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IJQRM NEW RESEARCH

20,8
Does ISO 9000 certification
936
improve business
Received February 2002
performance?
Revised October 2002 Clare Chow-Chua, Mark Goh and Tan Boon Wan
Accepted October 2002 NUS Business School, National University of Singapore, Singapore

Keywords ISO 9000 series, Singapore, Business Performance

Abstract This paper examines the issue of ISO 9000 certification and its perceived benefits for
Singapore based companies. Using an empirical approach, the paper seeks to ascertain if
certification has indeed improved the performance for listed and non-listed companies. The results
from a survey of 146 firms suggest that while certification leads to better overall financial
performance, non-listed certified firms experience better documentation procedures, higher
perceived quality of products or services, and more effective communication among employees
than listed certified firms. Some problems encountered in certification include the failures to
establish adequate monitoring programs, to follow set procedures and to carry out appropriate
management reviews of the new system as well as unclear authorisation.

Introduction
Globalisation has radically changed the competitive landscape and process flows
of business. A greater need exists for shrewder investment in infrastructure and
process standardization for business success. In this regard, the International
Organization of Standardization (ISO), a global federation of 130 national
standard bodies, seeks to promote standardization and the development of related
activities worldwide in order to facilitate the international exchange of goods and
services, and cooperation in the spheres of intellectual, scientific, technological
and economic activities. The ISO 9000 standards series is now widely accepted as
a minimum standard for a quality system for companies (Marquardt, 1992). In
essence, this is a set of quality system standards that prescribes good quality
practices, without mandating how a company should achieve them.
Nowadays, many countries have either embraced ISO 9000 or used it as the
basis of their national quality certification systems. Table I shows the average
growth rates of some countries. Thus, Japan has the fastest growth rate as
Japan is among the earliest countries to embrace the quality philosophy. In
Singapore, the number of ISO certified companies grew, on average, by 53 per
International Journal of Quality &
Reliability Management cent per annum compared to the global mean growth rate of 43 per cent.
Vol. 20 No. 8, 2003
pp. 936-953 Already, more than 1,808 Singapore-based firms are certified.
q MCB UP Limited
0265-671X
DOI 10.1108/02656710310493643 The authors would like to thank the three anonymous referees for their insightful comments.
 ISO 9000
Total number of
companies that certification
Annualised are ISO 9000
mean growth certified as at
Country Standards rate (per cent) 1996

Japan JIS Z 9901/9902/9903 115.6 7,247 937

Germany DIN ISO 9001/9002/9003 78 12,979
Canada CAN/CSA ISO 9001/9002/9003 77 3,955
USA ANSI/ASQC Q9001/9002/9003 72.8 12,613
India IS/ISO 9001/9002/9003 72 1,665
Malaysia MS-ISO 9001/9002/9003 63 1,123
France NF-EN 29001/29002/29003 53.2 8,079
Singapore ISO 9001/9002/9003 53 1,808 Table I.
Australia and Growth rates of
New Zealand AS NZS/ISO 9001/9002/9003 41.6 9,478 equivalent ISO
Source: www.iso.ch/presse/presse10.html standards

To be fair, ISO 9000 certification does not automatically guarantee quality

assurance, but rather consistency of procedures to fit into a command and control
mentality. While many organisations rush to be ISO 9000 certified, whether this
brings about better business performance is still an open question (Avery, 1994;
Sneddon, 1998). Indeed, a wealth of literature exists, which argues for and against
the use and practice of such certification instruments (Ebrahimpour et al., 1997;
Ferguson, 1996; Nield and Kozak, 1999; Skrabec et al., 1997; Struebing, 1996).
Notwithstanding, a recent trawl through the academic literature reveals a
paucity on the understanding of the benefits of ISO 9000 certification on
business and financial performance, perceived or otherwise, for large-sized
listed companies. This is an important question. For globalisation, there is a
push for quality recognition and certification. Thus, this paper attempts to fill
this critical void. The following research question is posed: Has ISO 9000
standards compliance benefited listed firms which are already governed by a
stricter standard of responsibility of wealth creation towards shareholders?
Therefore, the objective of this paper is to look at whether certified listed firms
have performed better than the non-certified listed firms and certified
non-listed firms. We also studied the barriers faced by the firms with
certification. Managers, CEOs and organisations can use the result of this study
to decide for themselves the value of ISO 9000 certification.

