that in order to justify the research the value of the information obtained from the research must be higher than the costs of acquiring it. The value of information is measured with the extent to which it is useful in the decision-making process (Kaczmarczyk, 2011). It is sometimes difficult, as, despite the fact that defining the research costs is relatively easy, estimating the value of information tends to be a problem due to the large number of factors, which must be taken into account (Popławski & Skawińska, 2012). The final stage of designing a research is developing research proposals and presenting them to decision makers. On the basis of the proposals
238
leaders make the decision about launching or abandoning the research. The proposals include the description of results of the preceding stages of
the
research,
which
(usually)
consists
of:
the
research
objective/objectives, the research background, the research scope, the research realization method, the organizational plan, additional data and optionally the pilot research results (Kaczmarczyk, 2011). After finalizing the preparatory work the information is gathered, the collected data are recorded and processed, the results are analysed and interpreted, and, finally, the research report is created (MazurekŁopacińska, 2016).
7.4. Quantitative and qualitative marketing research methods Through the prism of the way information is gathered marketing research may be divided into quantitative and qualitative. Quantitative research is realized in order to provide data, which can be subjected to statistical analysis. Such research is usually conducted on relatively large samples, including representative samples; therefore, it is possible to make generalized statements about the overall population on the basis of the obtained results. In quantitative research, standardized research tools are usually used. Moreover, there is a tendency to attach specific measures to the analysed phenomena (Kędzior & Karcz, 1996). Quantitative research is successfully used in product-oriented studies. A good example here may be the U&A (user and attitude) research, which is the source of information about the use of a given category of products as well as amounts to the basis for brand evaluation (Maison & Stasiuk, 2014). Quantitative methods 239
are often used in researches related to marketing communication (e.g. proposals for commercials) and packaging prices. Furthermore, in reference to brand research quantitative methods are used e.g. for measuring brand recall and recognition, i.e. measuring brand awareness. They are also applied in brand image research (Kall, Kłeczek & Sagan, 2013; Maison & Stasiuk, 2014). On the other hand, qualitative research is focused on understanding and explaining the analysed phenomena. Such research is not conducted in order to collect data for the purposes of statistical analysis, but with a view to explore specific phenomena, reactions and attitudes. Qualitative research is particularly important in the context of finding out the real needs behind the market behaviour of consumers. It is problematic that consumers are not aware of many of these needs or do not even admit that they have them. This type of research is realized on relatively small and unrepresentative samples (Kędzior & Karcz, 1996; Maison & Stasiuk, 2014). The comparison of quantitative and qualitative methods according to selected criteria has been presented in table 7.4. Table 7.4. Comparison of quantitative and qualitative methods Criterion
Quantitative research
Research objective
describing a unit’s behaviour
Research questions
questions which describe the problem quantitatively (e.g. “who”, “how often”)
Measurement standardized tools with the majority of closed questions instruments
Qualitative research understanding and establishing motives in a unit’s behaviour, its needs, preferences etc. explorative questions which describe the problem qualitatively (e.g. “how”, “why”) unstructured measurement; a free way of acquiring information; probing, open, dynamic and flexible questions 240
Criterion
Research sample
Quantitative research a large size of the sample; random and non-random sample selection; results might be generalized in the context of the population
Qualitative research
a small size of the sample; non-random sample selection;
an analysis without the use statistical methods; numerous possible interpretation (a wealth an analysis supported by of conclusions); a relatively large statistical methods; results Analysis/ risk of over interpretation and interpretation might be quantitatively misinterpretation; the analysis is generalized in the context of of results more difficult than the one in the overall population quantitative research; results are not quantitatively generalized in the context of the population passive, imitative; little active, creative; great emotional Role of emotional engagement engagement of research a research of research participants participants participant smaller impact on the course large impact on the course of research; limited contact of research – direct contact with with the source of data; the source of data; a researcher’s Role of competence, experience and a researcher reduced requirements in reference to the psychological special predispositions are very characteristics of a researcher important more data, but they are more general; using less data, but they are more statistical measures precise and deeper; results are and methods during presented in qualitative Research the analysis; interrelations categories; interrelations between results between factors are identified factors are identified directly; it is indirectly; data comparison is difficult to compare data; possible; forecasting is possible testing research hypotheses; generating research hypotheses; Main areas of quantification of phenomena; discovering the causes of a given checking statistical interest phenomenon; creating typologies relationships Source: own work based on (Maison, 2010; Kaczmarek, Olejnik, & Springer, 2013) 241
Qualitative research allows for establishing market tendencies and forecasting with the use of statistical and econometric tools. The basic methods applied in qualitative research include a survey and selected interviews. In the case of a survey the measurement is always performed in the form of a questionnaire filled out by a respondent. According to the way of spreading the questionnaire among study participants we may distinguish the following types of it: postal, newspaper, Internet, e-mail, presentational, public, handout, packaging etc. A short description of the selected types of questionnaires (including their advantages and disadvantages) has been presented in table 7.5.
Table 7.5. Advantages and disadvantages of selected types of questionnaires Advantages
Disadvantages
A postal questionnaire – a questionnaire is sent to the previously selected research sample by post. Next, it is filled out and delivered in the same way. In order to increase return a questionnaire is sent with an envelope and a stamp. Moreover, sometimes a reward is offered for the participation in the survey. possibility of researching a relatively large group of respondents; simple organization of the research; an interviewer’s impact is eliminated; it is possible to ask about issues that are contentious for respondents, which they would not answer willingly in the oral form (higher sense of anonymity)
it is necessary to prepare an up-to-date list of addresses; relatively high cost; low return; long duration of measurement; low degree of controlling the sample; an interviewer cannot control if the questionnaire is filled out correctly; some questions might be omitted; it is recommended to use short questionnaires
A newspaper questionnaire – a questionnaire placed in newspapers (it may take the form of an insert). respondents are asked to fill it out and send it to a specific address.
