Evaluating the ISO 9001

THE IMPACT OF IMPLEMENTATION OF ISO 9000 ON BUSINESS PERFORMANCE

Abstract

This research work is intended to evaluate the ISO 9001:2008 Quality Management System Standard, by going into its historical perspective, its dimensions in meeting quality management objectives and effectiveness in its operation internationally.

The standard is generic in nature and can be applied to any kind or organisation in manufacture/production, services or a combination of these. It is founded on eight quality management principles that are respectively, customer focus, leadership, involvement of people, process approach, systems approach to management, continual improvement, factual approach to decision making and mutually beneficial supplier relationships. Application of these principles can lead an organisation to maintain sustainable business performance in a highly competitive business environment, benefiting the organisation, customers and other stakeholders.

Implementation of the quality management system as per ISO 9001:2008 entails the following steps:

* Nominating a leader for implementing the project

* Formulating Quality Policy and Objectives

* Providing appropriate training for all employees

* Conducting gap analysis of the organisation’s system vis-à-vis the Requirements in the standard

* Filling the identified gaps through introduction of new procedures and new records.

* Preparing Quality manual and documentation required at different levels.

* Conducting internal audits and management reviews

* Arranging Third Party Audit if certification is intended.

There are differing opinions about the outcome of operational benefits of implementation of the system. Generally, benefits accrue to the organisation if the management is committed and do all what are necessary to involve managers and employees. There is a criticism that many organisations implement quality management systems out of external compulsions such as stipulation from customers or regulatory authorities. It is possible that internal commitment in such cases will be low. If that is the case, the benefits of implementation may be marginal.

The ISO standards are voluntary and are internationally popular. These are followed in 175 countries in the world. The number of certifications on ISO 9001 is steadily growing. Organisations desirous of satisfying customers and achieving continual improvements should implement the system.

Design/ methodology

This research work aims to scan only published information on the subject of ISO 9001: 2008 standards. This will include the historical perspective of quality management, development of the international standards, the management principles built into the standards, implementation of ISO 9001: 2008 in an organisation and its effect on business performance besides the international acceptance of the ISO standard.

There are books exclusively dealing with quality management, and the subject is covered in general in other management books such as operations management. The historical perspectives are expected to be obtained from these books as well as from the website of the International Organization for Standardization.

There are popular Journals that are devoted on specialised subjects such as the International Journal of Productivity and Performance Management, Quality management etc. These journals contain a number of research papers relating to implementation of ISO 9000 and the findings of scholars on organisational performance.

It is expected that the secondary data will adequately support the research objectives.

Findings

ISO 9001: 2008 is the latest version of the international standard on quality management. Quality management standards initially released in 1987 and its subsequent revision in 1994 were focused on quality assurance without particular focus on customers. Revision made in 2000 and revision in 2008 focuses on customers and includes relevant TQM principles.

There are organisations implementing ISO 9001 out of earnestness for continual improvements and there are others implementing it for obtaining certification status to “signal” customers or for meeting regulatory requirements. The study concludes that those who implement the standards with an internal will, fully involving managers and employees will be benefited and those who implement out external pressures or other extraneous reasons, gain only marginally.

The ISO 9001 standards are popular worldwide and the number of certifications is growing steadily.

Originality value

The researcher does not claim any new findings, as the study has been based on information already in public domain. The publication will have its own value due to its exclusive assemblage of ideas. This will be interesting for readers who want to get a composite exposure to ISO 9001: 2000 standards as this publication provides many ideas in one place.

Key words

Business performance, Customer focus, Customer satisfaction, Continual improvement

ISO 9000, ISO 9001, ISO 9005, Product realization, Quality management, Quality Manual, Quality Policy, Quality objectives, Resource Management, Systems approach.

Introduction

It is the post World-War II business scenario that led organisations to recognise the cost of bad quality, and initiate the movement for improving quality of products and services to compete with international players. Across-the-border business, forced those who enjoyed a protected domestic market to either do or die. Consequently, companies started recognising the importance of adopting TQM for improved overall performance.