Theoretical background
Recently, Goodman (1998) states that it is worthwhile to invest time and
expense to be ISO 9000 certified. Raynor and Porter (1991) have found that the
primary push for certification in the UK was the perception of the customer. In
this case, only 10 per cent of the respondents cited improvement in quality as a
IJQRM reason. However, Wong (1998) has identified some major reasons for
20,8 certification as customer requirements, good management practice,
competitors who are certified and instructions from headquarters to fulfil. In
sum, the most common reason found among the studies done so far is that it is
good management practice to have a quality system in place.
938 Benefits of certification
Likewise, the two most common benefits of certification reported in the
literature are the increase in productivity and access to overseas markets.
Indeed, certification provides access to markets such as Japan, Europe and the
US because the standards are now widely accepted. Most companies have
experienced an increase in the overall sales after certification (Kantner, 1997).
Supporting this, Calingo et al. (1995) found that ISO 9000 yielded better quality
systems, customer satisfaction, competitive advantage and reduction of quality
problems. Further, Haversjo (2000) also reported that ISO 9000 certified
companies have better earnings (rates of return) than similar non-certified
companies, largely due to increased sales. As for country specific studies,
Casadesus and Gimenez (2000) have reported that 65 per cent of the certified
companies in Spain have experienced high levels of internal (human resources
management, operations management), external (external customer
satisfaction, less complaints, repeat purchases), and financial benefits (e.g.
market shares, sales per employee, return on sales and return on assets). This is
consistent with Kaye (2000) who also reported benefits such as better
documentation, greater quality awareness of employees, better internal
communication, and an increase in operational efficiency. Further details of the
benefits are shown in Table II.

