Quality Governance of Enterprise Management System (Q-GEMS)

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Foreword

The business environment today is fraught with uncertainties rising from globalization and cross currency movements to increased competition from new entities. Many organizations today are also involved in a multitude of processes spread across numerous domains. Their day to day operations are inherently dependent on the proper and synchronous functioning of all the departments within the organization and also on the satisfaction of various stakeholders’ needs. It is therefore becoming increasingly necessary to bring together all the individual departments under the ambit of a common and integrated quality governance framework. Such a unified quality governance framework can help ensure adherence to leading practices followed across industries and synergize functions within the organization.

Organizations can also leverage the preferred practices followed in different organizations and apply them to tackle domain specific challenges which are sometimes left unanswered or partially answered by industry specific governance frameworks. The last decade has also brought to the limelight some important issues about corporate governance. An overarching governance framework consisting of leading practices prevalent across industries and domains is a core requirement.

This report is an attempt seek to bring together the challenges and concerns faced by various industries with insight from industry experts and leaders [Third party, our clients]. It also explores if an integrated governance framework might be designed to deal with most of these issues.

To understand the present issues faced by various organizations and explore the need for integrated quality governance framework to handle issues, KPMG in India conducted surveys of industry leaders from various domains spanning from IT/ITES to Banking & Financial Services. We would like to thank all the survey participants for their time and overwhelming response. [While circulating the survey, all the participants were formally informed that their responses will be recorded and used in thought leadership paper].

Quality Governance of Enterprise Management System 01



In order to understand the present issues faced and if an integrated governance system can help solve these issues, KPMG in India conducted extensive survey of experts and industry leaders. The responses received highlight the following factors:

A majority of organizations surveyed agree that a comprehensive corporate governance framework is required to monitor their day to day processes and operations.

Many organizations today are cognizant of the fact that to achieve profitability and sustainability, they need to streamline their business processes. By maintaining strict quality standards and ensuring compliance with regulations at each step, organizations can cut costs due to rework, lost sales and penalties. It would also increase their competitiveness in the market where customer loyalty is directly dependent on the reputation and benchmark setting quality standards of enterprises.

A comprehensive governance framework should address several key business areas.

Every organization needs proper and synchronous functioning of all the departments within the organization. To achieve this purpose, enterprises should adopt a framework that understands the individual department’s pain points and incorporates preferred practices across all industries. Industry specific frameworks focusing on limited areas suffer from a myopic perspective in this case.

Value transfer to stakeholders need to be ensured.

Many organizations are increasingly becoming aware of the need to address the concerns of all the stakeholders related to their business. The two primary stakeholders are the customers or end users and the employees. The last few years have seen increased focus on employee productivity and welfare, and increased value transfer to customers through cost benefits and synergies.

Executive Summary

03Quality Governance of Enterprise Management System


Corporate Survey Overview

To understand the current status of corporate governance in India and measures undertaken to ensure compliance with regulations, KPMG in India surveyed 50 industry leaders from various organizations. No responses are attributed to individuals, with the results made available in aggregate form only. The surveys were completed online in June 2013; this report provides an overview of the results.

Key issues faced by organizations todayThe two most important stakeholders for any business are its customers and its employees. Customers are the sole sources of revenue of any profit seeking organization. The employees on the other hand are the backbone of the enterprise. The survey highlighted this very fact that the most serious and common problems faced by organizations today are those related to customer satisfaction and employee motivation.

In addition to these two, respondents highlighted a multitude of other problems.


Source: KPMG in India Survey

Fig. 1


Aligning to an improved business governance framework improves the overall management standards:An enterprise governance framework ensures compliance with the best practices followed in the industry. Most of these measures are devised keeping in mind the long term sustainability of the business. A majority of the respondents were of the view that a modern enterprise governance framework touches vital aspects of organizational management. The goal is to ultimately lead to an improvement in overall business output. This is achieved through reduced project failure rates. It is needless to say project failures due to reasons of non compliance with regulations and quality issues will reduce if a governance framework is properly adhered to. All these ultimately lead to a business model and processes which are sustainable in the long run.


How much do you think management standards can be further improved in your organization by aligning to an improved business governance framework? Please rate on a scale from 1 to 5

Lowest1 5Highest

Do you think project failure rate will come down if a more robust business governance framework is implemented?



To what extent do you feel the need for having a business governance framework to achieve sustained business growth? Please rate on a scale from 1 to 5


Lowest1 5

Highest

Fig. 2

Fig. 3

Fig. 4



Focus on supply chain optimizationThe majority of the respondents are of the opinion that supply chain optimization is important to their business. It complies in case of manufacturing companies where process costs and customer satisfaction depend a lot on optimum lead time required to procure various raw materials and their movements in the supply chain.

