Chris Amponsah, Anne DeClouette, Dwight Dew, Elizabeth Pogue and Clint Wilson
Standards play a critical role in our lives every day. Without standards, quality would suffer, safety would be jeopardized, and efficiencies would not be realized. Organizations need standards to communicate, and to conduct business.
To promote standardization worldwide, the International Organization for Standardization (ISO) developed standards, so that a common international standard for documentation of quality systems could be applied regardless of culture. ISO standards can be adapted and applied to many different industries because of the broad construct of generically written standards (Foster, 2004).
In 1987, ISO adopted ISO 9000 as an international standard. Ever since, business analysts and other observers have debated whether it is an "effective" standard and worth pursuing. We believe it is.
A Little Background
The ISO 9000 standard originated from the United Kingdom Standard BS 5750 and focused on conformance with procedures. Subsequent revisions in 1994 emphasized quality assurance, and the 2000 version brought the concept of process management to the forefront. The ISO considered ISO 9000 so effective, it "embarked on developing an international standard for environmental compliance called ISO 14000" (Foster, 2004, 92).
As of December 31, 2006, ISO had developed 16,455 international standards in nine sectors based on the International Classification for Standards (ICS). The standards represent a total output of 620,768 pages. The technical sectors include:
(ISO Figures, 2007).
ISO 9000 is built on eight quality management principles:
(ISO 9000 Basics, 2007).
These principles are used by leaders to guide organizations toward improved performance.
The benefits of ISO 9000 are not confined to the business sector alone, but benefit society as a whole, including customers, governments, trade officials, developing countries, consumers, and the environment. Standardization allows businesses the opportunity to compete in markets around the world. This enables more competition, which results in more choices for customers. Standards also help developing countries compete in international markets without investing scarce resources on research and development. Consumers benefit from products or services consistently manufactured to agreed-upon levels of safety and quality. And the environment benefits through the establishment of controls to insure the quality of air, water, soil, and emissions (ISO 9000 Basics, 2007).
ISO: A Broad Look at its Importance
The most general justification for ISO is the fact that it is an internationally developed set of standards (Nelson and Daniels, 2007). This indicates broad inputs and applications suitable for enterprises across the globe. The standards are rigid by nature, given the long consensus process needed to create or modify them. With the increasing globalization of world markets, international standards become more appropriate. Rao, Ragu-Nathan, and Solis (1997) noted the increased global interest a decade ago. Martínez-Costa and Martínez-Lorente (2003), who focused on Spanish companies, more recently noted the global nature of certifications and growth in registrations is becoming increasingly non-European. And Quazi et al. (2002) recognized the same trend in increasing registrations by Asian companies.
The process for becoming certified is long, and requires total introspection on the part of the applicant. Companies are required to comprehensively document, and strictly comply with, the quality system in place (Reiman and Henry, 1996; Quazi et al., 2002). Therefore, the focus of becoming registered is to assure the organization's internal conformity with its own documented procedures.
The beauty of the ISO 9000 concept is its objectivity. The registration process culminates in a third-party audit of international standards that lends credibility to the certification. An independent organization, called a registrar, measures the company against the ISO 9000 standard that is accepted globally as the defining set of quality management system requirements. As a result, what could otherwise be viewed as a self-serving marketing claim becomes a third-party endorsement that is respected in the marketplace as being totally objective. This independent evaluation assures existing and respective customers that an effective quality management system is in place (Hutchins, 1997).
What Scholars Say
Some scholars (McAdam and McKeown, 1999; Martínez-Costa and Martínez-Lorente, 2003) have suggested that the motivations for implementing ISO 9000 are an important factor in effectiveness. Externally driven ISO 9000 pursuits are frequently done as a requirement for getting business. When initiated internally, however, rather than as a response to external pressures, companies tend to view ISO 9000 registration as just the beginning of a quality journey (McAdam and McKeown, 1999; Renuka and Venkateshwara, 2006). Seeing ISO certification as a beginning is consistent with the observation by Rao et al. (1997) that other nationally and internationally recognized standards, such as BSI, Kitermark, and Underwriters Laboratories, use ISO 9000 as a baseline requirement. ISO 9000 is therefore effective because it serves can be a foundation for other certifications.