Financial performance
While many studies have reported better business performance arising from
certification, few actually measure financial performance (Heras et al., 2002).
Heras et al. (2002) gave a comprehensive summary of research on ISO 9000
certification, and business and financial performances, showing that there is no
clear evidence of benefit from certification (see also Singels et al., 2001).
Terziovski et al. (1997) have reported that certified companies had not
experienced reduced costs or lower waste, improved quality and increase in
market share. More recently, Aarts and Vos (2001) have studied this issue by
examining listed companies in New Zealand on the impact of certification on
stock price. Like earlier studies, no significant benefits from ISO 9000
certification were found. This differs from Quazi and Padibjo (1998) who
reported that certified companies experienced improved quality, and increased
sales and market share. Likewise, Haversjo (2000) has reported that certified
companies had better earnings (rate of return) than similar non-certified
companies, coming largely from an increase in sales. The inconsistencies of the
studies could be due to the effects of firm size. Specifically, Jeng (1998) has
Benefit items Source
ISO 9000
certification
Better corporate image Goetsch and Davis (1998), Johnson (1977),
Tsiotras and Gotzamani (1996) and Vloeberghs
and Bellens (1996)
Greater quality awareness Brown and Van der Wiele (1995a, b), Brown
et al. (1998), Dale (1994), Dick (2000), Goetsch
and Davis (1998), Quazi and Padibjo (1998) and
939
Tsiotras and Gotzamani (1996)
Better documentation procedures Goetsch and Davis (1998), Jones et al. (1997),
McLachlan (1996), Santos and Escanciano
(2002) and Tsiotras and Gotzamani (1996)
Clearer working instructions or procedures Santos and Escanciano (2002) and Tsiotras and
Gotzamani (1996)
Clearer job responsibilities McLachlan (1996) and Santos and Escanciano
(2002)
Eliminate redundancy/reduce unnecessary Lloyd’s Register Quality Assurance Ltd (1994)
work and McLachlan (1996)
Enable easy accessible, traceable and auditable Dale (1994), Dick (2000) and Lloyd’s Register
work procedure Quality Assurance Ltd (1994)
Better customer service Brown and Van der Wiele (1995a, b), Brown
et al. (1998), Jones et al. (1997), McLachlan
(1996) and Raynor and Porter (1991)
Reduction in waste and inefficiency Brown et al. (1998), Dale (1994), Dick (2000),
Garvin (1988), Gotzamani and Tsiotras (2002),
Lee (1998), Mo and Chan (1997) and Raynor and
Porter (1991)
Improve customer satisfaction Brown and Van der Wiele (1995a, b), Dale
(1994), Lee (1998), McLachlan (1996), Mo and
Chan (1997), Morgan and Pierce (1992),
Gotzamani and Tsiotras (2002), Quazi and
Padibjo (1998) and Raynor and Porter (1991)
Greater competitive advantage Brown and Van der Wiele (1995a, b), Corrigan
(1994), Dick (2000), Gotzamani and Tsiotras
(2002), McLachlan (1996) and Quazi and
Padibjo (1998)
Helped in continual improvement Brocka and Brocka (1994), Dick (2000) and
McLachlan (1996)
Greater staff retention Brown et al. (1998), Gotzamani and Tsiotras
(2002), McLachlan (1996) and Mo and Chan
(1997)
Improve profitability Dick (2000), Gotzamani and Tsiotras (2002),
Haversjo (2000), Jones et al. (1997), Lee (1998),
Mo and Chan (1997), Scotto (1996) and Santos
and Escanciano (2002)
Increase market share Brown et al. (1998), Dick (2000), Lloyd’s
Register Quality Assurance Ltd (1994), Jones
et al. (1997), McLachlan (1996) and Santos and
Escanciano (2002)
Greater opportunity for export Brown et al. (1998), Dick (2000), Gotzamani and Table II.
Tsiotras (2002) Motivations, drivers
Expansion to international market Brown et al. (1998) and Lloyd’s Register Quality and benefits of ISO 9000
Assurance Ltd (1994) certification
IJQRM found that certified small and medium sized companies performed better than
20,8 large companies. Population differences (studies on companies of different
countries) and methodological errors (Haversjo, 2000) (e.g. perceived benefits
and actual benefits) can also explain the inconsistency.

940 Barriers to ISO 9000 implementation

The process of ISO 9000 certification is not always smooth. Most companies
have encountered problems during and after the process of certification.
Goetsch and Davis (1998), Kantner (1997), and Mo and Chan (1997) have
highlighted some of the implementation problems, namely, the failure to
provide adequate controls over documents and the data in them, the failure to
define responsibility and authority for personnel, and inadequate training.
Some common post-implementation problems include having a cumbersome
unworkable document control process that leads to the failure to carry out
management reviews of the quality system to ensure system effectiveness, and
the audit programs failing to provide feedback to management on compliance
with the quality policies and procedures.
Other challenges associated with implementation include gaining
management and employee commitment, and problems with interpretation of
standards, with assessors and consultants, and with documentation (Brown
and Van der Wiele, 1995a, b).

Research model
The benefits of ISO 9000 certification have been determined using different
approaches. They include structured interviews (Hill et al., 2001), questionnaire
administration (Gotzamani and Tsiotras, 2002; Lee, 1995, 1998; Singels et al.,
2001), case study research (Hill et al., 2001; Withers and Ebrahimpour, 1996),
factor analysis (Gotzamani and Tsiotras, 2002), cluster analysis (Casadesus and
Gimenez, 2000) and content analysis on secondary sources (Aarts and Vos,
2001; Beattie and Sohal, 1999).

