The Value of Accredited Certification
ISO 9001 and ISO 14001 are among the best known standards
published by the International Organization for Standardization.
These international management system standards have been
implemented by more than a million organizations in 175 countries.
But many more organizations that could benefit from implementation
of management system standards have yet to do so, even though
there are compelling reasons to do so.
ISO 9001, ISO 14001, and other management system standards can
provide a solid foundation on which to build an organization that
can withstand the test of time and challenges of the marketplace.
The principles of the standards can help involve and unite
employees in working toward a shared goal. And implementation of a
certified management system can be a source of employee pride and
provide a competitive marketing and sales edge.
For a low fee, the standards give organizations proven ideas,
techniques, and principles that many could not afford to research
on their own. And the immediate and long term benefits of
certification can far outweigh the costs. In addition to increasing
customer confidence in an organization, an accredited certification
can help the organization operate more efficiently.
Published Works
Value of Accredited ISO 9001 Certification
The results of a study by UNIDO, IAF,
and ISO show accredited ISO 9001 certification brings positive
results to certified organizations and their customers, and
ultimately to economies. The comprehensive study focused on Asia
and invovled a survey, interviews with purchasers, and visits to
certified organizations. The report is available at the UNIDO
website.
PS-Prep and the Supply Chain
In August 2012, Continuity
Insights published an article on How PS-Prep Can Shore Up Supply
Chains.
Five Myths of ISO
The August 2012 issue of Snow
Magazine, a publication of the Accredited Snow Contractors
Assocation (ASCA), features a timely article about "Five Myths of ISO"
given ASCA's recent development of SN9001, Quality Management
System Requirements for Snow and Ice Management Services.
ISO Certification and Performance
Jospeh Iwaro and Abrahams Mwasha, "The Effects
of ISO Certification on Organization Workmanship Performance,"
Quality Management Journal, vol. 19, no. 1, pp. 53ff.
The use of ISO 9001 certification to
improve workmanship on construction projects is a research area
that is presently receiving attention due to the competitive demand
for quality projects and infrastructure in the market. There is
limited information, however, regarding the extent of the
relationship between ISO 9001 certification and workmanship
performance. Also, the impacts of the systemic factors on
workmanship need to be considered. As a result, this study is aimed
at addressing these issues. This study investigates the effects of
ISO 9001 certification on organization workmanship performance
using the construction industry as a case study. A questionnaire
survey was used to identify factors that contribute to poor
workmanship on construction projects. The study also compared
workmanship performance between ISO certified organizations and
non-ISO-certified organizations. It was found that ISO 9001
certified organizations performed better in workmanship performance
compared to non-ISO 9001 certified organizations. As a result, a
correlation relationship was established among the improvement of
workmanship factors, ISO 9001 certifications, and workmanship
performance.
ANAB Accreditation Council Publications
Quality Digest Daily in August 2011 published two
articles written by members of the ANAB Accreditation Council.
The authors of the articles are
Mark Ames, president of AQS Management Systems Inc.; Reg Blake,
vice president of corporate development and regulatory affairs for
BSI Group America Inc.; Michael J. Caruso, vice president of
certification for UL DQS Inc.; and Phil Heinle, owner of Quality
Consulting.
Another article published
by Quality Digest notes that ISO 9001 can
help companies win new business.
Recent Research
Here's an overview of some recent research on the impact of
management system implementation and certification:
In this the first large-scale study to examine the effects of
ISO 9001 on employee outcomes such as employment, earnings, and
health and safety, David I. Levine of the University of California
at Berkeley and Michael W. Toffel of the Harvard Business School
analyzed a matched sample of nearly 1,000 companies in California.
ISO 9001 adopters subsequently had far lower organizational death
rates than a matched control group of non-adopters. Among surviving
employers, ISO adopters realized higher rates of growth of sales,
employment, payroll, and average annual earnings. Injury rates also
declined slightly at ISO 9001 adopters, although total injury costs
did not. The paper describes implications
for managers and public policy. Key concepts
include:
- Companies that adopt ISO 9001 subsequently grow faster in
sales, employment, payroll, and average annual earnings than a
matched control group. ISO 9001 adopters are also more likely to
remain in business.
- ISO 9001 adopters subsequently became more likely to report
zero injuries eligible for workers' compensation. However, there is
no evidence that a firm's total or average injury costs improved or
worsened subsequent to adoption.
Michael W. Toffel of the Harvard Business School conducted one
of the first evaluations to determine whether a voluntary
management program that features an independent verification
mechanism is achieving its ultimate objectives. Using a sample of
thousands of manufacturing facilities across the United States, he
found evidence that ISO 14001 has attracted companies with superior
environmental performance, and that adopters subsequently improve
their environmental performance. These results suggest that robust
verification mechanisms such as independent certification may be
necessary for voluntary management programs to mitigate information
asymmetries surrounding management practices. Implications are
discussed for the industry-associations, government agencies, and
the non-governmental organizations that design these programs, the
companies that are investing resources to adopt them, and those
that are relying on them to infer the quality of management
practices.
