Impact of ISO 9000 on Business Performance

Impact of ISO 9000 on Business functioningIntroduction planetary Organisation for Standard (ISO) is base in Geneva. It is a worldwide body founded in 1946 to promote and develop the international beat and related activities to facilitate the exchange of goods and services nationwide (Randall, 1995). ISO inaugurated a technical committee on prize trouble and select assurance to develop a universally accepted set of smell standard. In 1987 ISO promulgated the ISO 9000 standard series on forest watchfulness and assurance based on the commendable work of the committee (Hoyle, 2006). These standards were also revised in 1994 and 2000 respectively, and the nigh recent called ISO 90002000 family of standard.Many writers commence come up with slightly(prenominal) but related definition of ISO 9000. Hoyle (2006) defined ISO 9000 asA criteria that apply to the management of an validation when determining customers needs and expectation and supplying product and services that be intended to satisfy those needs and expectations.Martinez-Costa et al.(2004) also defined ISO 9000 as an eruptletive form for the valuation of the power of an organisation to design produce, and deliver feature products and services consistently. Sun et al.(2004) also has it that the standard provides guideline for organisations for establishing of their lineament management systems by rivet on procedures, control, and documentation.The Science and Engineering policy Studies unit (SEPSU) came up with a more summarized definition for the ISO 9000 family of standard. ISO 9000 was defined as being about fiber systems and about consistency. It aims to give customers confidence in their suppliers by assuring them that the suppliers shed in place management processes that deliver consistency (SEPSU think over,1994).The sphere also state that IS0 9000 encourages but never in itself directly assures product calibre.From the above definitions, it could by deduced that ISO 9000 is only a criteria or process to be followed to achieve quality, and non the quality itself.Research chore and study purposeThe definition given by SEPSU study clearly explained the role of ISO 9000. Still, many issues remains unaddressed. Firstly, surveys has it that despite the fact that several organisations spend so much resources in obtaining software documentation of the ISO 9000 standard , there seems to be other motive for seeking the certification and which therefore influences the outcome of the their occupation (Gotzamani and Tsiotras,2002 Idris et al.,1996).There are organisations that seek certification just for market purposes (Hoyel, 2007), and near also consider it as path of continuous forward motion for the company (Stone,2003 Goetsch and Davis, 2005). However studies permit shown that customers prefer products from suppliers that are ISO 9000 informed (Taylor, 1995a Witcher, 1993). This means organisations are now forced to obtain certification in whatev er way possible. As a solution of these hurry for certification, the European Commissions Directorate for industry which is a steep profile regulatory group has questioned the impressiveness of the certification since many European firms are not sure if the certification rattling infuses quality into their organisations (Stratton, 1994).The purpose of this paper is to address the problem above by examining critically if the ISO 9000 standard does better business slaying or not, by testing the strength of the relationship between the ISO 9000 certification and organisational performance.Research Question and study objectivesISO 9000 is only a beginning it provides a appliance with which to bring about systematic remediatement but it does not mend performance byitself.Paying attention to the above statement made by Hoyle (1994) on the value of ISO 9000 certification and its diverse nature, the following questions go out be clearly investigated in this workDoes ISO 9000 certif ication have a significant positive effect on business performance?What is the organisational attitude towards ISO 9000 certification?Providing answers to these questions above will lead to a clearer understanding of the concussion of ISO 9000 certification on business/organisational performance. It will also guide to a realistic management expectation of business value of ISO 9000 certification in an organisation and the knowledge that gaining an ISO 9000 certification is noting similar to creating quality organisation.Research methodologyThis research seeks to review several(prenominal)what extant theoretical literatures and web-based sources on the impact of ISO 9000 on business performance. It is important to acknowledge that major researches on ISO 9000 have been conducted via postal questionnaire (Magd, 2003, 2004, 2008 Bhuiyan and Alam, 2005, Douglas et al., 2003 Batchelor, 1992) which is a more standard, practical approach and gives less room for bias.Literature reviewThe literature review identified