Design
In this paper, a research model is designed to investigate the perceived benefits
of ISO 9000 certification on the performance of listed firms. Such firms are
listed on either the main board or the secondary board of the Singapore Stock
Exchange. The impact of certification on company performance is obtained in
two ways:
(1) by empirically surveying their perception of ISO 9000’s impact on
business performance, and
(2) by examining the annual reports to evaluate their business performance.
The independent and dependent variables used are ISO 9000 certification and
the company’s reported business performance, respectively.
 Following Beattie and Sohal (1999), we classify the financial performance ISO 9000
indicators for strategic business performance as: certification
.
profit margin on sales, which is computed as net income divided by sales;
. return on total assets (ROA), which is computed as net income divided by
total assets;
.
return on common equity (ROE), which is computed as net income 941
divided by common equity;
.
debt to equity ratio, which is computed as total debt divided by common
equity; and
.
earning per share (EPS), which is computed as net income divided by
outstanding shares.
The profitability ratio measures the firm’s effectiveness in generating profit.
The financial leverage ratios measure the capability of a firm to finance debt
and its ability to meet long-term obligations (Dickerson et al., 1995). These
ratios thus reflect the effective implementation of the ISO 9000 quality system.
The ratios were determined for periods before and after ISO 9000 certification.
We adopt a similar horizon used by Hendricks and Singhal (1997) i.e. we
examine the operating performance of our sample of ISO 9000 certified
companies over a ten year period: six years before ISO 9000 certification and
four years after. The control variable used is firm size. Obviously, company
size may have relevance due to the differences in resources, strategies, between
large and small companies. Following Raynor and Porter (1991), we examine
only large companies, namely, those that engage over 500 employees.
It is recognised that other variables may also have an impact on ISO 9000
and business performance. The effects of these moderating variables are
evaluated before any full-scale analysis is conducted. However, issues such as
technology and service requirements were omitted as either control or
moderating variables.

Research hypothesis
The expected relationships are shown in Figure 1, together with the prescribed
hypotheses. These hypotheses reflect the findings of the earlier literature on
ISO 9000 benefits, although they have not been empirically examined in the
Singapore context:
H1. Listed firms that are ISO 9000 certified experience greater benefits
than non-listed ones.
H2. ISO 9000 certification has a positive impact on the financial
performance of listed firms.
H3. Listed and non-listed firms encounter the same barriers with ISO
9000 certification.
IJQRM
20,8

942

Figure 1.
Research framework

Research methodology
A sample of 150 firms was drawn from those listed on the Singapore Stock
Exchange. Of the 103 responses, 34 per cent had ISO 9000 certification, 42 per
cent had no ISO 9000 certification and 24 per cent declined to participate in the
study. This then yields 35 companies with ISO 9000 certification and 43
companies without ISO 9000 certification. The company financial reports were
obtained from secondary sources such as annual reports. The complete
financial reports of 36 companies over a ten year period (1987-1997) were
available. Another group of 180 non-listed ISO 9000 certified companies was
randomly selected from the directory of the Singapore Productivity and
Standards Board. For this latter group, a courtesy call was made to solicit
participation. To each company that agreed to participate, the questionnaire
was faxed over and the responses collected through a followed-up telephone
interview. Through this means, 157 responses were collected, of which 68 are
large-sized companies. To control size, only large-sized companies were
selected for final sample. Hence, the final sample comprised of 146 companies
which is made up of 35 ISO 9000 certified listed companies, 68 ISO 9000
certified non-listed companies and 43 non-ISO 9000 certified listed companies.
The final sample of companies were administered a three-page questionnaire
comprising three sections. The first section of the questionnaire covers the
company’s profile with a question on the type of ISO 9000 certification. The ISO 9000
second section consists of 24 items of benefits measured on a five-point Likert certification
scale (1 ¼ no extent to 5 ¼ great extent) to assess their perception of
certification on business performance. This comprehensive list of benefits that
firms could derive from certification was compiled from the literature (Table II).
The last section considers the problems encountered during and after the
process of ISO 9000 certification. Likewise, this list of common certification 943
problems was compiled from various sources (Allen and Oakland, 1998;
Goetsch and Davis, 1998; Mo and Chan, 1997; Taylor, 1995).

