Building a Corporate Culture of Quality

Laboratories, chemical analysis, product inspections and other scientific elements are often associated with quality control, but underneath all the testing and protocol is a lifestyle, a way of doing business down to the little details and often overlooked tasks. At the root of high-quality businesses is a so-called Culture of Quality, a prevailing manner and belief that can sometimes sound like empty rhetoric, but which actually informs and guides how a company or organization is perceived.

Culture is really a mindset, according to Joe Chang, Ph.D., co-founder of Pharmanex and chief scientific officer of its parent Nu Skin Enterprises. Thus, a company’s culture of quality is the approach and commitment it takes to all aspects of its business, including its personnel and entire supply chain. “A culture of quality refers to the way that everyone in the company recognizes the importance and criticality of quality in your products,” Chang continued. “The idea and concept of quality becomes institutionalized, if you will. For our purposes, it is really about making sure that when we make products, all of us in the company must be willing to recommend these products to loved ones and family members.”

By this, the culture of quality in a company becomes a guiding principle, as people within the organization understand and subscribe to the commitment and practice of the standards of business put in place by management. This mindset refers to the belief and commitment that “I must do it right.”

“A quality culture reflects a commitment from seed-to-shelf and beyond,” said Andrew Shao, Ph.D., vice president of scientific and regulatory affairs for the Council for Responsible Nutrition (CRN). “This includes wherever your raw material is grown, how it is grown, how it is harvested, processed and extracted at the processing plant, and then how it is turned into an ingredient, brought to the manufacturer, how they formulate with it, make tablets and package the product, and how it gets to the retailer, who displays the product; even after the consumer buys it, the commitment to quality should continue. This means fielding questions and inquiries from consumers, in addition to outreach to ensure customers understand their expectations and if their needs have been met.”

George Pontiakos, president and CEO of BI Nutraceuticals, agreed quality goes beyond chemistry and production. “Quality is far more than just mold count, heavy metals and pesticides,” he said. “It’s a constant process, and you have to live it every day. By doing this, I ensure that the people who support me share my expectations, and we all execute at the same level.” He reported 18 percent of BI employees are exclusive to quality functions of the business, although 100-percent of the company is quality-minded. “We emphasize this by ensuring we are transparent to our own people,” he said. “They know what we are doing on a quarterly basis, which customers are in backlog, which vendors are performing well, up and down the line. The more you communicate good information to your people, the higher the level of execution they can perform.”

In theory, this idea of an infused attitude of quality within a company sounds good, but how does a business go about cultivating a culture of quality? The architects of such a culture are your senior management, who must show by example. This manifests itself in how management treats employees, as well as vendors and customers.

Rome wasn’t built in a day, nor is a quality culture. “It takes time; it is not an overnight process, not even a year-long one, but it takes multiple years,” Chang reported. “It took us 10 years to reach our current position, where each one of us in all areas of the company strives for a high-quality culture.”

Chang noted the founding credo for Pharmanex was to start a science-based, pharmaceutical-like supplement company. “Often, natural products people don’t like to hear the word ‘pharma’, but it doesn’t take them long to understand what we are about—when you aim to do science, you must do quality first,” he explained, adding, like it or not, pharma performs manufacturing to a high standard of quality. He said now, whenever new employees start at his company, they learn and understand the mission statement of science and quality, and are on board immediately.

Shao concurred on the notion that the leadership of a company, from the CEO down, must communicate the culture of quality on a regular basis to every employee. “This commitment to quality should be part of the company’s mission statement; one should be able to walk into any office or cubicle and have the employee recite the company’s commitment to quality and to developing products to improve customer health,” he offered. “Everyone should be able to recite this; if that commitment isn’t there, folks cut corners and don’t take quality seriously.” He said unfortunately, there are many companies started by well-meaning entrepreneurs, but these leaders are not connected to the quality issues and regulations the industry has to operate within. Bigger, more established companies in the industry know these issues very well, but often the newer players aren’t aware of these issues or choose to ignore them.

This disparity between companies committed to high quality and those, often fly-by-night companies apathetic about quality, is one of the biggest problems in extending the idea of a culture of quality throughout the natural products industry. Industry insiders continuously lament the lack of a level playing field, especially in dietary supplements.

For instance, ingredient companies have growers and other raw material sources on one side, and manufacturers on the other side. If a manufacturer buying ingredients is primarily price-focused, the higher quality, higher priced supplier will lose out to lower priced, often lower quality suppliers. On the other hand, if the ingredient supplier receives poor-quality raw materials from a grower, rejecting the material merely sends the shipment to another company willing to accept that material at a low cost.

“Stuff we reject never goes back to the grower,” Pontiakos said. “Not once have I seen it shipped back to original field; it finds a new home in the industry.”

Shao reiterated there can be no culture of quality in the industry if price is the only focus. “It leads to a lack of willingness to invest heavily upfront in research and development and quality assurance,” he said, noting much of this hesitation toward investing in quality is driven by business reasons such as lack of intellectual property protection, increasingly commoditized ingredients and narrow profit margins. “The natural products industry is a system set up to compete more on price than on quality.”