How important do you think is supply chain optimization to your business? Please rate on a scale from 1 to 5

Least important

1 5Most

important


Focus on Risk Assessment and Risk MitigationMany organizations spend a significant time and effort to mitigate business risks. Some of these risks include business risks due to non compliance with norms and regulations. Risks may also arise from information security related issues as also from increased competition amid a changing business landscape. If proper attention is not devoted to mitigate these risks, organizations can end up channeling a significant amount of time and resource to meet contingency situations. This can result in increased costs and reduced profitability.

Many organizations are cognizant of the above risk factors and focus on risk mitigation through a variety of measures including aligned internal policies, employee awareness initiatives and regular assessments.

Any framework adopted by organizations for corporate governance should focus on these issues to achieve its desired purpose.

How much overall effort is spent to mitigate the business related risks? Please rate on a scale from 1 to 5

No effort1 5

Substantial effort


Fig. 5

Fig. 6



How much effort is normally required for contingency situations? Please rate on a scale from 1 to 5

No effort1 5

Substantial effort


How often do projects go over budget? Please rate on a scale from 1 to 5

Never1 5

Very often


How do you ensure information security in your organization?


Fig. 7

Fig. 8

Fig. 9


Alignment with new technologiesTechnology today has become all pervasive in nature. Almost every business process is directly or indirectly dependent on the use of technology. With existing technologies getting updated every other day, organizations should be seeking to align and redesign their business processes continuously to gain a competitive edge over its rivals. To gain strategic advantage enterprises should work towards continuous innovation and quick adoption of new and related technological advancements.

How quickly is a new technology adopted in your organization in response to a strategic opportunity? Please rate on a scale from 1 to 5

Very slowly

1 5Very

quickly


Fig. 10




Role of Governance Standards in increased Customer SatisfactionMost governance standards are built on the principles of adherence to quality standards and value transfer to all the stake holders. Customer satisfaction is directly related to product and service quality. Consequently, implementing any governance standard focused on these aspects leads to an increase in customer satisfaction levels. This fact was highlighted in the corporate survey as shown in figure below.

Governance framework and Employee ProductivityGovernance framework emphasizes on assessment of employee work allocation and performance measurement. It helps reduce both burnouts due to excessive work pressure, as well as resource idle time due to improper job scheduling. The survey respondents were unanimous in saying that ensuring proper adoption of a governance framework ultimately leads to better employee productivity.

To what extent would you attribute the use and impact of governance standards in attaining higher customer satisfaction for your organization? Please rate on a scale from 1 to 5

No impact1 5

Sunstantial impact


Do you believe incorporation of a new business governance framework lead to better employee productivity?


Fig. 11

Fig. 12



Compliance with regulations and standardsThe primary aim of a governance framework is to maintain the enterprise compliance with prevalent norms and regulations. To ensure compliance, governance framework advocate various measures like periodic assessments, internal and external audits, reviews by the management and regular audits.

How do you ensure adherence to the standards within your organization?


How much do you think adopting a governance framework helps in complying with various regulations and service levels? Please rate on a scale from 1 to 5

Does not help

1 5Strongly

hepls


Fig. 13

Fig. 14



The Way Forward

Dealing with these diverse issues from various industrial domains requires a governance framework which can be applied across all industries. Such a framework should essentially combine preferred practices, relevant governance frameworks and standards specific to industries and sectors, and come up with an integrated model which is designed to tackle all these issues across all domains.

With this view in mind a new integrated governance framework called Q-GEMS (Quality Governance of Enterprise Management System) has been proposed (by KPMG-Business Excellence team).The subsequent section addresses the above issues and is applicable for governance and project management across all sectors and domains.


The Q-GEMS Framework- Key Cornerstones

It encompasses all domains and processes of the enterpriseThe Q-GEMS Framework is designed to address all the functions and processes required to govern and manage an enterprise. It is holistic in its approach and focuses not only on the internal processes but also on external processes requiring interaction with connected entities.

It is an overarching framework applicable to all industriesQ-GEMS combines leading practices followed across industries which in turn helps to ensure its applicability across different industries as a common governance and management framework. Industries can also benefit from cross domain knowledge which is sometimes not reflected in industry specific frameworks. It is simplistic in approach and its components and strategic points are written in a technology agnostic common language that is understood by people across domains. It provides a foundation to build good practices and is flexible allowing changes and additions to its list of strategic points and sub points.