Survey results
Perceived benefits
The reliability of the survey instrument comprising the 24 benefit items
found in Table II was examined. The Cronbach’s alpha reliability
coefficient for the instrument is 0.9014, suggesting very high instrument
reliability. The benefit items were factor analysed and a Varimax rotation
procedure with a criterion cut-off factor score of 0.5 was applied to select
the benefit factors which are shown in Table III. The value of the overall
KMO statistic for this factor analysis is 0.807. Four main factors were thus
identified:

Varimax rotated loading

Internal External Export
Composite factor/Benefit items process focus Bottom line orientation

1 Clearer work instructions/procedures 0.75

2 Clearer job responsibilities 0.71
3 Better corporate image 0.68
4 Better documentation procedures 0.66
5 Eliminate redundancy/reduce
unnecessary work 0.65
6 Enable easy accessible, traceable and
auditable work procedure 0.66
7 Greater quality awareness 0.57
8 Greater competitive advantage 0.84
9 Improve customer satisfaction 0.70
10 Helped in continual improvement 0.70
11 Better customer service 0.61
12 Reduction in waste and inefficiency 0.60
13 Improve profitability 0.83
14 Increase market share 0.75
15 Greater staff retention 0.58
16 Expansion to international market 0.90 Table III.
17 Greater opportunity for export 0.88 Rotated component
Eigenvalue 8.696 2.457 1.943 1.377 matrix for the benefits
Cumulative variance explained 36.23 46.47 54.57 60.31 of ISO 9000 certification
IJQRM (1) better internal processes through clearer working instructions or
20,8 procedures;
(2) better external focus resulting in greater competitive advantage, better
bottom line through improved profitability; and
(3) stronger export orientation through expansion to international markets.
944 H1 was then tested with an independent t-test. Table IV shows the results. No
strong statistical evidence was found to support H1 ( p , 0.01). However,
partial support was found for two items: better documentation ( p ¼ 0.04) and
effective communication among employees ( p ¼ 0.05). Judging from their
mean values, the non-listed firms perceive greater benefits from both items.
Also, at the significance level of 0.1, the ISO 9000 certified non-listed firms felt
that certification has led to a higher perceived quality of products/services
( p ¼ 0.08, mean ¼ 3.79) and a moderate decline in business costs ( p ¼ 0.08,
mean ¼ 2.97). However, both listed and non-listed firms did not feel very
strongly that certification has reduced business costs (mean values of 2.66 and
2.97, respectively). Lastly, the non-listed certified firms claimed moderate staff
retention ( p ¼ 0.1, mean ¼ 2.83). Hence, the non-listed certified firms perceived
better performance through an improved bottom line (less loss of employees)
and streamlined internal processes (through better documentation procedures).
Although H1 is not supported, however there exists evidence to suggest that,
regardless of its listing status, firms in general benefit from ISO 9000
certification.

Financial performance
Next, we examine the financial performance of the ISO 9000 certified listed
firms, using a paired t-test procedure. The results, as summarised in Table V,
suggest that listed certified firms reported significantly better results on ROA,
ROE and debt-to-equity ratios than listed uncertified firms. In particular, there
are obvious improvements in ROE and the debt to equity ratio. Thus, ISO 9000
certification has yielded better financial returns through better asset
management, better use of equity and debt control. To validate that the
improved financial performance is really due to ISO 9000 certification, a within
design experiment was conducted. The results are presented in Table VI, which
shows that all the financial ratios, except the profit margin on sales, show
significant improvement after certification. Hence, H2, namely, ISO 9000
certification improves financial performance, is clearly supported.