The first ISO 9000 Quality Management System Standard was introduced by the International Organization for Standardization in 1987. It is understood that this was a modified version of the then existed British standard BS 5750.The first set of standards released in 1987 for Certification, comprises ISO 9001, ISO 9002 and ISO 9003. These were revised in 1994. The latter two standards were discontinued when updated in 2000 and in 2008, retaining only ISO 9001 with provisions for exclusions to suit those categories of organisations covered by the earlier standards of ISO 9002 and 9003.

It has been mentioned in management books that there are two approaches to building a system. These are “building a system out of parts (the analytic approach)” and “building parts for a system (the holistic approach).” Hanna Mark D. and Rocky Newman W. in their book on operations management, 1 state that firms implementing TQM should take advantage of both the approaches. The authors narrate the experience of Ford Motor Company during the late 1970s to early 1980s about its decision to make own Transmission systems by “cloning” the Mazda Transmission plant

1 Hanna Mark, D & Newman, Rocky,W., 2001. Operations Management (p.185)

to partly substitute the system outsourced to Mazda. The Ford-built Transmission systems were found to cost much higher in meeting warranty related obligations. In other words the quality costs of Ford-made systems turned out to be higher.

It is explained that the American employees defined a quality part as “one that was built to specifications.” The authors report that, when Ford employees were asked as to where the specifications came from, “employees pointed to the process engineers.” The process engineers stated that these came from the product engineers. The product engineers believed that making a specification more precise would raise quality, but at a higher manufacturing cost and therefore they wrote specifications compromising between acceptability and cost. Ford’s engineers later found that though Mazda’s parts were four times likely to deviate from specifications, “there was much less variability form part to part.” The holistic thinking of the Mazda workers appeared to be the primary reason for superior performance.

ISO 9001: 2008 quality management systems 2 is intended enable organisations to deliver quality products or services while continually improving and enhancing customer satisfaction. The standard is structured to adopt the “Process approach,” and is based on eight principles described in the publication that stands updated as ISO 9000 (2005) 3. These are well understood TQM principles.

This research intends to go analytically into the eight principles mentioned above and to study its contributions to the management system.

2 ISO 9001:2008, Quality management systems- Requirements

3 ISO 9000:2005, Quality management systems- Fundamentals and vocabulary

Research Objectives

This research work has been planned to study:

(1) Principles behind the Requirements in the standard ISO 9001: 2008

(2) Implementation of ISO 9001: 2008 in organisations.

(3) Attitudes of business establishments towards implementation of ISO 9001: 2008 and its outcome on business performance

(4) Attitude of countries towards ISO 9000.

Research Design/ Methodology

This assignment has been planned to rely on secondary data on various aspects of Quality Management and related information contained in publications. This will include books, Journals, publications of the International Organization for Standardization including information available on its website and secondary data on the subject displayed by others for commercial purposes on the Web.

Literature Review

There are books exclusively dealing with Quality Management. There are other books that cover limited but relevant aspects on quality such as contained in general books on management. It is expected that these books will provide adequate information.

Several publications such as standards and supporting publications are available from the International Organization for Standardization. The subject of Quality Management and ISO 9000 are also covered in popular journals and it is intended to scan such journals. More sources will be identified during progressive stages of research. The initial sources identified for this research are listed below:

BOOKS

(1) ISO 9000: The Year 2000 and Beyond.3rd ed. (2000) by Perry L. Johnson

This book covers the history of Quality movement and all aspects relating to the ISO standard in terms of requirements with explanatory notes, details of implementation, Third Party certification and benefits of operation of the system.

(2) Encyclopaedia of Total Quality Management by Joel E. Ross (1995)

This publication is very comprehensive, covering all aspects of Quality Management such as TQM, ISO 9000 and popular systems, tools and techniques that are applied currently.

(3) Operations Management by Mark, D. Hanna & Rocky W. Newman (2001)

Chapter 5 in this book covers Total Quality Management and chapter 6 covers Quality Improvement Tools. Chapter 5 deals with TQM in general and gives details about ISO 9000, Quality Awards etc.

(4) ISO 9001: 2000 Quality Management System Design by Jay Schlickman (2003)

This book exhaustively covers all aspects of Quality Management and ISO 9001: 2000 in particular.

(5) Total Quality 3rd ed. by Vincent K. Omachonu & Joel E. Ross (2004)

This book is devoted to Quality and it covers relevant aspects including ISO 9000.

