The Context of the Organization

From February, Quality Austria will, in a series of technical lectures, provide information on the revision of ISO 9001:2015. Every month, a key concept of the revision will be explained more profoundly. We start this series with deliberations of Dipl.-Ing. Sabine Pelzmann, MSc MBA, and FH-Prof. Dr. Mag. Anni Koubek about the topic “The Context of the Organization”.

4.1 Understanding the organization and its context

FH-Prof. Dr. Mag. Anni Koubek and Dipl.-Ing. Sabine Pelzmann, MSc MBA

The “context of the organisation” is a new term in ISO 9001. This term can already be found in the uniform structure, which has been specified for all management system standards since 2012 and is called “High Level Structure”. Thus this concept equally is anchored in the ISO 14001 Revision.

The relevant requirements are stated in all management system standards in Clause 4. In this respect, two aspects are dealt with: “4.1 Understanding the organization and its context” and “4.2 Understanding the needs and expectations of interested parties”. The two topics are about identifying requirements that may have an impact on the planning of the quality management system.

In this article, we focus on the topic “Understanding the organization and its context”.

Due to this requirement, ISO 9001:2015 approaches the organization’s strategy much more than was the case in the past. Besides the organization’s purpose, the organization’s “strategic direction” will have to be considered explicitly when determining the most important factors influencing the organization. This also is to help to close the gap between strategic management and the quality management system, which can still be found in some organizations.

The analysis of the external and internal strategic influencing factors is no task that only needs to be tackled once: The organization will have to “monitor and control” these topics. This means that the organization will have to continually keep an eye on where major changes are happening and ensure that these changes are taken into account when designing the quality management system and the processes. In future, this way of having a look at changed basic conditions permanently will be more and more important because the ambient conditions are changing more rapidly and unpredictably in a highly technological, interlinked and global economy.

In this field of topics, there are the following typical questions: What does the market want? What can I offer? What’s my position as compared to that of others? What are the new technologies? What changes in terms of the legal, economic and social basic conditions? What about our resources and our efficiency and performance?

After the questions have been broken down according to the topic of quality, they will focus on the following: What are the expectations of the customer or those making use of my products? What can and will I offer to the customer? What do I need to do so? How do the basic conditions in which my customer uses the product change? What influences my capabilities of meeting the requirements placed?

The answers to these questions lay the foundations for designing the quality management system. Thus this will look different for each organization, and the quality management system will also have to change correspondingly - as far as the ambient conditions change.

Therefore, it is important to ensure that this connection between strategic work and the design of the quality management system is established well. Analyses of the context (the environment) often can be found in the field of “marketing” or “business development” and frequently are, due to their strategic significance, only accessible to the smallest management circle. This is why it is, in larger organizations, most likely this aspect of communication that will become the biggest challenge for organizations. In small and medium-sized enterprises, it may often be that no systematic approaches or policies for determining the context have been established yet. Here it is a matter of establishing an expedient procedure, which will also support strategic work beneficially.

For elaborating the context, there are manifold methods, whose choice depends on the type and size of the organization. For small organizations, it can be a question of elaborating the context in a team while making annual updates or a SWOT analysis (SWOT = Strengths / Weaknesses / Opportunities / Threats). In larger organizations, specific factors will have to be focused on when analyzing the context.

The methods of the analysis of the context, which are most commonly used, are based on the “PEST” or “STEP” method: In this respect, the letters of the acronyms stand for the categories of factors that are taken into account: socio-cultural factors, economic factors, technological factors and political factors. For organizations that have also integrated other management systems or whose operations require a lot of resources, it is recommendable to extend this categorization and consider the legal and environmental aspects separately. This is called “PESTEL Analysis” (due to the terms of “legal” and “environmental”).

However, successful organizations will usually have systematic ways to analyze the development of their competitors and the market. Depending on the organization, the topics of value chains, key competencies or resources can also be of utmost importance and be considered in specific analyses.