Barriers to ISO 9000 certification

Despite the positive impact of ISO 9000 certification on the financials of a firm,
the take up rate of certification by the listed firms is not very high (34 per cent).
An exploratory factor analysis to explore the barriers to certification has
revealed that the barriers can be categorised into the following major factors:
deficient supplier management, unclear lines of authorisation,
 Listed firm Non-listed firm
Benefits Mean SE Rank Mean SE Rank p-value

1 Positive cultural change 3.6 0.74 10 3.68 0.8 12 0.638

2 Better corporate image 3.97 0.86 4 4.04 0.70 4 0.645
3 Greater quality awareness 3.91 0.51 5 4.04 0.68 5 0.321
4 Higher perceived quality of products or services 3.59 0.66 11 3.79 0.72 9 0.08
5 Better customer service 3.74 0.85 8 3.71 0.88 11 0.839
6 Better documentation procedures 4.29 0.75 1 4.53 0.61 1 0.04**
7 Better working environment 3.23 0.94 17 3.44 0.97 16 0.289
8 Clearer working instructions or procedures 4.14 0.73 2 4.31 0.65 2 0.244
9 Clearer job responsibilities 3.91 0.82 6 4.04 0.84 6 0.454
10 Eliminate redundancy/reduce unnecessary work 3.38 1.01 16 3.32 0.82 17 0.753
11 Enable easy accessible, traceable and auditable
work procedure 4.11 0.83 3 4.26 0.68 3 0.329
12 Effective communication among employees 3.51 0.95 12 3.81 0.67 8 0.05**
13 Greater staff retention 2.53 1.23 24 2.83 1.09 22 0.10
14 Improve productivity 3.43 0.85 15 3.46 0.76 15 0.869
15 Improve profitability 2.91 0.98 20 3.01 0.89 20 0.589
16 Increase sales 2.97 1.11 19 3.22 0.99 18 0.252
17 Decline in business costs 2.66 1.16 23 2.97 0.83 21 0.08
18 Increase market share 2.82 1.29 22 3.03 1.11 19 0.399
19 Reduction in waste and inefficiency 3.5 0.75 13 3.56 0.72 14 0.774
20 Greater opportunity for export 2.85 1.25 21 2.79 1.38 24 0.849
21 Expansion to international market 3.12 1.23 18 2.82 1.36 23 0.290
22 Improve customer satisfaction 3.71 0.62 9 3.68 0.82 13 0.811
23 Greater competitive advantage 3.5 1.02 14 3.72 0.93 10 0.277
24 Helped in continual improvement 3.91 0.92 7 3.94 0.81 7 0.879
Notes: Means based on five-point Likert scale, “1” for “No extent” and “5” for “Great extent”; Significance levels for * at 0.01, ** at 0.05
certification

certification
ISO 9000

Benefits of ISO 9000

945

Table IV.
IJQRM non-conformance to procedures, lack of management review and inconsistent
20,8 inbound practices (Table VII).
We also examined the barriers faced post certification to ascertain if the
same barriers persisted. Again, an exploratory factor analysis found that the
barrier items categorised into three factors: failure to input adequate
monitoring programs, failure to follow prescribed procedures, and lack of
946 good management reviews of new system (Table VIII). Moreover, no statistical
significant difference was found between listed and non-listed firms. However,
a fair proportion of listed firms (37.1 per cent) and non-listed firms (45.6 per
cent) felt that the failure to carry out a management review of the new quality
assurance system to ensure sustained effectiveness is a hindrance.
Generally, the barriers before and after certification are similar. However,
two items differ: the failure to define the responsibility and the authority of the
personnel involved with the ISO 9000 certification, and the misinterpretation of
ISO 9000 requirements (Table IX). On the first item, Table VII has registered
this as unclear authorisation with a factor score of 0.78. Percentage wise, more
than half of the listed and non-listed firms affirmed the existence of this
problem, with almost 80 per cent of the non-listed firms indicating this as the
biggest barrier ( p , 0.004). A smaller percentage of respondents encountered
the second item of misinterpretation of requirements. Only 17.1 per cent of the
listed firms and 5.9 per cent of the non-listed firms regard this as an issue.
Hence, H3 is supported, except for the failure to define responsibility and
misinterpretation of ISO 9000 requirements.