Quazi et al. (2002) noted that proponents of ISO 9000 certification cite benefits such as "having the ability to improve product or service quality, efficiency and productivity, customer confidence, and competitive advantage" as well as "better control of business, increased sales/business, reduced costs, increased productivity and fewer customer complaints" (p. 54). McAdam and McKeown (1999) similarly stressed better control, lower costs, and fewer customer complaints. Elmuti and Kathawala (1997, as cited in Renuka and Venkateshwara, 2006) echoed the theme of higher productivity and asserted that ISO 9000 certification sparks increased export sales as well. Rao et al. (1997) concurred, and also discussed "consistency" as a benefit, and highlighted the comprehensive nature of the standards, which cover everything from initial product design to post-delivery customer service. Quazi and Padibjo (1998, as cited in Renuka and Venkateshwara, 2006) reported other, more intrinsic effects of certification, such as "improved quality of work life … improved company image and competitiveness in the marketplace, streamlined procedures and documentation; and increased consciousness for preventive and corrective actions" (p. 45).
Chow-Chua, Goh and Wan (2003) noted that most companies have experienced an increase in overall sales after ISO 9000 certification. They further noted that ISO 9000-certified companies attained better rates of return and the additional benefits of better documentation, greater quality awareness among employees, better internal communication, and an increase in operational awareness. All of these factors sharpen a company's competitive edge. ISO 9000 certification allows a company to have better internal processes through clearer working procedures, better bottom line profitability, and stronger exports from expansion into international markets. Fuller & Vertinsky (2006) reached a similar conclusion that ISO 9000-certified companies engaged in software engineering achieved increased profitability.
Effectiveness Based on Size
There's a well-documented difference in ISO 9000 certification benefits reaped by small and large companies (McAdam and McKeown, 1999; Martínez-Costa and Martínez-Lorente, 2003; Renuka and Venkateshwara, 2006). Large companies, for example, tend to enjoy a boost in stock price upon announcing they are pursuing certification. The marketplace believes that such an announcement is a harbinger of improved future revenues for the companies involved due to improved quality, which leads to reduced fixed costs, reduced variable-support costs that increase as sales volume increases, and increased revenues from sales. (Fuller & Vertinsky, 2006).
Smaller companies are less likely to automatically reap these benefits. It's more difficult for customers in the business-to-business market to ascertain if a small company is well-run. But while smaller companies may not get the automatic bioost in status from ISO 9000 certfifiation enjoyed by larger companies, they can still leverage certifrication to prove to the world they have greater control of their business. Renuka and Venkateshwara (2006) specifically cited benefits to small companies which have achieved certification: They were more technologically advanced than their peers, and were more likely to have implemented standard training/development and human resource management practices.
"Standing Out" While Conforming
While standardization is important for companies, so is product differentiation -- making a product that stands out from the crowd. While external standards, such as those described by ISO 9000, are rigid, internal company standards need to be flexible and dynamic. Companies that are most successful at creating and sustaining competitive advantage are those that maintain continuously renewing internal standards.
But it's not enough merely to have these advantages: Companies must communicate their advantages to other businesses, or the company will not prosper. Standardization through the ISO certification process allows an organization to communicate with other businesses, through a "common language," even as its own internal processes are changing.
Improvements Across The Board
Ultimately, results are what matter. Does being ISO 9000-certified actually result in improved product quality? Rao, et al. (1997) studied companies in four countries to test the link between ISO 9000 registration and quality; the study found that certified companies had significantly higher scores on measures of the eight quality constructs: leadership, information and analysis, strategic quality planning, human resource development, quality assurance, supplier relationships, customer orientation, and quality results.
Our Conclusion: ISO 9000 is Effective
For these reasons, we conclude that ISO 9000 appears to be an effective means of identifying companies that truly embrace quality standards.