Pertanika J. Soc. Sci. & Hum. 12(1): 1-9 (2004) ISSN: 0128-7702© Universiti Putra Malaysia Press

ISO 9000: Link between Seeking Certification and Perceived Benefit

SALLEH YAHYAInstitut Pengurusan Teknologi dan Keusahawanan,

KoUj Universiti Teknikal Kebangsaan Malaysia,Karung Berkunci 1200,

75450 Ayer Keroh, Melaka, Malaysia

Keywords: ISO 9000, certification, benefit, development

ABSTRAKMakalah ini menerangkan keputusan kajian tentang faedah tertanggap di dalam pensijilan ISO9000. Seterusnya, kajian juga meliputi hubungan di antara tujuan untuk mendapatkan persijilanISO dengan faedah tertanggap. Keputusan diasaskan oleh tinjauan daripada 405 syarikat diMalaysia yang 307 daripadanya adalah syarikat ISO dan 98 syarikat bukan ISO. Hasil k~ian

menunjukkan tiga faedah dalaman hasil daripada pelaksanaan ISO: (l) Dokumentasi yang LebihBaik (2), Kesedaran Kualiti yang Tinggi, dan (3) Memperbaiki Sistem Pengukuran. Bagi faedahluaran, perkara-perkara berikut telah dikenal pasti: (1) Peningkatan Kepuasan Pengguna, (2)Peningkatan Kualiti Terjangka, dan (3) Berdaya Saing. Keputusan statistik berkenaan hubungandi antara tujuan untuk mendapatkan pensijilan ISO dengan faedah tertanggap, menunjukkanbahawa syarikat yang mempunyai alasan ke arah pembangunan beroleh faedah dalaman yanglebih tinggi dari aspek: (1) Pengurangan Pembaziran, (2) Meningkatkan Kerjasama Di antara]abatan, (3) Kesedaran Kualiti yang Tinggi, dan (4) Peningkatan Tindakan Pencegahan, apabiladibandingkan dengan syarikat yang tidak berasaskan pembangunan. Bagi syarikat yang berasaskanpembangunan dan kepelbagaian, perbezaan yang signifikan hanyalah ditemui pada aspek kesedarankualiti yang tinggi. Manakala tiada perbezaan signifikan yang ditemui bagi syarikat yang berasaskankepelbagaian dan tanpa pembangunan. Dari sudut faedah luaran, tiada perbezaan signifikan yangditemui bagi mana-mana kombinasi tujuan untuk mendapatkan sijil ISO. Ini mungkin berdasarkanfakta bahawa faedah luaran adalah merupakan faktor-faktor luaran yang tidak boleh diambil kirasebagai tujuan untuk mendapatkan sijil ISO.

ABSTRACTThis paper presents the result of a study on perceived benefits of obtaining ISO 9000 certification.In addition, the link between the intentions of seeking ISO certification with perceived benefitwas explored. The results were based on a survey of 405 Malaysian companies with 307 being ISOcompanies and 98 non-ISO companies. The study revealed that three internal benefits wereexpected from ISO exercise: (1) Better Documentation (2), Greater Quality Awareness, and (3)Improved Measurement System. For external benefits, these items were identified: (1) ImprovedCustomer Satisfaction, (2) Higher Perceived Quality, and (3) Competitive Edge. Statistical resultson the link between the reason for seeking the certificate with perceived benefit have indicatedthat companies with developmental reasons have higher perceived internal benefits in areas suchas: (1) Reductions in Scrap, (2) Improved Departmental Co-operation, (3) Greater QualityAwareness, and (4) Higher Preventive Action, as compared to non-developmental companies. Forpair developmental and mixed, significant difference was only evidenced for greater qualityawareness. No significant differences were identified for pair mixed and non-developmental. Interms of external benefits, significant differences were not found for any combination of reasonseeking certification. This may be due to the fact that external benefits were exogenous factorsthat could not be considered as reasons for seeking certification.

Salleh Yahya

INTRODUCTION

Since the introduction of quality concept, variousmethods have been advanced in materializingthis particular concept. The more acknowledgedmethods included Total Quality Management(TQM) , Statistical Process Control (SPC), QualityFunctional Deployment (QFD), Kaizen,International Standard Organization (ISO), andBusiness Process Re-engineering (BPR). Amongthese methods, ISO 9000 appeared to be themost controversial one (Sun 1999). Manyarguments have been put forward about thebenefit and cost of ISO 9000. Criticism was loud,yet there were many advocates for ISO 9000.Taylor (1995) argued that ISO 9000 is necessaryfor the implementation of TQM. Garver andLucore's (1994) enthusiasm toward ISO 9000was reflected by believing that in the future, ISO9000 is imperative for business. Jones et at. (1997)have provided statistical evidence showing thatcertified companies have eventually benefitedfrom implementation of ISO 9000. Motwani etai. (1996) have summarized the benefits of ISOcited by Dzus (1991), Sateesh (1992), and Sprow(1992) into 6. These benefits are businesses withEuropean countries, recognition by theinternational community; marketing edge;improvement in quality, productivity, costs;discarding second-party audits by prospectivecustomers, and being listed in the international"certified supplier" directory. Benefits such asreduced customer complaints and conformingto specification were also reported (Kemezis1992) .