(6) ISO 9000 (2005): Quality Management Systems- Fundamentals and Vocabulary

This publication explains the concepts employed in ISO 9000. This will support the analysis part of this research as this forms the basis for the ISO 9001: 2008 standard.

(7) ISO 9001: 2008: Quality Management Systems- Requirements

The requirements of the standard for implementation of the system are covered in this standard. This is a very important publication for this research.

JOURNALS

Journal articles appeared in relating to the subject have been identified for this research. Information contained in these articles to the extent these support the research will be used. The identified Journals are given below:

· The Quality Management Journal

* Journal of Operations Management,

* International Journal of Productivity and Performance Management

* Quantitative Finance and Accounting

* Journal of Manufacturing Technology Management.

· Benchmarking.

Research Findings:General

Principles of quality management

Edward W. Deming, an American statistician was recognised as a guru on the subject of quality management, starting from his role in the Japanese industry in the latter’s pursuit for quality improvement in the 1950s. Deming’s model known as PDSA or PDCA is the basis for today’s quality management, although many experts have improvised these into other models.

Source: Schmoker Michael J., Wilson Richard B. p.17

There are four steps in PDSA. These are respectively Plan, Do, Study and Act.4 Developing a plan for a making product or for providing a service based on available data or information is the first step. The second step is to “Do” in the way it was planned. The third step is to “Study” (or check) the result to find whether the product or 4 Schmoker Michael J., Wilson Richard B., 1993. Total Quality Education: Profiles of Schools that Demonstrate the Power of Deming’s Management Principles. p.17 service achieved the planned attributes. The fourth stage provides for finding out the causes of deviations (if taken place) from planned results to modify the plan for subsequent cycles.

J.M. Juran, another American quality expert, proposed the Financial and Quality Triologies which cover “planning, control and improvement.” The Financial Triology while said to succeed in some cases has its own limitations.5 Quality experts generally agreed that they need to address more organizational segments in the system, particularly customer satisfaction.

Total Quality Management

Total Quality Management (TQM) is an accepted approach to improve quality and achieve customer satisfaction. Deming, in his book “Out of the Crisis,” 6 had set out 14 points for the US industry to practise to regain lost competitiveness. When Deming brought up these points, he was criticized for “putting forward a set of goals without providing any tools for managers to use to reach those goals.” 7 Nevertheless most of these principles have been adopted later.

A functional model of a quality management system taken from Schlickman Jay 8 is given in 2.

5 Gupta Praveen, 2004. Six Sigma Business Scorecard: Ensuring Performance for Profit. p.5.

6 Deming W. Edward, 2000.Out of the Crisis. pp.23, 24

7 Cohen Phil. “n.d.” Deming’s 14 points. [online]

8 Schlickman Jay .2003.ISO 9001:2000 Quality Management System Design.p.4.

General findings about the standard Scope and application of ISO 9001:2008

The standard can be applied to all types of organisations irrespective of type, size or nature of the product, as the requirements in the standard are generic in nature.

An organisation has the freedom to implement the requirements in the standard “for internal and external benefits.” It is also open to the organisation to decide on whether or not they seek certification. 9

The Process approach adopted in ISO 9001:2008.

There are numerous processes and sub-processes in an organisation operated by functional and cross functional groups. In order to “do it right the first time” and “do

9 ISO Survey of Certifications (The). (2007) p.5. [Internet]

the right things right,” processes should be managed effectively.10 Process management becomes effective, if processes are clearly defined and the right resources and controls are applied. Arbitrariness can creep into any process if process activities are not clearly defined.

The publication of ISO 9000: 2005 gives a model of the process approach by considering the requirements in the standard as comprising four processes within the organisation, each process receiving input from an internal customer (within the organisation) or external customer. 3 gives the model of the process-based quality management system envisaged in the standard.

10 OR [Omachonu Vincent K., Ross Joel E.], 2004.Principles of Total Quality. p.225

While there are several processes and sub-processes in an organisation, the above model represents the requirements in the standard grouped into four processes. These are respectively management responsibility, resource management, product realisation and measurement, analysis and improvement.