It adheres to stakeholder needsThe primary purpose of an enterprise is to create value for its stakeholders. Stakeholders not only mean the customers or clients and the manufacturer or service provider, but also third party entities or anyone who is directly or indirectly affected by the business processes. Stakeholder value creation encompasses the culture of cross purposes. In such a situation Q-GEMS stresses on mutual cooperation and pre-decided value distribution. Value creation also means reaching an optimum balance between cost drivers and risk coverage. The benefits realized can vary from financial and commercial benefits for businesses to public service for philanthropic and public organizations.

Fig. 15 Features of Q-GEMS




It addresses all the ‘interacting elements’The ‘interacting elements’ are the various factors which influence the success of implementation of Q-GEMS. Q-GEMS consists of six groups of ‘interacting elements’:

Frameworks, Policies and Norms The frameworks, policies and norms are the guidelines that oversee the daily management of an enterprise.

Practices and Activities The practices and activities help an organization translate the higher level business objectives to more granular employee goals.

Decision Making Entities The patronage and continued emphasis on adhering to governance frameworks by the decision making entities determine whether the implementation of a governance framework will be effective and successful or not.

Culture, Ethics and Behavior The importance of culture, value and ethics to the successful implementation of a governance framework is sometimes underrated, but it is one of the prime factors for success. It determines the chances of employee dissatisfaction, friction and resistance to changes.

Information, Applications and Services Information is a vital component of every business process and transaction. For organizations providing services related to information and technology, information and applications are often the end product. Information, applications and services also form the core components of the infrastructure of the enterprise.

Skill and Competencies Adequate skill and competencies of the employees are necessary to complete business activities, undertake any decisions and contingency measures.

It simplifies the processes and allows for flexibility and judgmentThe Q-GEMS framework is simplistic in approach and technology agnostic. It is flexible and can be also applied in parts which are relevant to the particular industry. More than being prescriptive in approach, Q-GEMS provides a guideline for industries which focuses on the best practices followed across different domains. Since it acts as a guideline and stresses on certain key areas of practice, newer standards and methodologies can be easily incorporated that focus on those areas.

It addresses the risk areas and business constraintsQ-GEMS seeks to emphasize on the balance between risk and growth of the enterprise. To create value organizations should optimize both risks and benefits delivery. To ensure this objective, organizations should have a proper risk capturing and risk management mechanism as well as regular quality checks to monitor compliance with regulations. Risks can be of various forms like financial risks, risks related to information, physical safety risks and so on.

It focuses on continuous improvementThe Q-GEMS Framework is built around the Deming Cycle or the Plan-Do-Check-Act cycle. At the core of this process is the philosophy of continuous improvement.

Q-GEMS is designed to ensure this through proper monitoring, internal audits and assessments to collect data and then acting upon those data and feedback information to improve the processes.

Fig. 16 Continuous Improvement Cycle



The Q-GEMS Framework

Components, Strategic Points & Checkpoints

The proposed Q-GEMS framework is built on seven key components which are vital for an enterprise to sustain its operations:

• Operations and Business Continuity

• Customer and Stakeholder Relationship

• Quality and Audit

• Marketing and Sales

• Facilities and Administration

• Human Resources.

These points are dealt with in detail in the subsequent sections. The seven components contain a total of 18 strategic points grouped together according to relevance. The basic overview of Q-GEMS framework can be represented by the figure below:

Q-GEMS Components and Strategic Points

Operations &

Business

Continuity

�

�

�

�

�

Innovation &

Change Response

Supply Chain

Optimization

Information

Security,

Exchange,

Assimilation and

Storage

Optimization

Alignment with

New

Technologies

Dependence on

External Entities

Customer &

Stakeholder

Relationship

�

�

Optimization of

Service Delivery

Customer

Support,

Handling and

Billing Practices

Quality & Audit

�

�

Internal Audits &

Assessments

Adherence to

quality standards

( Internal &

External)

Marketing,

Finance and Sales

�

�

�

Products &

Service

Innovation

Optimize the

Distribution

Mechanism

Transparent

Financial System

Facilities and

Administration

�

�

�

Assets &

Capability

Management

Information

Based Decision

Making

Physical Safety &

Security

Standards

Human

Resources

�

�

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Compentency

Development

Change

Orientation

Performance

Evaluation

Fig. 17 Q-GEMS Components and Strategic Points



The strategic points can be further broken down into strategic sub points which in turn consist of several checkpoints. This structure is shown below:

Fig. 18 Q-GEMS Framework


Operations and Business ContinuityThe business environment today is fraught with uncertainties rising from globalization and cross currency movements to increased competition from new entities. For a business to sustain in the long run, it needs to adapt quickly to these changes and innovate continuously. It also needs to ensure that its operations are optimized and efficient and measures are in place to address issues related to both security and maintenance of information. The following strategic points sum up these issues:

• Innovation and Change Response

• Supply Chain Optimization

• Information Security, Exchange, Assimilation and Storage optimization

• Alignment with new technologies

• Dependence on External Entities.