On the other hand, Sun (1999) has claimedthat depending only on ISO 9000 would notguarantee quality improvement. To support thisclaim, it has pointed out that emphasis of ISO9000 was not on Quality improvement. ISO 9000focused more on quality management systemand quality assurance. A similar notion wasperceived by Juran and Gryna (1988), withreference to European inclination to ISO 9000.Lee (1998) in a study of ISO 9000 developmentin Hong Kong has revealed one big limitation ofISO 9000, which is the use of technology.Nonetheless, Lee's study has lent support toimplementation of ISO 9000. Motwani et at.(1996) have listed out five major criticisms ofISO 9000 from previous literature. Theircriticisms are the litigation problems concerningproduct safety, unaddressed issues on continuous

improvement, preparation costs for certification,and maintenance of ISO certification.

Following all these debates, this studyattempts to assess the perceived benefits of ISO9000. This specifically refers to the degree ofperceived ISO (internal and external) benefitsof its implementation. Furthermore, therelationship between the intentions of seekingISO certification with perceived benefits wasalso explored. This study would contribute tothe presently scarce literature on the MalaysianISO experience.

ISO Perceived Benefit

Jones et at. (1997) have delicately approachedthe perceptions of benefits received from ISO.Attempts have been made to see the relationshipbetween intentions of applying ISO withperceived benefits. A questionnaire survey of272 Australian ISO 9002 quality-certifiedcompanies has indicated that those companiesthat seek certification for internal developmentexperienced a wider range of favorable outcomesfrom ISO than companies that seek certificationfor the purpose of "obtaining certificates". Inparticular, the favorable outcomes consisted ofgreater standardization of operationalprocedures, fewer mistakes and less defectivework, fewer customer complaints, more business,lower operating costs. Statistical evidence hasalso indicated that longer-certified companiesdid not experience more beneficial outcomesfrom ISO than recently-certified companies,irrespective of the purpose of applying forcertificates. However, authors revealed thatlonger-certified companies seem to outperformthe newcomers in terms of businesses andoperating costs. This finding holds true only forcompanies that seek certification for internaldevelopment.

Leung et ai. (1999) presented the results ofcosts and benefits from obtaining ISOcertification. Using 500 ISO certified companiesin Hong Kong, the survey result buttressed theadoption of ISO, as 65% of the sample showedthat the certification is worthwhile, and 76%believed that costs involved in obtaining thecertificate are inexpensive. Three factors wereinvestigated in its effect upon ISO cost andbenefit, which were the duration of time takento get certification, number of years sincecertification and reason for certification. The

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ISO 9000: Link between Seeking Certification and Perceived Benefit

first two factors did not significantly affect cost­benefit. For the third factor, few companies thatseek certificates to satisfy customers requirementsindicated that benefits outweigh costs, ascompared to companies seeking certification dueto internal development. However, statisticalresults failed to indicate the significance of thisfactor. This fmding commensurates with Jones etal. (1997) study but contradicted the study resultof lloyd's Register Quality Assurance (Osman1994; Brecka 1994). It has found that longer­established certified companies (more than 5years) enjoyed many more benefits compared tonewcomers (less than 5 years).

In a study on the relationship between TQMpractice and an organization's performance usinga sample consisting of 1341 manufacturing siteslocated at Australia and New Zealand, Terziovskiand Samson (1999) have conveyed anunfavorable message for ISO. As ISO status wassuspected in influencing organizationperformance, its effect was removed from a TQMModel that linked TQM with organizationalperformance. After controlling this factor, itseemed that ISO did not have any significantexplanatory power of organizationalperformance, irrespective of presence or absenceof TQM environment. The authors believed that"ISO certification is implemented as part of theTQM philosophy and methods" (Terziovski andSamson 1999).

Sun (1999) showed similar inclination withregard to the effectiveness of ISO. Contributionsof ISO and TQM towards quality improvementin 600 companies located in 20 differentcountries were elicited. The results postulatedthat TQM performed better than ISO. A strangephenomenon occurred as results showed thatnon-ISO certified companies exhibited atendency of outperforming ISO-certifiedcompanies. The explanation given was the non­ISO certified companies might have implementedother TQM methods. However, extensive use ofISO techniques tends to associate with higherachievement. Learning effect may be the reasonbehind this occurrence. In regard to this, theauthor proposed a combination of ISO andTQM, which produced much more qualityimprovement as compared to companiesadopting solely TQM and ISO.

Haversjo (2000), in an attempt to assessfinancial effects of ISO 9000 registration, hasrevealed that fmancial enhancement occurred

simultaneously with registration. The authorcontended that a third variable may be in playhere and not necessarily the effect of ISOregistration. The third variable, according to theauthor, could be other improvement programsinitiated by registered companies. Hence,financial effect is due to innovative managementrather than ISO 9000. However, the view is keptopen as ISO 9000 may be one of theimprovement technologies applied by "the mostinnovative management". Than, ISO 9000 couldbe considered as worthwhile after all.