quiet some articles that deals with impact of ISO 9000 on businesses in quality and reliability management studies. Despite the perceived do good of the ISO 9000 certification, only few studies have examined if ISO 9000 cognizant organisations do actually perform good than non-ISO 9000 certified organisations. These studies include Magd, 2008 Terziovski et al., 2003 leeward, 2003 Chow-chua 2003 Sun, 2000 Dick et al., 2002 Heras et al., 2002a etc.). Several papers associated with ISO 9000 are chiefly focused on the qualitative benefits associated with its certification, like communication and planetary understanding of the companys process, and not the quantitative benefits. Some literatures also focused on what to do to gain ISO certification.Perceived benefit of ISO 9000 certificationISO 9000 certification bodies such as the British Standards Institute (BSI), Lloyds Registers Quality Assurance (LRQA) and SGS, have claimed some benefit of ISO 9000 such asBringing recognition and reputation at the market place, change magnitude customers satisfaction, high profit margin (www.BSI-GLOBAL.com). Reduction in dotty, combative advantage, formalize management system (www.SGS.com).Magd (2008) listed some benefits like usefulness in documentation and improvement in efficiency of the quality system are among the top of the inning perceived benefits of ISO 9000 in an empirical survey conducted on the Egyptian manufacturing sector. In another investigating in a servicing company in the UK industries, Douglas et al. (2003) found that the main external benefit of the ISO 9000 was the higher perceived quality from the customers, and the main inwrought benefit being good documentation procedure. In another research carried out by chow-chua et al. (2003), highest numbers of respondents agreed that expansion in international market was the internal motive, and improvement in customer satisfaction as the external factor for seeking ISO 90 00 certification. However, an empirical study conducted by Heras et al (2002a) conclusively express that the major benefits sought from ISO 9000 is profit improvement (see Table i below for illustration). In another negative vein, in a study conducted in china involving 194 manufacturing and servicing sector, a good number of respondents expressed the view that ISO 9000 will not have direct effect on companies business performance (Dang, 2007). In fact Lima (2000) also supports this view. This variation in survey results only proves a point That the writ of execution and the impact of ISO 9000 standards vary from organisation to organisation and from body politic to country, these variation is as a result of the various organisational context and the level of the countries awareness of quality management practice ( Magd , 2004).ISO CertificationQuality management systemQuality improvementBusiness performanceProfitabilityCertified to ISO 9000 standardThe approved quality Managem entSystem brings an Increased emphasis on quality and how it may be achievedconsistentlyInternal Less waste and duplication of effortExternal quality received by customers improvesReduced beImproves CompetitivenessFewer customer defections so sales increase Badge of quality opens more sale opportunitiesCost of sales reducesleading to increased winnings Profitabilitybenefits from scaleeconomies and lower salesacquisition costDriving forces for seeking ISO 9000 certificationJuran (1995) has said that the main reason for an organisation seeking quality certification is maintenance or market expansion. In a survey by Madg (2008), the question was the deferent reasons for seeking of certification. These options were being limited to 14. The answer rate was 35 pct, (see Table ii next page). The participants were asked to rate the significance of these reasons on a five- point scale. In response to improve the efficiency of the quality system and to achieve customer satisfaction took the top position. However, improve employees relations and capturing workers knowledge came below the list.(Table ii) Driving forces for seeking ISO 90002000 certificationRANKDRIVING FORCESMSD1.2.3.4.5.6.7.8.9.10.11.12.13.14.To improve the efficiency quality of the quality systemTo achieve customer satisfactionPressure from competitors/foreign partnersTo maintain/increase market shears stay off potential export barrierTo meet government demands, requirements or pressureTo achieve quality improvementTo market product in the international compassTo use ISO as a marketing promotion toolTo be a step towards TQMTo achieve cost reductionTo meet corporate objectivesTo improve employees relationCapturing workers knowledge4.714.684.644.624.604.563.713.643.473.293.192.242.172.140.420.480.490.500.570.601.021.101.421.301.271.201.181.09NOTE The Mean score is based on participants level of agreement with each statement on a scale of 1 = powerfully disagree to 5 = Strongly agree a mean score above 4 indicates high, between 3 and 4 indicates moderate and a score