Formal Management Systems Help Startups Succeed Says
Award-Winning Paper
Young companies that adopt structured systems to run their
operations in their early years grow three times faster than
competitors and have a lower rate of CEO turnover, according to an
award-winning research paper.
According to the researchers, "Some entrepreneurs
mistakenly view management systems as significant inhibitors to
creativity and growth" and delay adopting systems such as
information-based routines that can maintain or alter patterns of
organizational activities. "Failure by managers to recognize the
value of systems when they achieve rapid growth in their early
years will increase the likelihood that part of that growth and
scaling will not be sustainable."
"Building Sustainable High-Growth Startup Companies: Management
Systems as an Accelerator," is the co-winner of the 2011 Accenture
Award presented by the California Management Review,
recognizing a paper that "has made the most important contribution
to improving the practice of management." Antonio Davila, professor
of entrepreneurship at University of Navarra in Barcelona; George
Foster, The Konosuke Matsushita Professor of Management at the
Stanford Graduate School of Business; and Ning Jia, and associate
professor of accounting at Tsinghua University in Beijing
co-authored the paper after studying 78 California companies.
At their inception, many young companies can be run successfully
by a founder/CEO who wears multiple hats and oversees all aspects
of the operation. "As the company grows, however, this management
style can be deadly," the researchers found.
For most companies, the change needs to be made when the firm
includes somewhere between 50 and 100 employees. They found that
firms with "professional investors," such as venture capitalists,
tend to be more successful because the investors force the
transition to a more formal management style.
Survey of ISO 14001 Certified Companies
Researchers at the University of Pennsylvania's Wharton Risk
Management and Decision Processes Center found that most of the ISO
14001 certificate holders responding to a national survey reported
a relatively quick payback time on their investment. The survey
data indicate that doing a thorough job up front in identifying
environmental aspects and testing them for improvement leads to the
bottom-line benefits that organizations expect from certification.
Many organizations experienced a two-year financial payback, and
some experienced a one-year return. The impact of internal gains in
areas such as employee awareness, management awareness, and
management involvement in environmental affairs was even greater,
indicating that ISO certification streamlines a facility's
management system to produce long-term benefits. The Wharton survey
was developed with input from ANAB and QSU Publishing Company.
Additional Resources
Benefits of Accredited Certification
The Independent International Organisation for
Certification (IIOC) has added a section to its website on
the benefits of
accredited certification. The most significant addition
is summaries of more than 40 research papers that
highlight the many different benefits of certification.
Papers are categorized and there are links to sites where the
full paper can be purchased or viewed. The original group of papers
includes research carried out in 19 countries by almost 50
universities and published in 29 leading journals. IIOC intends to
add new papers as they are written.
Benefits of Management Systems Certification
M. Litsikas, 1997. Companies choose ISO certification for
internal benefits. Quality, 36: 20-26, and S. Rao, et al.,
1997. Does ISO 9000 have an effect on quality management rractices?
An International Empirical Study. Total Quality
Management, 8: 335-346.
- Management standards entail a recipe of beneficial practices
and thereby improve the operational performance of certified
organizations.
A. King, et al., 2005. The strategic use of decentralized
institutions: exploring certification with the ISO 14001 management
standard. Academy of Management Journal, 48(6):
1091-1106.
Benefits of ISO 9001 Certification
A. Terlaak and A.A. King, 2006. The effect of certification with
the ISO 9000 quality management standard: a signaling approach.
Journal of Economic Behavior and Organization, 60(4):
579-602.
- Certification to ISO 9000 is associated with a facility growth
effect, which increases with the extent to which buyers have
numerous suppliers among which they can choose. The effect of ISO
9000 is larger in industries where supplier attributes are more
intangible.
- Facilities certified to ISO 900 experience a greater increase
in production volume subsequent to certification than non-certified
facilities, and the effect increases with the size of the industry
to which the certified facility belongs.
-
Certification allows buyers to identify suppliers with better
quality attributes, which, in turn, triggers certified facilities
to expand their production.
Benefits of ISO 14001 Certification
Nicole Darnall, 2006. Why firms mandate ISO 14001
certification. Business & Society, 45(3),
354-381.
- Firms that mandate ISO 14001 endure greater external pressures
and have stronger complementary resources and capabilities that
support their organization-wide ISO 14001 policies.
- Continual improvement of environmental practices can facilitate
pollution prevention by encouraging firms to substitute harmful
inputs with more environmentally conscious ones and to eliminate
some regulated processes altogether.
P. Bansal and T. Hunter, 2003. Strategic explanations for the
early adoption of ISO 14001. Journal of Business Ethics,
46: 289-299.
- Organizations certified to ISO 14001 may be able to enhance
their environmental image and confer external legitimacy.