242
Advantages
Disadvantages
simple organization of the research; it is possible to reach a large group of respondents; respondents have the deep sense of anonymity
relatively high costs; low return; low level of sample control; it is necessary to use short questionnaires; the questionnaire can be accessed by competition
An Internet questionnaire – a questionnaire is place on a website simple organization of the research; it is possible to reach a large group of respondents; speed of measurement; low costs; respondents have the deep sense of anonymity
access limitation for certain social groups (e.g. people without the Internet access); low level of sample control; the questionnaire can be accessed by competition
A presentational questionnaire – a questionnaire is dished out to the group of respondents during conferences/ symposia, in lecture halls, at reunions and other public meetings simple organization of the research; high return; short duration of measurement; high level of sample control; it is possible to present additional materials; standardized conditions for performing measurements
it is necessary to gather many respondents at one location; respondents have the low sense of anonymity; it is recommended to use short questionnaires
A handout questionnaire – a questionnaire is delivered to respondents by an interviewer, who requests them to fill it out short duration of measurement; high return; high level of sample control
high costs; respondents have the low sense of anonymity
A public questionnaire – a questionnaire is placed in specific places and the interested can fill it out (e.g. at points of sale, libraries) simple organization of the research; low costs; it is possible to reach a large group of respondents, who answer the questions, because
low return; long duration of measurement; level of sample control; the questionnaire can be accessed by competition 243
Advantages
Disadvantages
they are interested in a given research problem (due to the location of the questionnaire) A packaging questionnaire – a questionnaire is printed on the packaging of a product or put inside the packaging Source: own work based on (Popławski & Skawińska, 2012)
As mentioned above, in qualitative research interviews are also used (in addition to questionnaires). During an interview the direct communication between an interviewer and a respondent occurs. The classical type of such a study is a direct paper and pencil interview (PAPI). It consists in an interviewer’s asking questions and writing down a respondent’s answers in an interview questionnaire. Another type of this research is the computer assisted personal interviewing (CAPI), during which an interviewer uses a computer or a tablet. The obtained answers are typed directly into a mobile device by an interviewer, which enables fast data collection for the research company. Undoubtedly an advantage of CAPI is the possibility of presenting support materials (e.g. video clips, advertising materials). Another type of interviews is a telephone interview, i.e. as its name suggests, an interview realized with the use of a phone. An interviewer reads the previously prepared questions to a respondent and writes down their answers in an interview questionnaire. The computer-assisted telephone interviewing (CATI) is also commonly used. In the case of this type of interviews specialist computer software is applied. The rapid development of the Internet made the computer assisted web interviewing (CAWI) more and more common. This system supports 244
the process of designing a questionnaire, research realization, as well as data control and analysis. It also allows for adjusting questions to a specific profile of a research participant. Furthermore, it enables the access to the results of the ongoing research as well as the measurement of the time needed to answer particular questions and conduct the whole research. Realizing research with the use of the CAWI method is relatively inexpensive and the time of measurement is short. Moreover, there is a deep sense of anonymity among respondents, which makes it easier to obtain answers related to contentious issues). The system checks if the answers are complete and, like in the CAPI method, it is possible to present multimedia materials. On the other hand, the lack of certainty whether specific respondents really participate in the research is a big disadvantage of this method (Sobocińska, 2016). Qualitative research may be realized once or in the form of repeated (constant, cyclical) studies e.g. panel research. A panel is a permanent group (sample) of units, which has been selected for multiple participation in the research performed at specific intervals. Due to the constant effort made to obtain information about the changes of market phenomena in time, including the information about the changes of respondents’ attitudes and behaviour as well as about their reasons and motivation, it is extremely significant to select the research sample in an adequate manner. The research sample should reflect the structure of the overall population, as the results of panel research are to be representative for it (Kaczmarczyk, 2011; Popławski & Skawińska, 2012; Marak, 2016). Research performed with the use of qualitative methods is mainly used with a view to solve decision-making problems related to introducing a new product onto the market and to create marketing communication. 245
It also aims at knowing consumers in depth, i.e. exploring their attitudes, opinions about products and brands, habits, needs, barriers and motives linked with the use of products and brands. In the case of introducing a new product onto the market, the realization of qualitative research allows for detecting or/and avoiding costly mistakes at all stages of creating the product. Qualitative methods may be applied for researching physical and functional features of products, but they are most commonly used in analysing the positioning, name and packaging concepts (Maison, 2010). Qualitative research plays a special role in researching all seven dimensions of a brand’s image, i.e. circumstances of purchasing and use, type of user, product features, functional benefits, benefits related to the experience of using a brand, symbolic benefits, and brand personality (Kall, Kłeczek & Sagan, 2013). The basic qualitative methods include: a focus group interview (FGI), an individual depth interview (IDI), and participant observation. An individual depth interview (IDI) consists in the conversation of two people – an interviewer and a respondent – made with a view to reach relevant information and obtain in-depth knowledge within this scope. This method is very useful for finding out and better understanding a respondent’s needs, motives, values etc. An informal character of the conversation (combined with the interviewer’s skills) enables the access to the needs, motives, barriers etc., of which the respondents are not aware. The interview should be recorded (as opposed to being noted) so as to allow the interviewer to focus on making the conversation deeper and guiding it towards the desirable information (Maison, 2010; Maison & Stasiuk, 2014).