Innovation & Change Response

• Process & product innovation as per business goals

Strategic Points Sub-Points

Supply Chain Optimization

• Optimization of supply chain elements

Information Security, Exchange, Assimilation & Storage Optimization

• Ensure Information security, privacy & copyrights through audits

• Monitor data access & exchange

• Data sharing as per standards

• Proper data storage and retrieval mechanisms

Alignment with New Technologies

• Technological alignment & modernization for competitive advantage

• Technological alignment as per business goals and processes

Dependence on External Entities

• Compliance with regulations of third party entities to whom processes are outsourced

Fig. 20 Q-GEMS Component : Operations and Business Continuity



Customer and Stakeholder RelationshipAny business ultimately needs to provide value to its customers and stakeholders. Needless to say, to maintain profitability and a loyal customer base, organizations need to bring about innovation in both their products as well as service delivery. Organizations in the service sector need to constantly improve their customer touch points and provide increased value to the customers. The strategic points which reflect these points are:

• Optimization of Service Delivery

• Customer Support, Handling and Billing Practices.

Quality and AuditThis component consists of strategic point related to

• Internal Audits and Assessments

• Adherence to quality standards (both internal and external).

Regular internal assessments should be a part of the organizational processes to ensure compliance to both external regulations as well as internal specified quality standards. Internal audits also foster greater transparency and ensure investor confidence in the corporate governance standards followed within the organization. Maintenance of quality standards, although perceived as costly by some organizations, helps in retaining customers. It also helps to reduce cost of rework and cost involved due to rejections and scrap.

Optimization of Service Delivery

• Responsive & aligned to industry practices

• Aligned to technological & process innovations


Customer Support, Handling & Billing

• Documented statements clarifying commitments

• Client & stakeholder satisfaction evaluation

• Stake holder transparency

Internal Audits & Assessments

• Comprehensive audits for system reviews & corrective actions


Adherence to Quality Standards (Internal & External

• Target achievement & quality specifications

• Focus on continuous improvement

Fig. 21 Q-GEMS Component – Customer and Stakeholder Relationship

Fig. 22 Q-GEMS Component : Quality and Audit



Marketing, Finance and SalesMarketing and Sales are the most fundamental functions of any profit seeking organization. The two strategic points addressing this area represent the primary concerns:

• Product and Service Innovation

• Optimize the distribution mechanism

• Transparent Financial System

The success of every profit making organization depends on whether its products or services are bought the target customers. Customer needs and desires are transient and to cater to this change, organizations need to align their marketing strategy to reflect customer sentiments. This requires market insight and product and service innovation. It includes campaigns and advertisements as well.

Even with a proper marketing strategy, a product may fail to reach the target customers and lose market share. To address this issue, organizations need to ensure the proper implementation of distribution standards.

Facilities and AdministrationEvery organization needs assets to produce any product or service of value. Improper asset management leads to pile up of inventory and semi produced goods, employee burnout or under utilization and higher costs due to consequent delays and rework. Proper asset management consists of addressing the three ‘M’s-

• ‘Muda’ or wastage

• ‘Muri’ or overburden, and

• ‘Mura’ or variation.

Organizations should also ensure that proper safeguard measures are in place to prevent accidents and breach of security. The strategic points which come under this Q-GEMS component are:

• Assets and Capacity management

• Information Based Decision Making

• Physical Safety and Security Standards.

Product & Service Innovation

• Innovate products & services to suit client requirements & business goals


Optimize the Distribution Mechanism

Strategic Points - Transparent Financial System

• Proper handling & billing

• Optimize distribution network as per business objectives

• Transparency & value transfer to end users

• Ensure benefits delivery

• Conflicting interests handled as per agreements

• Financial transparency maintained and data shared with stakeholders

Assets & Capacity Management

• Forecast & schedule capacity & staffing requirements

• Evaluate & manage process efficiency


Information Based Decision Making

• Measure & manage service & revenue performance & act upon problem areas

• Prioritize projects based on information

Physical Safety & Security Standards

• Monitor & maintain physical safety & security standards

Fig. 23 Q-GEMS Component – Marketing and Sales

Fig. 24 Q-GEMS Component – Facilities and Administration


Human ResourcesEvery organization is ultimately dependent on its employees for sustaining its business processes. Organizations need to have training, seminars and workshops for proper competency and skill development of its employees. Employees need to be aligned and made aware of the enterprise goals, which in turn would reduce pains during transitions and enable smooth change management. Q-GEMS also help to ensure that the performance of employees is evaluated on a timely basis and information related to feedback and corrective measures are acted upon. The strategic points which make this component are:

• Competency development

• Change orientation

• Performance Evaluation.

