The Value of Accredited Certification

Documents

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

Airports and Environmental Management Systems

A report published by the Transportation Research Board examines current practice of environmental management system development at airports in the United States and Canada. According to airports with established programs, EMS are an effective way to reduce environmental impacts, improve environmental performance, and increase operating efficiency for any size airport.

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:

Quality Management and Job Quality: How the ISO 9001 Standard for Quality management Systems Affects Employees and Employers

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.
Resolving Information Asymmetries in Markets: The Role of Certified Management Programs

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.

  • Certification provides credible information about hard-to-observe organizational attributes; in particular, certification reveals the existence of an underlying management system and such systems are associated with performance improvement.

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.

  • The existence of an EMS in a given year was associated with significant increases in environmental performance in the follow year.

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.

  • Basque companies report substantial operational and financial benefits from certification.

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.

  • Firms were more likely to seek certification when their potential trade partners might lack credible information or fear supplier opportunism.

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.
ISO 9001 in the Supply Chain

Brochure available from ISO for downloading and distribution in English and French.

The Third-Party Process: Waste of Resources or Added Value?

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.

Standards Boost Business Website

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.