Principles forming the basis of the standard ISO 9000: 2005 lists out eight principles that have been incorporated in the standard. These are serially studied and analysed in the following sections:

(1) Customer focus

ISO 9000: 2005 (Cl.0.2. p.ii) states that organisations should “understand current and future customer needs” and “strive to exceed customer expectations.” Hill Charles W.L. and Jones Gareth R 11 observes that “a company must give customers what they want, when they want it and at a price they are willing to pay- so long as the company’s long term profitability is not compromised in the process.” The authors mentioned this to highlight the importance of achieving superior responsiveness from customers. According to OR (11 Ibid.p.142), motivating the whole company to focus on the customer should be the first step. The means for this are “demonstrating leadership, shaping employee attitudes and using mechanisms for bringing customers to the company.”

It is said that customer satisfaction is the result of a three part system that comprises (1) company processes, (2) company employees and (3) consistency of product or service to customer expectations (11 Ibid. p.208).The effectiveness of the system is a function of how well these three factors are integrated.”

11 Hill Charles W.L., Jones Gareth R.( 2004) Strategic Management. An Integrated Approach.p.142.

(2) Leadership

Defining Leadership is not as simple as it may appear to a common man. Northhouse Peter G., in his book 12 cites Stogdill (1974) to convey that “there are almost as many different definitions of leadership as there are people who have tried to define it.” The meaning in this case is to be understood in the context of the kinds of leadership required in organisations that require management and motivating skills to bring up cultural changes.

Drummond Graeme., and Ensor John, 13observes that the “role of the leader is to get the best out of people and deal with the unexpected,” and “this is achieved by creating an environment where actions can take place.” The authors cite Adair (1984) to identify the following leadership needs:

1. Task needs- aiming to complete the project

2. Group needs- developing team spirit and morale

3. Individual needs- harmonising the above with the needs of the individual.

The leader will “emphasize” task, group or individual needs depending on circumstances for accomplishing the objective. The above is diagrammatically presented 4.

12 Northhouse Peter G., 2003. Leadership: Theory and Practice 3rd ed.

13 Drummond Graeme, Ensor John, 2001. Strategic Marketing: Planning and Control.2nd ed.p.252

(3) Involvement of people.

Involving personnel who are closest to the processes in decision making activities can bring better results, because it is they who are in the better know of things happening in their work environment and better placed to bring ideas for solving problems or for making improvements in processes or products. Improvements may be in the form of reduction in cycle time, reduction in cost, increase in throughput or in the form of decreasing the variations within the processes.

HR policies in the company should be oriented to optimally improve employee involvement. As a basic step the wants and needs of employees have to be recognised.

These can be achieved by motivating and appropriately empowering them to take their own decisions. Involvement can be improved by better communication with the workforce on customer requirements, communication of company’s policies and objectives, providing training to update and improve job knowledge etc.

(4) Process approach

A process transforms inputs to outputs (ISO 9005: 2005.p.7). For the process to achieve the desired results, appropriate resources and controls are necessary. A holistic approach is required to get optimum results in terms of quality and cost, which means that the entire resources of functional teams should work with the common defined objective, without individual functions applying their own norms. The example of Ford Motor Company given in the introductory part of this research paper reveals the reported failure of the company to adopt a holistic approach. The process approach requires clearly defined roles of employees with a defined agenda and clear understanding of organisational policies and customer requirements.

(5) Systems approach to management

An organisation creates value for its customers. The contributions to value addition come from different functional groups. Value creation or addition also takes place in the entire supply chain. Therefore the organisation will be able to add value by facilitating the links in the supply chain as well. OR (10.Ibid.p.163) gives the example of Wal-Mart deriving advantage from the entire supply chain by using a “sophisticated computer-based information system that improved the output of many other activities such as distribution, purchasing and warehousing.” The systems approach uses benchmarking and data analysis to improve quality of products and services through various means.

(6) Continual improvement

Any organisation will require continual improvement for sustaining business in a highly competitive environment. Therefore this has to be a permanent objective. It calls for aligning activities of the organisation with organisational plan and making employees aware of the plans, providing training for them to realize that it is everybody’s business. Benchmarking performance indices and communicating these to all and motivating them to achieve the set goals leads to continual improvements.

(7) Factual approach to decision making

A system generates data and this data requires to be transformed into useful information. This is possible through systematic analysis of these data. Effective decisions can be made by use of analysed data. Data and information should be maintained in a readily retrievable form to take correct decisions.