ISO certified Non-ISO certified

Financial ratios Mean SE Mean SE p-value

Profit margin on sales 15.3282 2.239 16.5357 3.263 0.761

Table V. ROA 8.9477 1.1541 5.8025 0.9375 0.037
Impact on financial ROE 18.6848 1.8967 9.1553 1.5381 0.000*
performance for ISO Debt to equity 1.4739 0.3917 5.4180 0.8595 0.000*
9000 and non-ISO EPS 0.2183 0.032 0.2336 0.042 0.774
certified listed firms Note: * Significant at 1 per cent

Before certification After certification

Financial ratios Mean SE Mean SE p-value

Profit margin on sales (per cent) 15.75 2.53 15.04 2.30 0.218
Table VI. ROA (per cent) 5.79 1.21 8.95 1.15 0.000*
Impact of ISO 9000 on ROE (per cent) 14.30 1.54 19.68 1.99 0.000*
financial performance of Debt to equity (times) 2.25 0.52 1.47 0.39 0.000*
listed firms before and EPS 0.13 0.017 0.24 0.034 0.000*
after certification Note: * Significant at 1 per cent
 ISO 9000
Factor
Non- certification
conformance Inbound
Composite factor Supplier Unclear with Management logistics
Barrier items management authorization procedures review practice

Deficient supplier control 0.85 947

Inadequate training 0.81
Out-of-date
documentation 0.79
Failure to define
responsibility and
authority for personnel 0.78
Calibration of tools and
gauges 0.59
Failure to adhere to stated
process control
procedures 0.73
Inadequate control over
non-conforming
product 0.71
Contract reviews are not
conducted, or changes
to contracts are not
reflected in the paper
work 0.56
Fail to provide adequate
controls over
documents and data in
them 0.74
No periodic management
reviews of quality
system elements or
records of reviews are
inadequate 0.73
Poor receiving practices Table VII.
for incoming materials 0.86 Factor analysis on
Eigenvalue 2.583 1.646 1.379 1.18 1.156 barriers encountered
Cumulative variance during ISO 9000
explained 21.53 35.24 46.73 56.57 66.20 certification

Discussion and implications

We now discuss several areas where our findings have implications for
companies. First, although ISO 9000 certification has been around for well over
a decade with many organisations having aggressively pursued certification,
the results have been mixed (Buttle, 1996; Sneddon, 1998). The benefits of ISO
9000 certification should be based on sound platforms of interoperability and
transparency of systems, procedures and processes. However, there is little
reported empirical evidence of this in practice apart from the popular press,
IJQRM
Factor
20,8 Inadequate
Composite factor monitoring Non-conformance Lack of management
Barrier items programs with procedures review

Document control process that is so

948 cumbersome that it is
unworkable, and, as a result, not
followed 0.70
Failure to monitor and maintain
auditor performance 0.66
Audit programs fail to provide
feedback to management and
non-compliance with quality
policies and procedures 0.54
Failure to follow documented
procedures 0.69
Failure to have lower level
documents such as procedures
and work instructions under
control 0.79
Failure to carry out management
reviews of quality system to
ensure effectiveness of the
Table VIII. system 0.81
Factor analysis on Lack of feedback concerning the
barriers encountered process 0.55
after ISO 9000 Eigenvalue 1.921 1.094 1.04
certification Cumulative variance explained 27.44 43.07 57.93