Competency Development

• Training, skills & knowledge development

• Employee orientation to organizational values & ethics


Performance Evaluation• Performance data & feedback collected, analyzed

& acted upon following CUIKA

• Defined skill & knowledge requirement for jobs

Change Orientation• Performance & evaluation aligned to business

goals

• Business goals communication to all employees

Fig. 25 Q-GEMS Component : Human Resource




Q-GEMS Potential Benefits

Q-GEMS offers organizations synergy across all functional domains and helping to ensure improvement the key areas of Finance, Operations, Marketing, Development, Customer Satisfaction and Employee Productivity. The potential benefits of Q-GEMS include:

• It brings down costs pertaining to process and IT costs and helps ensure regulatory compliance.

• It can enable improvement in quality through internal audits, assessments and through its continued focus on the philosophy of continuous improvement.

• It helps to ensure resource optimization through motivation and skill development of employees and regular performance assessment checks and acting on feedbacks.

• Q-GEMS lays emphasis on change management and change responsiveness which enables organizations to remain flexible and adapt to the changing business environment and customer behavior.

• Q-GEMS advocates sustainability of business and business processes which is essential to achieve the long term goals of an enterprise.

• Through supply chain optimization Q-GEMS helps ensure proper inventory and lead time management and reduces the costs related to these.

• Q-GEMS emphasize business and finance risks optimization which helps ensure long term sustainability of business.

• The Q-GEMS focus areas on benefits transfer, stakeholder relationship management, customer handling and billing are helpful in retaining clients and customers and maintaining harmony.

• Q-GEMS focuses on data driven and data based decision making which eliminates bias.

• Q-GEMS strives to improve data security and copyrights maintenance through data transaction monitoring, proper authentication, data access, data storage and retrieval protocols.


The new business environment, with its share of uncertainties and legal complexities, requires a business governance model, which is neither abstruse nor too domain specific. The KPMG proposed Q-GEMS framework combines preferred practices from every industry sector to come up with an integrated framework which focuses on both simplicity as well as universality of approach. Its strength lies in the fact that although it specifies a number of strategic points to be adhered to by the organizations, it is not intended to be prescriptive in nature. The generic strategic points can be tuned as per the needs and necessities of an organization and the particular sector where it operates.

A key challenge, however, lies in the proper implementation of the framework. This requires the unanimous support of all the stakeholders. Employees and the management might need to deviate from their present style of work or rendering services and adapt to the changes. The management’s dedication and continued efforts in this regard will decide the success of the implementation process and attainment of the overall business objectives.

Conclusion Verdict & Lessons Learned




Appendix

Respondent Information

How do you ensure adherence to the standards within your organization?


Please specify your relevant work experience in years.


Fig. 26

Fig. 27




MethodologyThe survey was prepared and conducted during the last two weeks of June 2013 by KPMG in India. The result from the 50 respondents was noted for evaluation. No responses are attributed to individuals, with the results made available in aggregate form only. The surveys were completed online via e-mail. Where survey responses total more than 100 percent, respondents were able to select more than one answer. All data quoted in the publication is the proprietary of KPMG in India unless otherwise stated.

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• http://www.hl7.org/about/index.cfm

• COPC- 2000 CSP Standard Release 4.3 Version 1.1

• http://www.38500.org

• http://www.coso.org

• http://www.tmforum.org/

• http://www.itil-officialsite.com

• The Open Group Architectural Framework Version 8.1

• COBIT 5, An ISACA Framework, www.isaca.org/COBITuse.

AcknowledgementsSpecial thanks to Sourav Chakraborty and Isha Arora for their valuable contribution on this thought leadership paper.

Heartfelt thanks to all the respondents for taking their time out and participating in KPMG – Q-GEMS survey.

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.


The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International.

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KPMG Contacts

Pradeep UdhasHead – Markets T: +91 22 3090 2040 4100E: [email protected]

Raman K KPartner & Head – Business Excellence T: + 91 80 3065 4700E: [email protected]

Sankaran VenkataramaniTechincal Director – Business Excellence T: + 91 97 8999 9652E: [email protected]

Kewyn Walter GeorgeManager – Business Excellence T: + 91 97 8901 1128E: [email protected]

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MANAGEMENT CONSULTING

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