(8) Mutually Beneficial Supplier Relationships

An organisation and its suppliers are interdependent. If the relationship is maintained on a continuing basis the potential available with the suppliers can be fully exploited. Product improvement can take place from the initiatives of either side.

Implementation of ISO 90012008 in Organisations

The method of implementation of the system in an organisation venturing for the first time will involve the following steps as paraphrased from a document retrieved from Internet. 14

The proposal is to be considered a new project and resources have to be identified and earmarked for implementation. First a senior member of the management has to be placed as “Management Representative,” with responsibilities as described in clause 5.5.2 of the standard, that include developing implementing and maintaining the system. A steering committee comprising members from different functions should be constituted to work as a team for implementation of the project. The Management Representative is to be formally trained to take up the responsibilities. Other members and employees in general will require awareness training. This shall be arranged.

The organisation has to formulate its Quality Policy as per requirements given in section 5.3 of the standard and measurable objectives originating from the policy have also to be identified as given in clause 5.4.1.

The documentation requirements as given section 4.2 in the standard include:

* A Quality Manual addressing all the requirements in the standard.

* Procedures stated as essential in the standard besides procedures considered necessary by the organisation.

* Records to evidence effective operation of the standard.

The documentation hierarchy and guidance on preparation is available in ISO 10013. 15 Section 4.2.3 and 4.2.4 in the ISO 9001:2008 standard defines the controls prescribed for documents and records. Documents provide information for performing work and records evidence the performance of work.

Section 8.2.2 of the standard prescribes Internal Quality Audits. Trained personnel are required for this. Nominating Auditor candidates and training them also forms part of the implementation project. Auditors can derive guidance form ISO 19011.16

Once the documents and records are in place, internal audits shall be performed according to a plan. Audit findings call for corrective and/or preventive actions as per requirements in clauses 8.5.2 and 8.5.3 of the ISO 9001standard. After one or two internal audits followed by Management Reviews complying with requirements in section 5.6 in the standard, the organisation will be able to present itself for Third Party audit and obtain accredited certificates.

15 ISO 10013:2001. Guidelines for quality management system documentation

16 ISO 19011:2002. Guidelines for quality and/or environmental management systems auditing

Attitudes of business establishments towards implementation of ISO 90001: 2008 and its outcome on business performance.

A research study by Costa Micaela Martínez, et al., in the Quality Management Journal, 17 had observed that the 2000 version of ISO 9001 became closer to TQM (The statement would as well apply to the 2008 version). The researchers concluded that, merely implementing the new standard will not improve performance unless firms “adopt the changes seriously and do not merely try to add new lines to their Quality Manual.” This raises a general question whether all those who implement the ISO 9000 systems do it with all seriousness.” An article appeared in Review of Quantitative Finance and Accounting, 18 concludes that:

“many companies seek an ISO 9000 certificate because their clients expect or their competitors are registering for one.”

Nevertheless, by obtaining registration (certification), the management, “signals its commitment to quality.” The survey by the authors revealed that shareholders of large firms have benefited, while it is not so in the case of small firms. Terziovski, et al., 19 on their study of certified and non-certified Australian and New Zealand firms observed that:

“ISO certification does not significantly impact performance measures like operating performance, customer satisfaction, employee relations and business performance.”

They conclude that benefits of the certification will accrue as recognition of the

17 Costa Micaela Martínez, Lorente Ángel Rafael Martínez (2007)ISO 9000:2000: The Key to Quality? An Exploratory Study.

18 Ferreira Eurico J.,et al.(January 2008) Long-run performance following quality management certification.

19 Terziovski M., Samson D., Dow D., 1997. The business value of quality management systems certification: evidence from Australia and New Zealand

certified firm to organisations prescribing ISO certification as a minimum requirement for acceptance as viable suppliers. Another finding was reported by Quaze HA, et al, 20 is that implementation of ISO 9000 brings benefits “such as improvement of product and service quality, efficiency and productivity, customer confidence, and competitive advantage. This view is not shared by another researcher Dalgleish who reports that ISO 9000 certification brings hindrance than help. It is pointed out that the “certificate leads to a ‘pass/fail’ mentality, the ISO 9000 certificate hinders quality and efficiency- the very things it is supposed to encourage.”