of less than 3 indicates a low level of agreement SD = Standard Deviation.Another good example is the Science and Engineering Policy Studies Unit in the UK (SEPSU study,1994).This study took 28 survey on many different issues among these were the same as Magd (2008), reasons organisations seek certification and the effectiveness of the certification. There appears to be a motive some managers adopt certification. The commonly cited driving force for seeking ISO 9000 however, was customer pressure. This, therefore, results in less improvement in organisational performance (Park et al., 2007 Singles et al., 2001). The problem with this type of analytic thinking is that it lacks the strength to show the relationship between ISO 9000 certification and organisational performance .However, it gives some useful results.Business value of ISO 9000A more all-round(prenominal) empirical survey on quality practice is the external quality study (American Quality Foundation,1991).The study surveyed 500 banking, computer, automobile ,and health care organisations in Japan, Canada, USA, and Germany. The result of this survey was that some quality practices, close especially supplier certificate and process improvement which is aided by ISO 9000 indeed have some significant effect on performance. (Prubhu et al., 2000) also supports this fact.Similarly, a study in Australia by the Australian Manufacturing council (AMC study, 1994) whose approach was to analyze the methods and approach used by the Australian and New Zealand manufacturing organisations in quality management practice. The result was that more than 50 percent of the ISO 9000 certified firms agreed that ISO 9000 certification was a significant factor in the improvement of their business performance. Managers of certified firms has therefore agreed that certification increases customer perception of product quality, and such perception can often be ef fective in wining new customers (Cermen Escanciano et al.,2001). Firms are been advised in the AMC study ( 1994) that certification is not a substitute for quality product and services. The AMAC study has been criticized for its data analysis methodology (Terziovski et al.,1997).Organisations can achieve certification but still produce a curt quality product (Zuckerman, 1997 Hertz 1997). Furthermore, certification could cause managers to have a self-satisfied attitude towards quality. There is this risk of also bringing in some poor practices through the certification process. It will be the outstrip practice if organisations could set a quality standard for themselves well above the minimum being outlined by ISO 9000, and also seek ways to improve (Terziovski et al., 2003).Batchelor (1992) surveyed 647 certified manufacturing and service companies in the United Kingdom, and discovered that 15 percent of the respondents that participated thought they had gained business value on n ine dimensions of organisational performance, which include customer satisfaction, waste and cost, market share, new customers, procedural efficiency, mental faculty motivation, staff attitudes, and error rate.A quite impressive body in management and quality literatures has pointed out that the major reason backing organisations decision to adopt ISO 9000 system is due to perceived marketing benefits (Lloyds Register, 1993). A survey carried out by Sun (1999) did some remarkable investigations on ISO 9000 certified firms in no.way. The survey reveals that ISO 9000 and quality are correlated. This was known to be in respect of the reduction of customer complaints, defects, and improvement of business performance in productivity and profitability. Supporting these facts Heras et al.(2001) reported that organisations that has implemented ISO 9000 standard have successfully been able to project themselves to achieve continuous improvement, competitive advantage, and are better-run or ganisation. Zairi and Baidoun (2003) also supports this fact.Magd (2003) in another study conducted at Saudi Arabia involving 140 ISO 9000 certified manufacturing firms. Using a questionnaire as a means of primary coil data collection, this relied on the use of five-point likert scale. The study suggested 20 possible benefit of ISO 9000 of which the respondents were asked to rate the extent to which ISO 9000 tinct these elements. These rating were to be from crucial effect to no effect. From the results of the survey, improvement in efficiency of the quality system, increased quality awareness in the firms, improvement in customer service, and increase in quality of product was seen as of benefits ISO 9000 certification among the Egyptian manufacturing companies.McAdam and canning (2001) in another assessment of the impact of ISO 9000 on the performance decided to focus his study on the grammatical construction construction companies in nothern Ireland. The methodology used was t o conduct a semi interview with six surveying practitioners on their view on ISO 9000.This determination obtained was then used to develop and structure a questionnaire towards the study purpose. Out of about 66 questionnaires posted, 52 usable ones were returned. The result was that ISO 9000 certified firms indicated some internal benefit in varying degree. 