246
Another vastly popular method used in qualitative research is a focus group interview (FGI), which means moderated discussions of several participants. A moderator is to guide (or – focus) the discussion in a way that allows them to explore the subject of the interview as deep as it is possible (Maison, 2010; Maison & Stasiuk, 2014). An FGI can be successfully used in order to solve problems related to: the identification of the gist of a new phenomenon, the determination of the causes of the phenomena, in reference to which the quantitative research results are hard to explain, generating new ideas, exploring and understanding consumers’ assessment, attitudes, motives etc. in relation to products, and marketing communication (Sobocińska, 2016). The comparison of in-depth and focus group interviews has been presented in table 7.6.
Table 7.6. Comparison of individual depth interviews and focus group interviews Criterion
Individual depth interviews
Focus group interviews
Specificity of the method participants
one interviewer and one participant
duration of interview
duration from approximately duration from approximately 1,5 to 3 hours 2 to 3 hours
time of realization
smaller amount of more information within information within a specific a shorter time – shorter time – longer realization realization
amount and depth level of information
more information from a single participant, more indepth information
247
one interviewer and several participants
less information from a single participant, more superficial information
Criterion
Individual depth interviews
Focus group interviews
contact between research no contact between research participants, reciprocal participants, a respondent’s stimulation of participants, interactions large reciprocal impact between studies behaviour depends greatly on a researcher on utterances and reactions of respondents Application of a method problem exploration
strong need to explore and search for contextual information
relatively smaller need to explore the problem in more detail
perspective
searching for information from a more psychological perspective
searching for information from a more sociological perspective
confrontation of opinions
no need to confront opinions
need to confront individual opinions of participants
reciprocal impact of respondents
fear of the situation in which the assumption the presence of other people that the presence of other may block answers people may stimulate answers
recruitment
participants are difficult to access
participants are relatively easy to access
Source: own work based on (Maison, 2010)
Participant observation4 stems from ethnographical research, in which information is gathered outside a researcher’s office – in participants’ real environment. Participant observation consists in a researcher’s becoming a member of the analysed group for some time (they do not fully 4
In general observation is defined as data collection, which includes the systematic collection and analysis of human behavior (both verbal and non-verbal). The main objective of observation is gathering all data about the real behavior of people (Popławski & Skawińska, 2012). It should be stated that the observation method is applied in both quantitative and qualitative research. 248
reveal their role). Revealing the observer’s real role could have impact on the results, especially in the case of “contentious” topics. The researcher’s task is mainly to gain trust and acceptance, but they also should observe carefully and describe the results (Kaczmarek, Olejnik & Springer, 2013).
7.5. Bibliography Kaczmarczyk, S. (2011). Badania marketingowe – podstawy metodyczne, Warszawa: Polskie Wydawnictwo Ekonomiczne. Kaczmarek, M., Olejnik, I., Springer, A. (2013). Badania jakościowe – metody i zastosowania. Warszawa: Wydawnictwo CeDeWu. Kall, J., Kłeczek, R., Sagan, A. (2013). Zarządzanie marką. Warszawa: Oficyna. Kędzior, Z., Karcz, K. (1996). Badania marketingowe w praktyce. Warszawa: Polskie Wydawnictwo Ekonomiczne. Kotler, P., Keller, K.L. (2012). Marketing. Poznań: Dom Wydawniczy REBIS Sp. z o.o. Kotler, R., Armstrong, S. (2012). Marketing. Wprowadzenie. Warszawa: Oficyna. Maison, D. (2010). Jakościowe metody badań marketingowych. Warszawa: Wydawnictwo Naukowe PWN. Maison, D., Stasiuk, K. (2014). Psychologia konsumenta. Warszawa: Wydawnictwo Naukowe PWN. Marak, J. (2016) Obserwacje (in:) Mazurek-Łopacińska, K. (Ed.) Badania marketingowe – metody, techniki i obszary aplikacji na współczesnym rynku. Warszawa: Wydawnictwo Naukowe PWN SA. Mazurek-Łopacińska, K. (Ed.). (2016). Badania marketingowe – metody, techniki i obszary aplikacji na współczesnym rynku. Warszawa: Wydawnictwo Naukowe PWN SA. 249
Popławski, W., Skawińska, E. (2012). Badania marketingowe w zarządzaniu organizacją. Warszawa: Polskie Wydawnictwo Ekonomiczne. Sobocińska, M. (2016). (in:) Mazurek-Łopacińska K. (Ed.) Badania marketingowe – metody, techniki i obszary aplikacji na współczesnym rynku. Warszawa: Wydawnictwo Naukowe PWN SA Sojkin, B. (2009). Informacyjne podstawy decyzji marketingowych. Warszawa: Polskie Wydawnictwo Ekonomiczne. Szreder, M. (2010). Metody i techniki sondażowych badań opinii. Warszawa: Polskie Wydawnictwo Ekonomiczne.