Pontiakos added part of the challenge in the industry, as a whole, is the procurement base is really purchase price variance-driven. He explained the procurement side of the industry hasn’t achieved the level of sophistication yet where, in the market, companies know the actual cost of a vendor. “You could price out Echinacea purpurea, and it’ll be within in X dollars per kilo from a ton of vendors, but the more important questions are: is it in spec, did it arrive on time, and was it rejected after it arrived? We know a rejection costs $1,600 just in paperwork alone. So when a vendor delivers material and it’s rejected, not only do I rate that supplier negatively for the paperwork charge, but I also have to look at how the rejection affected my throughput and production. What did it do to efficiency? What customer did I annoy by not being able to deliver my product on time? And then, what did this delay do to my customer’s business?”

Quality companies in the middle of the supply chain often find themselves working overtime to bring their partners up to speed on quality. Within a company, management has control over the quality culture, but when it comes to vendors, growers, cooperatives, wildcrafters and all manner of raw material providers, the knowledge and resources for high-quality processes might be lacking. Major companies in the natural products industry have found themselves visiting such partners more often. They educate these sources and communicate to them the level of quality, including specifications and other requirements, necessary to forge and continue a business relationship. In this way, the high-quality ingredient suppliers and manufacturers can bring up the quality culture on that end of the supply chain. Up to this point, these quality middlemen have done this voluntarily and for the good of their company and the industry. Soon, this could become something of a barrier of entry into natural products, specifically dietary supplements.

With the first wave of the federal GMPs (good manufacturing practices) for dietary supplements about to hit the deadline for compliance, many are wondering how this regulation will affect the level of quality in the industry as a whole. One thing is certain—the GMPs place almost all of the burden of proof and responsibility on the manufacturer of the finished product. It is up to this manufacturer to ensure the ingredients or raw materials coming in for formulation are unadulterated and properly identified; packaging and production are also part of this GMP protocol. Should FDA enforce the regs adequately, inferior raw materials and prevalence of low-quality goods should begin to recede into oblivion. Thus, GMPs could help level the playing field.

“Really, manufacturers will need to lean heavily on the ingredient supplier for information on the supply chain, traceability, potential contaminants—a whole host of parameters,” Shao said. “This is where quality-focused ingredient suppliers will have a leg up on competition, the companies which, to this point, have not maintained quality-focused activities in the marketplace, including those who don’t do due diligence, because they won’t know where the raw material came from, what potential contaminants are and at what level. Quality-focused companies know these things, even for the international markets.”

Besides GMPs, there have been many quality systems available that are either specific or non-specific to natural products. Programs such as Six Sigma, Quality Circles and ISO 9000 have helped businesses of all industries systemize their quality activities and create a culture of quality. Pontiakos explained most of these systems came out of the military, which needed a protocol to ensure life safety-dependent products wouldn’t fail in a life safety-challenged environment. These were then adapted to commercial use.

Pharmanex developed a supplement-specific, in-house quality system called 6S®, based on some of these programs. This is a common practice among high-quality, trusted supplement companies. Chang confirmed there is much overlap between all these systems, but Pharmanex needed to adapt and simplify these programs to natural products. Pharmanex decided it was easier for its people to remember six words that begin with the letter ‘S’—selection, sourcing, structure, standardization, safety and substantiation. “Eventually, we feel GMPs will become the dominant quality program in our industry,” he conceded.

An overlooked area of quality is that of claims, claims substantiation, advertising, marketing and related activities. While FTC oversees these parts of business, self-regulation also exists within natural products. CRN has partnered with the National Advertising Division (NAD) of the Better Business Bureau (BBB), offering a grant to NAD’s voluntary program, which looks at supplement advertising for truth and accuracy. Any company with national advertising can participate.

Advertising and claims are important to quality, because the ultimate end game is consumer confidence. “If you have a high-quality product that meets label claim 999 out of 1,000 times, but the health claims are way out there, in terms of reflecting research done on your specific product, then you’re undermining consumer confidence,” Shao said. “When you’re over-promising and under-delivering in terms of efficacy of your product, you’re undermining consumer confidence.”

Pontiakos took this idea one step further: “If you are an entrepreneur or officer in a public or marquee company, and you spent your entire life putting in untold hours to build your business and brand, why would you jeopardize that for few cents per kilo?” However, he said, such destructive behaviors and the underlying attitudes focused on price variance have changed markedly. “Unfortunately, it took a couple of really high-profile companies to go down, but now I’m starting to see significant change in customer base within the market, in terms of high-quality products vs. previously low-quality products. The approaching GMPs are also helping.”

Chang’s wisdom on the importance of building a culture and commitment to quality is, “Quality is the DNA behind your identity and brand. At the end of the day, it is how we define ourselves, as a company, as an industry.”

For Pontiakos, the little steps towards a quality culture could result in giant leaps: “If nothing else, if industry could change one metric and rate their suppliers on total ownership cost of quality, instead of purchase price variance, the quality and confidence problems in this industry would go away immediately.”

Editor's Note: INSIDER's Quality Control section is sponsored by Ethical Naturals; however, the company does not review or approve editorial content.