which have from time to time provided largely anecdotal records for public
consumption and persuasion. This paper has therefore attempted to furnish
empirical evidence on the value of ISO 9000 to business performance.
Like Skrabec et al. (1997), our study suggests that ISO 9000 certification is
beneficial to firms, both listed and non-listed. However, listed firms that are
certified out-performed financially those that are not certified (Table V).
Shareholders may want to take note of this. Certified firms that imposed upon
themselves with the strict regimes of certification also tend to end up with
healthier balance sheets, and profit and loss statements. Although there is no
statistical evidence to suggest that ISO 9000 certification reduces business
costs, this should not be confused with the need for organisations to adopt
transparency, scalability and inter-operability in their processes, procedures
and systems. By its very nature, ISO 9000 certification allows a firm to focus in
this direction.
Our empirical investigation provides reasonable evidence, as far as the local
business context is concerned, that while ISO 9000 certification leads to better
financial performance, non-listed firms with ISO 9000 certification have
 ISO 9000
Listed Non-listed
No. Barrier encountered firms (%) firms (%) p-value certification
During implementation
1 Failure to provide adequate controls over
documents and the data in them 20 26.5 0.319
2 Failure to define responsibility and authority for 949
personnel 51.4 79.4 0.004*
3 Calibration of tools and gauges 17.1 19.1 0.517
4 Poor receiving practices for incoming materials 22.9 14.7 0.222
5 Failure to adhere to stated process control
procedures 8.6 2.9 0.215
6 Deficient supplier control 11.4 11.8 0.617
7 Inadequate control over non-conforming product 17.1 10.3 0.245
8 Inadequate training 14.3 17.6 0.447
9 Outdated documentation 11.4 8.8 0.459
10 Periodic management review of quality system
elements is not held or review records are
inadequate 14.3 10.3 0.383
11 Contract reviews are not conducted or changes to
contracts are not reflected in the paper work 11.4 8.8 0.459
12 Misinterpretation of ISO requirements 17.1 5.9 0.073*
After implementation
13 Having cumbersome and unworkable document
control process and as a result not followed 22.9 29.4 0.321
14 Failure to carry out management review of
quality system to ensure effectiveness of system 37.1 45.6 0.272
15 Failure to follow documented procedures 14.3 16.2 0.523
16 Failure to have lower level documents like
procedures and work instructions under control 11.4 8.8 0.459
17 Lack of feedback concerning the process 20 16.2 0.41
18 Failure to monitor and maintain auditor
performance 8.6 7.4 0.552
Table IX.
19 Failure of audit programs to provide feedback to
Barriers encountered by
management and compliance with quality policies
listed and non-listed
and procedures 5.7 8.8 0.448
firms with ISO 9000
Note: x per cent of listed firms refers to x/total of all listed firms certification

experienced better documentation procedures, higher perceived quality of

products or services, and more effective communication among employees than
listed firms with ISO 9000 certification. To put it simply, without scrutinisable
accountability to shareholders, non-listed firms would need to have a
prescribed system to endorse better processes and procedures.
Clearly, the benefits are multi-faceted and vital for our globalised future. Our
data and results have shown that ISO 9000 certification allows a firm to
experience better internal processes through clearer working instructions or
procedures, better bottom line through greater profitability, and stronger export
IJQRM through expansion into international markets. All these factors sharpen the
20,8 competitive edge of the firm. Hence, for firms with a competitive orientation, the
adoption of ISO 9000 certification will follow naturally and will be a breeze.
It is inevitable that problems would be encountered in implementing ISO
9000. This study has shown that a successful ISO 9000 implementation cannot
be carried out independently of supply chain partners and without
950 conformance to set rules and regulations. Clearly, Table VII highlights the
need for operations and quality managers to constantly manage the monitoring
programs, stick to procedures, and perform management reviews of the new
system, reinforcing Goestch and Davis (1998). In short, ISO 9000 certification is
a static conformity format, which must undergo regular review for a system to
stay in tune with the current dynamic global environment.
Some of the key pitfalls to avoid after ISO 9000 implementation are the
failures to establish adequate monitoring programs, install strict compliance
procedures and systems, and conduct regular management reviews of the new
system.

Concluding remarks
Nevertheless, with this additional set of findings, organisations are now in a
better position to decide for themselves their sustained commitment to ISO
9000 certification. Further research is needed. One area is the influence of
customers or suppliers on ISO 9000 adoption. Another is the value proposition
of ISO 9000 adoption and implementation for the entire supply chain. Other
research directions in the future could include studying the effects of company
size and the influence of certification duration.

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