C. Coglianese and J. Nash, eds., 2001. Regulating from the
Inside: Can Environmental Management Systems Achieve Policy
Goals? Washington, DC: Resources for the Future.
- Organizations that certify to ISO 14001 may be able to use ISO
14001 to increase their internal efficiencies and create
competitive advantage opportunities and economic benefits.
- Companies that reduce their environmental impacts below legal
reporting thresholds may no longer be subject to costly regulatory
mandates.
M. Delmas, 2002. The diffusion of environmental standards in
europe and in the United States. Policy Sciences, 35:
91-119, and R. Adams, 1999. ISO 14001: a key ingredient of
competitive advantage. Environmental Law and Management,
11: 103-114.
- Efficiencies can accrue through the auditing process by
reducing the risk of costly environmental accidents, lowering
corporate liability exposure, and improving access and
competitiveness in the marketplace.
N. Darnall and D. Edwards Jr., 2006. Predicting the cost of
environmental management system adoption: the role of capabilities,
resources, and ownership structure. Strategic Management
Journal, 27: 301-320.
- Strategic benefits may accrue to ISO 14001-certified companies
in that certification requires that firms routinely scrutinize
their internal operations, engage employees in environmental
issues, continually monitor their progress, and increase their
knowledge about their operations.
K.F. Pun and L.K. Hui, 2001. An analytical hierarchy process
assessment of the ISO 14001 environmental management system.
Integrated Manufacturing Systems, 12: 333-345.
- EMS activities also help firms to increase employee morale and
reassess environmental performance as a contribution to
productivity and innovation.
K. Kollman and A. Prakash, 2001. Green by choice? Cross-national
variations in firms' responses to EMS-based environmental regimes.
World Politics, 53: 399-430.
-
Although often difficult to quantify, the enhanced image and
legitimacy that can accrue from ISO 14001 certification could lead
to increased sales, improved ability to recruit talented employees,
and enhanced relations with external stakeholders.
Benefits of an EMS
W. Shireman, 2003. A Measurement Guide to Productivity: 50
Powerful Tools to Grow Your Triple Bottom Line. Tokyo: Asian
Productivity Organization.
- Continual improvement processes benefit organizations by
embedding environmental considerations deep within the firm so they
become an integral element of the business strategy.
A. King, et al., 2005. The strategic use of decentralized
institutions: exploring certification with the ISO 14001 management
standard. Academy of Management Journal, 48(6):
1091-1106.
Certification Pays
C.J. Corbett, et al., 2002. Does ISO certification pay? ISO
Management Systems, Special Report, 31-40.
- Certification appears to lead to improved financial performance
measured by return on assets.
- Firms that failed to seek certification experienced substantial
deteriorations in return on assets, productivity, and sales, while
firms that sought certification generally managed to avoid such
declines.
- Firms that received certification did not, on average,
see their absolute performance improve, but did
see their relative performance improve substantially,
compared to their uncertified peers.
C.J. Corbett, et al., 2005. The financial impact of ISO 9000
certification in the US: an empirical analysis. Management
Science, 51(7): 1046-1059.
- After deciding to seek their first ISO 9000 certification,
publicly traded U.S. manufacturing firms experienced significant
abnormal improvements in financial performance.
- Careful design and implementation of consistent and documented
quality management systems can contribute significantly to superior
financial performance.
M. Casadesús et al., 2001. Benefits of ISO 9000 implementation
in Spanish industry. European Business Review, 3(6):
327-335.
Why Companies Become Certified
A. King, et al., 2005. The strategic use of decentralized
institutions: exploring certification with the ISO 14001 management
standard. Academy of Management Journal, 48(6):
1091-1106.
Costs of Certification
Naveh et al., 1999. ISO 9000 Survey '99: An Analytical Tool
to Assess the Costs, Benefits and Savings of ISO 9000
Registration. McGraw-Hill: New York.
-
Research found the average cost of certification for an
organization in petrochemicals is about $9 per thousand dollars of
sales for organizations with sales volumes smaller than $25
million, and $1 per thousand dollars of sales for companies with
sales volumes of $25-$100 million. Similar patterns hold for
organizations in six other industries investigated.
Value and More Value
E. Naveh and A. Marcus, 2004. When does ISO 9000 quality
assurance standard lead to performance improvements? Assimilation
and going beyond. IEEE Transactions Engineering
Management, 51(3): 352-363.
- A detailed survey of ISO 9000 in the United States finds that
"going beyond" the requirements of the standard increases its value
to the firm.
Brochure available from ISO for downloading and distribution in
English and French.
Certification, registration, accreditation - the jargon of
conformity assessment can be confusing. This white paper on the
value of accredited certification covers the basics and then
some.
The Standards Boost Business webiste has added two new
testimonial videos that feature corporate and industry leaders
speaking about the financial and strategic benefits their
organizations have reaped as a result of their participation in
standardization. The website also includes information on the
value of standards, toolkit, case studies, and FAQs.