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8. PROCESS OF MARKETING COMMUNICATION BETWEEN AN ENTERPRISE AND THE MARKET
8.1. Introduction Marketing communication is a specific type of social communication. Its main objective is to mutually exchange information between an organization (an enterprise) and its surroundings (Ankiel-Homa, 2012, p. 53). In professional literature, the term of marketing communication tends to be associated with promotion, which is one of the key marketing tools – mix marketing (along with product, price and distribution). Promotion is defined as “informative and persuading actions, which aim at stimulating demand for an enterprise’s offering or at shaping a positive image of the offering and its offerer (an enterprise, an organization or an institution)” (Sztucki, 1998, pp. 256-257). As pointed out by Szymoniuk, marketing communication is a broader term than promotion mainly due to the fact that promotion is considered a one-sided process, whereas communication entails a reciprocal flow of information between an offerer and a receiver (in both directions) (Szymoniuk, 2006, p. 16). Therefore, nowadays the term “promotion” is more and more often replaced with the term “marketing communication”. Keywords: marketing communication, market, marketing communication process, marketing communication tools
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8.2. Definition, elements and function of the marketing communication process In professional literature, there is no commonly accepted definition of the marketing communication process. It is defined inter alia as: the process of presenting a set of stimuli in communication channels targeted on the receiver with a view to cause a desirable set of reactions (De Lozier, 1976, p. 168); the process, by dint of which an enterprise shapes and creates stimuli for a given receiver in order to cause a set of their desirable reactions (Yeshin, 1998, p. 341); „a seat of measures and actions, by dint of which an enterprise sends characteristic information about a product and/or the enterprise itself to the market, as well as shapes customer needs, directs demand and decreases price elasticity” (Wiktor, 2013, p. 13); „the flow of information related to a company, a product brand or other aspects of marketing actions between different entities on the market (mainly an enterprise and entities belonging to its market surroundings)” (Garbarski, 2011, p. 264). As mentioned above, marketing communication is a process, within which occurs an interaction between an enterprise (a sender of information) and an addressee of the communicated message (a receiver of information). In order to explain and present the communication process accurately researchers in the relevant scope of questions created model approaches, which are based mainly on the linear character of communication. They also have been interested in understanding the occurrence of messages and communicational meaning.
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In the professional literature, the most popular the model is the one developed by Shannon and Weaver, which is a classical model consisting of elements revealing not only the essence of the marketing communication process but also of social, interpersonal and institutional communication (Shannon & Weaver, 1949, p. 21). The key elements of the communication process according to the Shannon and Weaver model are information source and receiver, whereas the communication instruments are message and channel.
information
coding
channel
decoding
receiver
source
FEEDBACK
Figure 8.1. Elements of the communication process (the Shannon and Weaver model) Source: own work based on (Shannon & Weaver, 1949, p. 21)
According to figure 8.1. the Shannon and Weaver communication model includes direct or/and indirect contact between information sources and receivers. The means of transmission may be the verbal or/and nonverbal (face expressions, gestures). The following elements connect the information source and the receiver: messages (i.e. the transmitted content), code (i.e. the language of communication), transmission channel (i.e.
the
way
content
reaches
the
receiver)
and
decoding
(i.e. the interpretation of the message performed by the receiver). In the communication process the information source is able to quickly verify if the transmitted information has been interpreted correctly through
253
the feedback effect, i.e. the ability to obtain reciprocal signals (AnkielHoma, 2012, p. 52). The detailed characteristics of the component elements of the marketing communication process have been presented in table 8.1.
Table 8.1. Characteristics of the marketing communication elements Communication element
Characteristics
sender
an enterprise, i.e. an organizer of actions within the scope marketing communication, which sends information to receivers
receiver
an addressee of messages generated by the sender (a person, an enterprise, an institution)
message
a communication, i.e. the central element of the communication process, which embraces meanings and symbols
coding
a process, which includes the transmission of messages designed to be transformed in a symbolic form with the use of picture, sound and text
decoding
a reverse process (if compared with coding) consisting in transforming sounds, pictures and texts into specific content by the receiver
channel
a manner and means by dint of which the message reaches the receiver; there may be 3 basic communication channels distinguished: presentation means (e.g. words, gestures, phrases), representational means (e.g. texts, pictures, sounds, pictures), technical means enabling transmitting information (e.g. newspapers, television, the Internet, radio)
Source: own work based on (Górska-Warsewicz, Świątkowska & Krajewski, 2009, pp. 39-41)
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In the communication processes, it sometimes happens that messages transmitted by the sender are not properly decoded, i.e. are not correctly interpreted, by the receiver. Such situations stem from possible communication disruptions, i.e. the so-called information noise, which can be caused by the following factors: the selection of an improper transmission channel, the excessive amount of information, or the improper coding of the transmitted content. In the context of the characteristics of the marketing communication elements of enterprises on the market it should be stated that this process may have a substantial group of recipients. The group can include (Szymoniuk, 2006, p. 22): individual consumers (end customers), institutional recipients (enterprises), trade intermediaries, suppliers (of goods, services, capital), market partners, market audience (authorities, institutions, professional organizations), competition. Market communication fulfills many important and overlapping functions within the scope of the marketing activity of enterprises. The group of basic functions of marketing communication includes: informative, persuasive and reminding functions (Garbarski, 2011, p. 264). On the other hand, Wiktor points out that apart from the informative and persuasive functions marketing communication also fulfills the competitive function (Wiktor, 2013, p. 59). The basic functions of communication have been presented in table 8.2.
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Table 8.2. Function of communication Function
Characteristics
informative
creating the awareness of a product brand (a new brand) raising awareness of a product brand (an existing brand) modifying a product brand creating demand for a product (stimulating demand) market education of the existing and potential buyers
persuasive
encouraging trial purchasing encouraging to make the purchase again and to increase the frequency of purchasing reducing the post-purchase dissonance
reminding
competitive
preventing the decrease of a product brand’s or product category’s recognizability creating loyalty to a brand or an enterprise creating a set of non-price instruments for an enterprise’s competition on the market
Source: own work based on (Wiktor, 2013, p. 62; Garbarski, 2011, p. 264)
In 1980s the term of the integrated marketing communication was introduced. Back then it was associated with the term of marketing communication. The term “integrated marketing communication” was first used by the American Association of Advertising Agencies in 1989 (Caywood, Schulz & Wang, 1991). Nowadays the integrated marketing communication is the most common term referring to marketing actions of market entities. It is defined as: „a way of planning marketing communication, which takes account of the strategic role of various communicational instruments and assures the cooperation between them for the purpose of achieving clarity, coherence and possibly large impact on the receiver” (Woźniczka, 2009, p. 24).