One study by Jang Woan-Yuh, Lin Ching-I.21 in its literature review reveals that organisations that pursue ISO 9000 certification willingly are more likely to report improved organisational performance than those that only obtain certification under customer pressure. The study concludes that external motivation for implementing ISO 9000 does not guarantee positive results. It is the approach of managers and employees that determine the success.

The findings of Dick Gavin P.M. et al 22 also points to the same conclusion that:

“although there is some evidence to indicate that quality management system certification has some causal influence on business performance, there is also evidence for the existence of a substantial mechanism whereby better performing firms self-select to adopt certification.”

20 Quaze HA, Hong CW, Meng CT, 2002. Impact of ISO 9000 Certification on Quality Management Practices: a comparative study. P.53-67

21 Jang Woan-Yuh, Lin Ching-I (2008) Successful ISO 9000 implementation in Taiwan:How can we achieve it, and what does it mean?

22 Dick Gavin P.M., et al (2008) Shedding light on causation between ISO 9001 and improved business performance.

Attitude of countries towards ISO 9000.

A concise overview highlighting the benefits of implementing ISO 9000 and ISO 14000 given in the ISO website 23 indicates that over a million organisations have implemented these standards in 175 countries all over the world. The ISO Survey 2007 (9. Ibid) gives the statistics of ISO 9001 and 14001 certifications issued from 2000 to 2007. The charts provided in Appendix 1 gives the country wise data of certifications. The data does not lend itself for an objective analysis as the these do not reveal any analytical relativity with the size of the country or the size of its industrial base. It is therefore difficult to analyse these data. It is however seen that the annual growth of certification has been declining from the early years of certification. It is understandable that the growth rate will be higher when a system is newly introduced and the growth stabilises after the initial growth to a lower level. The survey however reveals that it is popular in all the countries in the world.

Limitations of the study

The study has only scanned accessible secondary data and no attempt was made to verify published research findings through primary data collection. However, the study has relied on multiple sources and therefore should be credible. As such, the study may also be considered balanced in as much as differing opinions have been reported.

Conclusions

The eight quality management principles that formed the basis of ISO 9001:2008 standards are well conceived and these take the standard to a TQM level. Organisations implementing the standard with the objectives of fully realizing the potentials can expect overall benefits and continual improvements in quality of products, services and customer satisfaction. Organisations implementing the system half heartedly are unlikely to realize the quality related potentials.

ISO 9001: 2008 can be implemented by any organisation irrespective of size or type, including service organisations. Implementation involves, training of key personnel, imparting awareness to all employees, formulation of quality policy and objectives, preparation of Quality manual addressing requirements in the standard, preparation of written procedures and organising records to evidence activities performed as per the system. After implementation, the organisation can choose to seek certificates from accredited agencies that perform an independent audit of the system.

Organisations that go for ISO 9001:2008 certifications out of external pressures such as for getting qualified as vendors, may realise only marginal benefits, due to lack of internal will and absence of actions to involve employees to the required extent.

ISO 9001:2008 standards are popular in 175 countries and the number of certifications is steadily growing as revealed in the ISO survey 2007.

Operation of ISO 9001: 2008 can be recommended for any organisation choosing to implement it in a holistic manner for realizing the full potentials of the system.

23 International Organization for Standardization. [Internet]

References

Cohen Phil. (n.d.), Deming’s 14 points. [online] Available from: http://www.hci.com.au/hcisite2/articles/deming.htm.[accessed 12 November 2009]

Costa Micaela Martínez, Lorente Ángel Rafael Martínez. (2007)ISO 9000:2000: The Key to Quality? An Exploratory Study. The Quality Management Journal, 14 (1), p.7-18

Dalgleish S.(2002) ISO 9000: more hindrance than help, Quality 41(10), p.64

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Dick Gavin P.M., Heras Inaki, Casadesus Marti (2008) Shedding light on causation between ISO 9001 and improved business performance. International Journal of Operations & Production Management, 28(7), p.687-708

Drummond Graeme, Ensor John (2001) Strategic Marketing: Planning and Control.2nd ed.Oxford:Butterworth-Heinemann

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APPENDIX 1

World Statistics of ISO 9001 and ISO 14001 Certifications