The Path to Long-term Profitability

In FDA regulated industries we have to comply with GMPs.  It’s a federal law.  But we also have to make a profit.  It’s the law of the invisible hand from Adam Smith.  Our question is, How can we do both?

GMP compliance costs money.  Nobody can deny that.  But to see only the cost of GMPs is to look at your organization through a straw.  We need to understand the entire system.

First, let’s review the outcomes of GMP noncompliance.  Of course, we know that we could be in trouble with FDA.  But that’s just the beginning of our problems.  What about the financial impact?  After all, we’re in business to make money, right?

Noncompliance costs money.  Everyone knows that.  What most people don’t realize is how much.  Sure, if you have to rework a batch, that cost is visible on cost reports.  But what about all the costs that don’t show up as line items in costs reports?

• Disruption of operations due to out of conformance purchases and production
• Excessive inventory levels maintained to accommodate poor quality (just-in-case inventory)
• Poor-quality related schedule changes
• Lost customers

These costs are invisible on a production cost report, but they are nonetheless real.

If you’re running a business, you need to find some way to drive down these costs.  It’s particularly important in FDA regulated industries because the cost of errors is so much higher.  We can add fines and negative publicity to the list.

How do we drive down the number of errors in our daily operations?  We might ask what happens in our current operation when an error occurs.  Typically, we initiate an investigation, which is necessarily a reactive process. 

When the employees see the investigator coming, they prepare to get blamed.  Consequently, the best source of information about the incident dries up.  Management’s ability to prevent the error from happening again gets exponentially more difficult.

What if there were a more proactive way to prevent these errors from happening in the first place?  How do we get our employees to follow GMPs all the time, even when no-one is looking?

When companies embark on the GMP journey, they go through three stages.  The first stage, learning GMPs, is easy.  Writing all your SOPs and training the employees is drudgery, but straightforward.

Everyone agrees that the last stage, getting everyone to comply with GMPs is by far the hardest.  Yet this is the stage that hides the highest costs.  Most companies are stuck at this stage.  What can you do about it?

The first thing to realize is that if you do nothing, nothing will change.  Resign yourself to this reality forever.

The second fact that you need to confront is your organization’s culture.  It needs to change.  Oh, you didn’t think your organization has a culture? 

Every organization has a culture, whether it was purposely created, or not.  And yours accepts the fact that every day is a constant firefight to correct yesterday’s problems.

The third reality is leadership.  If you’re the leader, you need to change.  Back to you in a minute.

If you are a concerned member of the organization – like the quality manager, you need to try to get leadership to change.  How do you convince somebody that they need to change?  As you know, it’s not easy.  But it starts with you putting together a deal they can’t refuse.  More in a later blog post.

Ok, back to the leader.  If you are leading a group of people in an FDA regulated industry, you were probably picked because of your excellent administrative abilities.  You have an analytical mindset.  You get things done. 

What you are NOT is a charismatic leader.  You are not a Winston Churchill or a Martin Luther King. 

And neither am I.  Let’s be honest with ourselves.  If we ever had to rely on our speech making skills to make a living, we’d starve in the street.  If we are going to change the culture of your organization, we’re not going to do it with motivational speeches.

You need to find a way to transform the culture of your organization using the skills that make you great.

If you have waded through realities One and Two above, you have reached a decision point.  You now must decide whether you are going to accept the Call to Adventure and embark on the Hero’s Journey, as described by John Campbell.

But let’s be clear, we’re not talking about mythology.  You have to make a business case to yourself.  If you are going to commit significant resources to create a strong quality culture, you need to justify it to yourself and to your bosses.

The other thing that you must do is to check your ego at the door.  You need a squad, the coaches in the clubhouse, as they say in baseball.

Now comes the justification.  How do you put together the deal that can’t be refused?  More in my next post.

If you are intrigued by this approach, but would like help see Positive Compliance^TM.

How about you?  Do you have a similar story?  What has worked best for you?  Comment below.