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The integrated marketing communication is a key tool for interactions between an enterprise and the market (clients and market surroundings) and amounts to an instrument for the realization of an enterprise’s marketing strategy. Moreover, it should be highly correlated with the basic marketing tools such as product, price, and distribution. While planning actions within the scope of the integrated marketing communication an enterprise must set specific objectives, whose realization is supposed to be supported by the communication. The marketing communication objectives, which, as mentioned above, should be closely linked with the general strategy of an enterprise in the context of the mix marketing elements, may be divided into two groups (Szymoniuk, 2006, p. 23): quantitative objectives (sales objectives, economic objectives), which define the desirable sales level of the promoted offering or the target market share; qualitative objectives, which are focused on changing the attitude of the promoted message receivers to an enterprise and its offerings, or on reducing the price elasticity of the demand for the offer. The key benefit of applying the integrated communication system for an enterprise is the reduction of its costs through efficient management of the communication process, which amounts to the basis for cooperation with various market entities. It may result in saving time, eliminating repeated actions as well as assuring coherence and efficiency of the integrated communication activities (Łopacińska, 2014, p. 3).
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8.2. Marketing communication tools for enterprises Marketing communication plays a key role in transmitting information about a given enterprise and its offerings to the receiver (a target customer). It is also crucial for receiving feedback about impressions and expectations related to the product (Goryńska-Goldmann & Kozera-Kowalska, 2018, pp. 139-147). In practice marketing communication includes a set of various actions and means, by dint of which enterprises create and send messages to receivers. Generally, communications may be divided into (Malinowska, 2015, p. 40): direct interpersonal communication, interpersonal media communication,
indirect media communication. On the basis of the analysis of enterprises’ communicational activities
focused on the market (mainly the present and target clients) it may be stated that enterprises generally apply indirect media communication. On the other hand, interpersonal communication (media and direct) occurs less frequently. From the point of view of marketing communication mass media are a significant tool for spreading information and obtaining feedback (Gillan, 2011). Until recently the major medias for transmitting information in the marketing communication process performed by enterprises on the market were: television, newspapers, radio, cinema, the Internet and the so-called outdoor media (i.e. billboards, posters, banners). However, under the circumstances of intense market competition, the excessive amount of information and advertising communication
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enterprises were forced to seek new solutions within the scope of communicating with the market (including customers). Marketing communication uses both traditional media and new technologies, which generate innovative communicational solutions as the channel of transmitting information. Therefore, while analyzing the marketing communication tools we divide them into traditional and modern ones. The traditional marketing communication tools are called “the promotion mix”. They include: advertising, sales promotion, public relations, and personal selling. On the other hand, the modern marketing communication tools are constantly developing (due to the dynamic development of the Internet and mobile technologies). They may be grouped into tools based on traditional communication channels (traditional medias) and tools based on social media (modern medias). The classification of the traditional and modern marketing communication tools have been presented in table 8.3. Table 8.3. Traditional and modern marketing communication tools Traditional marketing communication tools
advertising sales promotion public relations personal selling
Modern marketing communication tools based on traditional medias
guerilla marketing ambient media shockvertising product placement advergaming viral marketing
Source: own work 259
based on modern medias Tools based on social media: social networking sites blogs Wikipedia discussion forums virtual reality services enabling sharing data
For the purposes of realizing the marketing communication objectives enterprises use an integrated set of medias, tools and communication channels. The set is shaped depending on numerous factors such as: category of the promoted product, time of marketing actions, the size of the budget, the target client (the receiver) of marketing activities, and the reach of communication actions.
8.3. Traditional marketing communication tools As mentioned above, the traditional marketing communication tools (also called the promotion mix) include advertising, sales promotion, public relations and personal selling. Specific communication instruments, despite the fact that they fulfill similar functions, differ in the many basic criteria such as (Wiktor, 2013): the character of impact (personal and impersonal promotion), the subject of reference (individual buyers, institutional buyers), the level of diversity of the transmitted information (individualized information, standard information), the size of expenditure for communication actions (forms of relatively large or low financial expenditure), the flexibility of actions (flexible instruments and instruments of low flexibility), the time horizon of the impact of communication activities. Specific traditional marketing communication tools, distinguished according to their characteristic features, are characterized below.
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8.4.1. Advertising Advertising is one of the most popular marketing communication instruments. The American Marketing Association defines advertising as “any paid form of impersonal presentation and promotion of ideas, goods and services by an identified sponsor at a given location and time with the use of media” (Kotler, 1994, p. 547). The impersonality of advertising consists in delivering a(n) (advertising) communication to receivers not through people, but with the use of media. Advertising, as an instrument of promotion, fulfills the following functions (Grzegorczyk, 2010, p. 43): the informative function – through an advertisement receivers obtain knowledge of new products and technologies, new product features; at the competitive level this function allows buyers to differentiate between products and brands; the persuasive function – advertising aims at persuading receivers that some products (and brands) are better than others; this function is also important for motivating a consumer to take purchasing activity; the reminding function – an advertisement binds buyers to a specific product or brand as well as develops purchasing habits and loyalty to products and brands. Apart from these basic functions advertising can also perform the educationnal and social functions, which are realized mainly through advertising communications of non-profit institutions (Górska-Warsewicz, Świątkowska & Krajewski, 2009, p. 59). The classification of forms and types of advertisements has been presented in table 8.4.