35 percent agreed that they have improvements in management systems, 24 percent had improved service quality, 12 percent agreed they had developed clearer communication, and 6 percent of the respondents believed that ISO 9000 increases profit ratio. In summary, this research brings to light that majority of the respondents share the view that ISO 9000 has a significant impact on business performance, because of there is more benefit as compared to the demerits.In a survey conducted by Douglas et al.(2003) questionnaires were being forwarded to 200 quality managers/representatives in UK industries. Among these 200, long hundred were from the service sectors while 80 were from the manufacturing sector. The simple task was for them to indicate the financial benefit of the ISO 9000. 104 usable questionnaires were received. 53 percent claimed they dont perceive any benefit with regards to staff motivation. 45 percent of the respondents said that their organisation did not achieve any benefit with regards to cost and waste reduction. Despite the contradictory figures a whopping 75 percent believe ISO 9000 to be a good value for money. This reaction may likely be in connection with the fact that they now gained the ability to tender for contracts previously not realistic.Another investigation was carried out by Musa et al (2003) which involves a different approach altogether. This survey compared the performance of ISO 9000 certified and non-certified Turkish firms by using their crinkle market returns. The list of the monthly returnes of these firms was gotten from the Istanbul Stock Exchange ISE (2001) market of Turkey from January 1977 to December 2000.One hundred and three (103) of these firms are ISO 9000 certified while one hundred and seventeen (117) where non-satisfied. Based on the objective of the research, two main hypotheses were madeH1 ISO 9000 certified firms have higher stock market returns than non-ISO 9000 certified firmsH2 ISO 9000 certified firms have lower variability.This type of analysis of using the stock market returns of firms has some limitation since limited number of companies readiness meet the criteria to be listed in the stock market. Also the survey was measuring only the exports excluding the regional returns in this analysis.Considering the literature review so far, it appears that some managers have failed to distinguish conformance from performance. This is because they have not yet understood the primary role of ISO 9000 certification.ISO 9000 is a conformance specification that shows that the company has a system which is undefendable of giving a quality goods and services (Teziovski et al. 1997). The willingness of the management and the employees to use and accept the standard in their day to day activities also depends on this capacity. Askey and Dale (1994) has it that managers tend to vary from the original practices after gaining ISO 9000 certification, which often result in managers engaging their workforce in preventive actions, after much damage has been done already (Brown, 1994). Performance specification on the other hand falls on the tools and techniques, and requires the employees to use the certification process as part of improvement initiative (Allan, 1993). The major problem that emerges from the review is the managers perception of the ISO certification as the answer rather than a tool to an answer. There is a general view in the literature that certification is a potential path to summarize Quality Management (Sun, 2000).Barrier to ISO 9000 effective implementationSome assessments were performed to ident ify the perceived barriers that might add to the inefficient implementation of ISO 9000 in Egyptian manufacturing organisations by Magd (2008). Some numbers of barriers were extracted to perform this study. The respondents were being required to rate these barriers on a five point scale. From strongly disagree=1 to strongly agree=5. As explained in the research there was consecutive agreement among the Egyptians manufacturer that top management commitment, lack of serve personnel, insufficient quality education and training, lack of financial resources, and failure to define responsibility were among the top barriers for an effective implementation for ISO 9000. Top management commitment was the most important barrier because if an organisation is lagging in management commitment, the employees do not tend to prioritize the quality management system, which will therefore affect the implementation of the quality management (Lee, 2004 Magd, 2003 Bhuiyan and Alam, 2005). Boiral and M arie-Josee (2007) made it clear that lack of managers and employers commitment, difficulty in understanding the quality