The hidden cost of compliance for manufacturers

March 2020 | EXPERT BRIEFING | BOARDROOM INTELLIGENCE

financierworldwide.com

There is little doubt that in most organisations the finance and quality assurance teams are at odds with each other – and at times diabolically opposed.

Quality organisations often act like the Central Intelligence Agency after the horrific events on September 11th; if the government did not fund some security initiative, it warned there was a threat of another attack looming. Finance, on the other hand, has difficulty understanding the need to fund expensive, large, complex quality systems and processes that have no payback, return on investment or apparent efficiency. Manufacturing leads are often frustrated by being asked to achieve cost reduction targets within a manufacturing facility, but are unable to reduce anything quality related. In fact, it often seems that while the rest of an organisation is shrinking, quality groups continue to grow at a disproportionate rate. The quality assurance groups within an average US Foreign Corrupt Practices Act (FCPA)-regulated drug product manufacturing facility (sterile and non-sterile) tend to be the largest cost centres operationally in a manufacturing plant. From the outside in other manufacturing areas, quality assurance is often look at as a cumbersome burden that ‘holds things up’. The perception is that quality is a constant ‘roadblock’ to progress, product release and even revenue generation.

Why does this perception exist?

No one can disagree that regulated quality standards – especially in the pharmaceutical industry – are constantly increasing. As government regulators inspect facilities, they are finding new issues that require (often costly) remediation. For example, many of the issues highlighted by a US Food and Drug Administration (FDA) inspector in 2019 would not have even been identified as a problem that required fixing in 1999. Part of this has to do with the FDA organisation itself, specifically FDA inspectors. We all know that part of any employee’s job is to appease the boss and demonstrate a good work product and value to the organisation. This, then, ties to performance, compensation and the ability to gain promotion. Therefore, undoubtedly FDA inspectors are going to identify and document new problems and issues that may have otherwise gone unnoticed years ago in a prior inspection.

Another factor is that government inspectors and quality regulations and laws are often uniquely different across the globe. A manufacturing regulatory requirement in one country may not apply in another. An issue raised during a local inspection at a facility in Brazil, for example, may never be flagged in the United States. In addition, if a manufacturing facility produces for more than one country market, the site must be ready for inspectors to visit from each of these markets, no matter how small or large the volume of production. This requires unique and different quality assurance processes and procedures at every manufacturing facility across the globe.

The quality assurance organisation structure, reporting lines and decision-making behaviours

This increase in standards and complexity is forcing change to the regulatory landscape and the size of quality assurance organisations. As the regulatory landscape changes, the bar continues to rise. Quality assurance organisations tend to report directly up and into a separate quality compliance and controls organisation, managed as a distinct group. Quality assurance leaders may be part of a manufacturing site or regional manufacturing team, and a solid reporting line decision-making body which reports directly up to senior quality leaders at the company’s executive level. The goal in theory is to achieve objectivity and independence of the group. While on the surface this organisational structure appears to be the most effective way to ensure objectivity and undue influence from business-driven operational leaders, it does present its own set of challenges.

Quality assurance personnel, by their very nature, are meticulous highly sceptical decision makers. On the one hand, this behavioural quality is an asset to an organisation, in that it helps to ensure manufacturing processes and procedures are followed to the strictest parameters, ensuring quality products are produced and released meeting all regulatory standards. However, the structure also leads to a lack of ultimate decision making, where instead of signing off on a quality release document, additional information and data points are continuously requested, delaying a product’s release for distribution and ultimately its ability to generate sales revenue. The quality organisation, as a separate group, but still critical to releasing revenue-generating products, struggles to make any decision and gets bogged down in a revolving ‘trust but verify’ mindset. With this organisational structure, there is a tendency to demonstrate little or no self-empowerment and independent ownership to drive decisions.

What can be done to improve and optimise the quality organisation structure?

Changing the skillset of a senior quality assurance organisation’s leader, from a traditional technical PhD to a traditional operational business development leader, may seem illogical given the background, but often helps to streamline processes, interactions and decision making with the remaining manufacturing organisation. This senior individual can implement empowerment and leadership at all levels of the quality assurance organisation, instead of a traditional pyramid structure. An operational leader who has a traditional management background and would otherwise not be seen by a technically trained quality leader can effectively turn the quality assurance organisation into a true partnership, working with (rather than against) the rest of the manufacturing organisation.

Frank Orlowski is the president and founder of Ation Advisory.

Frank Orlowski

Ation Advisory