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Table 8.4. Basic typologies of advertisements Criterion
Types of advertisements
type of receiver
a consumer advertisement an institutional advertisement
sponsor of an advertisement
a manufacturer advertisement a commercial advertisement a political advertisement a social advertisement
subject of an advertisement
a product advertisement a service advertisement a social advertisement (social problems and charities)
objective of an advertisement
a PR advertisement a product advertisement a sales promotion advertisement
way of product/service presentation in an advertisement
a non-comparative advertisement (not accompanied by a comparison with rival products) an indirect comparative advertisement (it is indicated that a given product is the best within the whole category) a direct comparative advertisement (a given product is compared with another product from its category)
channel of advertising communication
a TV advertisement a newspaper advertisement an Internet advertisement a radio advertisement a post advertisement an outdoor advertisement a cinema advertisement an advertisement at points of sale (POS)
Source: (Garbarski, 2011, p. 267; Szymoniuk, 2006, p. 64)
According to the transmission channel we may distinguish television, radio, newspaper, cinema, Internet, post and outdoor advertisements, as well as advertisements at points of sale. The advertising channel
262
is a concrete means – a television channel, a radio station, a specific newspaper or an Internet portal. On the other hand, an advertising medium is a form of advertising channel, which is characteristic of a given channel, e.g. a newspaper advertisement, a television spot, an advertising leaflet or a sponsored link (Grzegorczyk, 2010, p. 86). The selection of the most popular advertising media and channels has been presented in table 8.5. An advertising-based marketing campaign is usually run by enterprises in several medias which complement each other (e.g. a nationwide radio commercial ideally complements a television commercial). The efficiency of advertising, understood as a communication tool, mainly depends on the advertising material (which should be interesting for a receiver), the proper selection of medias and advertising channels (adjusted to the specificity of the material and the target receiver), as well as on ensuring the appropriate number of repetitions (which enable remembering
the
advertising
material
by
the
target
receiver).
While creating an advertising material enterprises should also remember about the limitations of this form of communication, among which we may distinguish (Garbarski, 2011, p. 268): high costs related to the process of preparing an advertisement, disapproving reaction to the advertising material by addressees, the decreasing efficiency of advertising related to the development of modern communication instruments, legal restrictions related to specific forms of advertisements (e.g. a comparative advertisement), product categories (e.g. alcohol) and receivers (e.g. advertisements targeted on children).
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Table 8.5. Media, advertising means and channels Advertising channel
Advertising media - examples
television
commercial spots, advertising programs, promotion boards, patronage programs, sponsored programs, product placement
radio
commercial spots, sponsored programs, contests and quizzes, jingles
newspapers
announcements, module advertisements, untypical advertisements (inserts, bands, stiff pages, French doors)
outdoor advertisement
billboards, posters, citylights, diapasons, advertising columns, balloons, advertising means of transportation, boards, photographs, neon lights, advertising painted on buildings
cinema
commercial spots, commercial boards, sponsored screening, product placement
Internet
advertising banners, links, keywords, sponsoring, mailing, pop-up windows, pop-under windows, advertising wallpapers
direct advertising
addressed and unaddressed deliveries, advertising letters, leaflets, brochures, advertising newsletters, souvenirs
point of sale
leaflets, posters, folders, catalogs, audiovisual materials, displays, product samples
Source: (Górska-Warsewicz, Świątkowska & Krajewski, 2009, p. 68- 69)
8.4.2. Sales promotion The term of sales promotion is interchangeable with the terms “sales intensification” or “complementary advertising” defined as “communication activities of a relatively short timescale of impact, which aim at a significant increase in the interest in a product” (Garbarski, 2011, p. 270). The functions of sales promotion have been enumerated below (Wiktor, 2013):
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offering buyers specific economic or/and psychological benefits; encouraging instant purchasing of a product or a service; attaching “something special” to a product, which is supposed to make it stand out from the competition; creating unique opportunities of short timescale on the market, which cannot be used permanently in reference to the offering; causing relatively quick sales effects, which are short-term and temporary. The group of receivers of the actions related to sales promotion can include end buyers, trade intermediaries and sales department personnel. Depending on the end receiver we may distinguish the following sales promotion categories (Szymoniuk, 2006, p. 134): consumer promotion – it is focused on buyers with a view to increase demand for a product; trade promotion – it is focused on wholesalers and retailers with a view to realize the sales objectives of a manufacturer; promotion focused on the sales department personnel – it aims at motivating employees to maximize sales of a product or a service. Depending on the type of sales promotion enterprises apply various instruments. The overview of the sales promotion instruments according to the target receiver has been presented in table 8.6.
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Table 8.6. Sales promotion instruments Type of promotion
Selected instruments
consumer promotion
price reductions and refunds, free samples, vouchers and codes, special packaging, bonuses (freebies), contests, programs for rewarding loyalty
trade promotion
quantity and temporary discounts, financial bonuses, bonuses, payment in installments, delayed payment, free products
promotion focused on trainings, competitions, extra remuneration, bonuses the sales department personnel Source: own work based on the analysis of professional literature
The sales promotion instruments are mainly applied on the consumer goods market (much less frequently on the production goods market) and can bring the planned results if specific conditions are met. The conditions include (Garbarski, 2011, p. 271): limited timescale (if an action lasts for too long, it loses attractiveness and becomes a standard offering); attractiveness and the attachment of an extra benefit to a product (a benefit related to purchasing a product must be particularly attractive to the target customer, otherwise customers will not be interested in the purchase); rather infrequent application (the sales promotion instruments applied on the permanent basis cease to be attractive to customers); communicational support (actions within the scope of sales promotion call for appropriate communication, e.g. through a commercial or a leaflet of retail chains).