management system, meeting and system development, time intricate in training and difficulty in overcoming the communication barriers are common factors against the implementation of ISO 9000 standard. Another similar study conducted in Singapore by Quazi and Padibjo (1998) explained that high cost of implementation, extra effort in documentation, shortage of manpower, resistance at supervisory levels, lack of management commitment and employee resistance to change are among the top barriers. These finding should be a significant factor to stakeholders in a business. The barrier to be eliminated can easily be identified so that the standard could be implemented effectively.Criticism of ISO 9000 certificationSeddon (1997a) a strong critic of ISO 9000 expresses the view that a number of operations that are associated with ISO 9000 are actually not fully optimized wi thin the work place. According to Douglas et al. (2003) the view of some critics of ISO 9000 is that some organisations whose objective was TQM ( match Quality Management), implementing ISO 9000 took them away from achieving that objective. The issue of cost of registration and implementation has also been stressed (Dick, 2000), in that the costs are greater than the desired benefit.(Douglas et al.,2003) in their survey asked participants to indicate a five-point scale the extent they agree with some statement against ISO 9000 (See table iii). From the survey, 53 percent of the respondents did disagree with Gotzamani and Tsiotras (2001) on the view that ISO 9000 sub-optimize performance in a workplace. On the argument about continuous improvement, Lee (2004) argued that 1SO 9000 only introduces improvement through prevention and correction of non performance. These critics has argued that achieving ISO 9000 certification does not mean quality as organisation may still be certified a nd still give poor quality output. The consistency and the role of the assessors of this standard have been questioned by previous researches (Killman and Stanford, 1996).CriticismStronglydisagreeDisagree incompleteAgreeStronglyagreeISO 9000 promotes action which results in sub-optimization of performance.ISO 9000 a step backwards in the guess of TQM.ISO 9000 relies too heavily on other, in item assessors interpretation of quality.ISO 9000 can only be effective if accompanied by a culture change.It is easy to be ISO 9000 certified yet produce poor quality output.ISO 9000 will only control output quality is about improving output.121480195365448193527192214920922354543300324184FindingsFrom the random-sample carried out in this research, it will be practical to conclude that quality studies have been able to identify two main sections of which quality impacts business performance In terms of manufacturing aspect which involves the increase in employee quality awareness, improve in in ternal quality process, reduction in production cost and increased productivity, reduces defect and wastage, improves operational performance. Marketing aspects where it increases costumers satisfaction, and market performance, and ability to tender for business. It also exposed how companies clutch for ISO 9000 certification as if it was a remedy for their quality control problem.Limitations of the studySeveral limitation of this study must be mentioned. In contrast to previous studies, which used survey, questionnaires and average monthly stock market returns of the organisations to examine their performance, which is wide, more stable, consistent and provides less room for bias or error. This study is based on collection of secondary data on the impact of ISO 9000 in business performance.Conclusions and RecommendationsThis work did analyze the result of implementing the ISO 9000 standard in business. From the opinions of researches reviewed in this paper it is of no doubt that th e implementation of these standards has an effect on organisational performance. There is a very high consensus regard to the influence of ISO 9000 on a companys results, mainly through operation improvement, and the cost of companies internal activities.Despite the numbers of surveys on the impact of ISO 9000 on business, this review identified that few surveys have focused on Africa. Further researches should be focused on these developing countries because it is on this basis the general impact of ISO 9000 can be determined.ReferencesAllan, M.J. (1993), Implementation of ISO 9001/2 in bear-sized Australian manufactures,unpublished Research Project, Melbourne Business School, University of Melbourne,Melbourne.Australian Manufacturing Council Study, leading the way A study of Best Manufacturing Practices in Australia and New Zealand, 1994, pp.59-63.Askey, J.M. and Dale B.G, (1994 )From ISO 9000 Series Registration to Total Quality Management An Examination, Quality Management Jour nal, pp.67-76.Batchelor, K. ( 1992 ), Badge of quality, Financial Times, September. 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