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8.4.3. Personal selling Personal selling, also called door-to-door selling or personal communication, is defined as “an oral, personal presentation of offerings and a business conversation of a seller (or a team of sellers) with one or more potential buyers performed with a view to cause the purchasing of the promoted offering” (Sztucki, 1995, p. 136). On the other hand, Wiktor defines personal selling as “presenting the offerings of an enterprise and intensifying sales with the use of direct interpersonal contacts of employees with buyers” (Wiktor, 2013). Personal selling is mainly applied in the following situations (Garbarski, 2011, p. 269): the group of communications (advertising) receivers is relatively narrow; therefore, the application of other marketing communication tools (e.g. a commercial) would be significantly more expensive (such a situation occurs mainly on the B2B market); the product is complex and calls for a detailed explanation given separately to individual potential buyers; it is necessary to put more personal pressure on a buyer in order to persuade them to a specific action (e.g. purchasing a product); the product must be adjusted to buyers’ needs and expectations, or the conditions of purchasing must be individualized (warranty, the method and conditions of delivery). Due to the abovementioned personal selling (understood as a marketing communication instrument) is mainly applied on the production goods market in reference to institutional buyers. Moreover, personal selling may
267
be used as a tool for maintaining business contacts between an enterprise and trade intermediaries on the consumer goods market. Personal selling can take the form of direct and indirect communication. It supports the realization of the following communicational functions of an enterprise (Górska-Warsewicz, Świątkowska & Krajewski, 2009): transmitting information about products, acquiring information about customer needs, making offers and establishing business contacts, supporting sales through advice and presentations, shaping the positive image of an enterprise. One of the key advantages of personal selling (understood as a marketing communication instrument) is the direct contact of a seller with a buyer, which creates the possibility of immediate feedback, i.e. the instant observation of a receiver’s reaction and adjusting to their requirements. Personal selling may be a leading communication instrument (e.g. on the production goods market) or an additional tool for supporting other communicational actions (e.g. on the consumer goods market). It should also be noted that personal selling can take place at many locations (most frequently adjusted to a buyer’s preferences) among which we may enumerate inter alia enterprises, points of sale, fairs and exhibitions, public places and clients’ homes (Garbarski, 2011, p. 269).
8.4.4. Public relations Public relations are a marketing communication instrument, which aims at shaping a positive image of an enterprise and establishing relationships between an enterprise and its market surroundings. According to Kotler’s
268
definition public relations “involve a variety of programs designed to promote and protect a company's image or its individual products” (Kotler & Keller, 2012). In the professional literature within the scope of public relations of enterprises such actions as managing crisis situations, sponsoring as well as building and protecting a company’s reputation are also highlighted (Jaska & Werenowska, 2017). Activities within the scope of public relations in an enterprise fulfill the following functions (Wiktor, 2013): the informative function (transmitting information about an enterprise to its surroundings); shaping contacts (establishing relationships between an enterprise and its surroundings); representation (representing an enterprise’s leadership and its decisions); creating a positive image of an enterprise; the
integrating
function
(contributing
to
the
harmonization
of an enterprise’s relationships with its surroundings); the
stabilizing
function
(ensuring
stable
relationships
with
surroundings, especially after temporary crisis situations); intensifying sales (maximizing sales on the basis of a positive image of an enterprise and its products). Activities related to public relations should be performed by entities on a permanent basis, independently of the sales level of products/services mainly due to their key objective – creating a positive image of a company and shaping positive relationships with market surroundings. On the basis
269
of the detailed analysis of receiver categories of actions within the scope of public relations we may distinguish: internal public relations focused on employees, leadership as well as on labor unions and organizations functioning within the internal structure of an enterprise; external public relations focused on specific component elements of surroundings, i.e. clients, suppliers, competition, institutions, media, investors, pressure groups, local communities, etc. The division of actions related to public relations proposed above determines the instruments, which should be used in the context of specific receivers. The applied tools can take a direct form (e.g. a presentation of a company’s representative during fairs, enabling visits to a company, organizing press conferences) or an indirect form (e.g. sponsoring, a reportage about an enterprise, publishing materials about an enterprise) (Wiktor, 2013, p. 244). The overview of selected public relations instruments in reference to internal and external receivers has been presented in table 8.7. Apart from the instruments enumerated in table 8.7. within the public relations activity enterprises organize the so-called events, i.e. marketing events. Events are most often focused on the consumers of products or services offered by a company. Moreover, they relate to culture, sports, arts, or team-building. Due to their large popularity with consumers such events are common in the present practice of performing public relations actions (Garbarski, 2011, p. 274).
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Table 8.7. Selected public relations instruments Form of public relations
Selected instruments
internal public relations
team-building events, anniversaries, corporate newsletters, internal blogs, email communication with employees, trainings, Intranet, sports and cultural events for employees, a visual identification system of a company
external public relations
press conferences, open doors, lobbying, sponsoring, social media accounts, social engagement, advertising companies, charity events, lectures, participation in fairs and exhibitions, a visual identification system of a company
Source: own work based on (Wiktor, 2013, p. 245)
If compared, activities within the scope of public relations have two important advantages over other marketing communication tools (Garbarski, 2011, p. 274): relatively lower costs of reaching the present and potential buyers in comparison with e.g. a commercial, relatively high credibility, in particular in the case of applying public relations instruments based on media.
8.5. Modern marketing communication tools The advances in modern technologies, the changing consumer needs, the omnipresent Internet, as well as the development of nonstandard media have encouraged enterprises to use new forms and channels of communication in a more and more intense way (Wyrwisz, 2014). The traditional communicational actions are supported (or even replaced) by modern communication instruments, which are creative, often
271
unpredictable and interest-arousing for receivers. At the present stage of the technological development we observe dynamic advances in devices, IT systems and technological systems within the scope of the use of media in
the
marketing
communication
process
(Malinowska,
2015).
Furthermore, the growth of the Internet (Web 3.0) is one of the key determinants of changes in the marketing communication of enterprises (in the context of the use of new medias). In the course of the last several decades (since 1990) the global Internet has undergone enormous evolution. Despite the fact that the Internet – the biggest invention of the end of the 20th century – was created for military purposes, it has always been centered on the exchange of information, resources as well as on social activities (Frąckiewicz, 2006; Żukowski, 2016; Stachowiak, 2018). Nowadays the Internet is the key communication channel for enterprises. It is used to establish and maintain contacts with consumers, to exchange experiences and views, and to keep an enterprise’s relationships with its surroundings (de Pourbaix, 2007; Stachowiak, 2018). As mentioned above, modern marketing communication tools may be divided into the ones based on traditional medias and the ones, which use new medias, i.e. social media. Modern communication instruments based on the innovative use of traditional communication channels have been presented in table 8.8.
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Table 8.8. Modern communication instruments based on traditional media Instrument
Characteristics
guerilla marketing
unconventional advertising actions, in the case of which the media are e.g. walls, benches; the message has a mysterious character, which makes it attractive for receivers
ambient media
advertising, which uses alternative media in the public space (an advertisement, which fits into a receiver’s surroundings); an example of it can be 3D graffiti, visualizations of brand logotypes in the streets
shockvertising
shocking advertising, which aims at evoking strong emotions in a receiver through the atmosphere of scandal; this type of advertising is performed on the edge of legal and ethical norms, as it often incorporates erotic and religious motifs
product placement
the placement of a product (a brand), services in media such as films, television series, television programs, books and computer games; making the advertising message less persuasive is an important advantage of this tools
advergaming
advertising actions, which consist in displaying the advertising message in games dedicated to consoles (Xbox, PS) or mobile devices (smartphones, tablets)
viral marketing
advertising messages, which spread on the Internet thanks to the engagement of the receivers themselves (Internet users); they often make the impression of amateur films
Source: own work based on (Stachowiak, 2017, pp. 112-115)
As mentioned above, the dynamic development of information technologies and modern media generates new solutions within the scope of marketing communication. Along with the modern tools based on traditional media described in table 8.8. social media have been making headway in a very intense way. Therefore, social media are marketing
273
communication channels for enterprises, products, services and brands. Social media marketing is defined as ”the use of social platforms, blogs, virtual realities and other analogical spaces for advertising, image-building, sales, client support and service purposes” (Mazurek, 2016). The development of social media has been presented in table 8.9.
Table 8.9. Development of social media in the world and in Poland Medium
Worldwide
Poland
Classmates.com / nk.pl
1995
2006
Sixdegrees.com
1997
-
Friendster.com
1999
2007
Blogger.com
2002
-
Linkedin
2003
2012
MySpace
2003
2008
YouTube
2004
2007
Twitter
2005
2011
Yahoo!
2006
2011
Foursquare
2009
2009
Instagram
2010
2013
Pinterest
2010
2013
Google +
2011
2011
Snapchat
2011
2011
Source: http://www.mofo.com/files/uploads/images/a-short-history-of-social-media.pdf
Nowadays the most popular social media in the world are: Facebook, YouTube, Instagram and Twitter (https://businessinsider.com.pl/media/ internet/najpopularniejsze-serwisy-spolecznosciowe-w-polsce-i-na-
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swiecie/m9gksls). Similarly, the most popular portals in Poland in 2017 were Facebook (with over 20 million users) and YouTube (with over 19 million users) (Stachowiak, 2018). The enormous communicational potential of social media has been noticed by enterprises operating on both the consumer goods and the production goods markets. Therefore, these enterprises have begun to realize communicational objectives in social media. The most frequent objectives of enterprises realized with the use of social media include (Mazurek, 2018): increasing the awareness of a brand, a product or a service, increasing traffic on websites, creating a positive image of a brand, maintaining customer loyalty, increasing the quality of customer service. As it has been pointed out by Lisowski, enterprises use two conceptions of communicational actions in social media. The first conception consists in developing the brand awareness and creating its positive image – thanks to accounts on social networking sites enterprises reach their clients with a relatively low financial expense. The other conception relates to marketing effectiveness and treats social networking sites as media for commercials and linking platforms to online stores (Lisowski, 2018, p. 366). The actions taken by enterprises in social media within the scope of marketing communication have been presented in table 8.10.
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Table 8.10. Advertising actions of enterprises in selected social media Social medium
Examples of advertising actions
Facebook
discount vouchers, contests, games and applications, sneak-peeks, unique contents, posts encouraging dialog, links to online stores
Instagram
advertisements, competitions, personalization, use of hashtags, links to online stores
YouTube
viral marketing, commercials, live streaming of events, tutorials, links to online stores
Source: own work based on (Stachowiak, 2017, pp. 138-141)
Nowadays social media amount to an essential channel of communication between enterprises and receivers. They offer a broad range of possibilities (by dint of offering various tools, platforms, new features), which
allow
enterprises
to
realize
their
image-building,
sales
and communicational objectives.
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