In another study, Lee et al. (1999), havepresented the survey result of 363 companies onbenefits of certification. The samples weremanufacturing (114 companies), service (110companies), and construction (139 companies).Table 1 below shows the findings documentedin their study.

TABLE 1Benefits of certification

Benefits Percent(%)

Clearer work procedures 99Improved quality of product/service 88Improved team spirit 89Better control of subcontractors 73Increased efficiency 68Less customer complaint 61

Source: Lee, T. Y., K. N. Leung and C. C. Chan (1999)

METHODOLOGYThis study forms a part of a larger study onquality practices among Malaysian manufacturers.405 sets of usable questionnaire are utilized inproducing the present results. Respondents'profiles are as in Tables 2 and 3. The 8dimensions of internal benefits were consideredhere, namely: scrap/rework, inter-companycommunications, departmental/cross functionalcooperation, documentation, measurementsystem, cultural change, quality awareness, andprevention. A 5 point Likert-scale was used uponthese 8 dimensions, with 5 = most important and1 = less important. The external benefitconstructs were also based on a 5 - point Likert­scale, with 7 distinct items. The items stipulatedin the questionnaire consist of: customersatisfaction, market share, perceived quality,company's glory, competitive edge, time tomarket, and quality audits (external).

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TABLE 2Respondent profile

Paid Up Capital (RM) ISO Non-ISO Operating Years

Not specified 95 28 Not specifiedbelow 0.5 million 5 9 below 5 years0.5-2.5 million 44 28 5-10 years2.5-5 million 21 8 10-15 years5-7.5 million 21 10 15-20 years

7.5-10 million 6 0 20-30 years

10-25 million 45 6 greater or equal to 30 years25-50 million 37 350-100 million 17 3greater than or equal 16 3100 million

Total 307 98 Total

TABLE 3Respondent grouping by sectors

Sectors

Agricultural & Machinery ProductsAutomotive & Component ProductBuilding Materials & Related ProductsCement & Concrete ProductsCeramics & Related ProductsChemical & Adhesive ProductsDiversified IndustriesElectrical & Electrical ProductsFood & BeveragesFootwear & Leather ProductsFurniture & Related ProductsGift & JewelryIndustrial & Engineering ProductsIron & Steel ProductsPetroleum & GasPharmaceutical, Medical Equipment, Cosmetics & ToiletriesPlastic Resins & Plastic ProductsPaper, Printing, Packaging & LabelingRubber ProductsStationeryTextiles &Wearing ApparelConsultancy Services & Industrial EstatesComputer & Related ProductsTransportation & Freight ForwardingMining and Quarrying

ISO Non-ISO

13 214 1077 2668 2041 1569 1525 10

307 98

ISO Non-ISO

3 212 322 614 04 119 64 1

79 1414 191 25 61 3

18 620 53 02 216 322 614 31 05 12 23 12 01 0

A reliability analysis was performed on the 8internal benefits and 7 external benefits usingCronbach's coefficient alpha (Cronbach 1951).This approach was being adopted to examinewhether these instruments were internally relatedor not in measuring degree of ISO's internal/

external benefits. Cronbach's alpha approachwas preferred, as it is free from limitations ofsplit-half (Flynn et at. 1990). Two separatereliability analyses are conducted as the natureof external and internal benefit would be distinctand different, and both the analysis outcomes

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are documented in Table 4. Using SPSS reliabilityanalysis-Cronbach's alpha, the Cronbach's alphavalue along with Alpha if item deleted for eachinstrument were derived. According to Hair etal. (1992), an alpha value higher than 0.70 andabove is considered as acceptable. WithCronbach's alpha of 0.8388 for internal benefitand 0.7851 for external benefit, and Alpha ifitemdeleted over 0.70 for all instruments, it could beconcluded that items stipulated in internal andexternal benefit were (statistically) consistentand reliable in measurement of perceived benefitof ISO.

RESULTS

Internal Benefit

Table 4 also depicts the mean scores for eightstipulated questions on internal benefitsgenerated by ISO. The highest mean value forinternal benefit was (i) Better Documentation,which appeared as the most important benefitand this fmding commensurates with the findingof Lee et al. (1999b) as shown in Table 1. ISOdisciplines were seen as "imposed on calibration,document control and internal audit ensure acompany operating efficiently (Pun et al. 1999)."Hence, the adoption of ISO would eventuallylead to establishment of new systems andprocedures that intend to document relevant

activity performance. Data solicited throughdocumentation was used in conducting gapanalysis. Velury (1996) contended that emphasisof ISO 9000 is on analyzing the gap between thestandard and existing procedures, which thenfind ways to eliminate the gap. Pun et al. (1999),on the other hand, claimed that emphasis ofISO 9001 is on validating the supplier's ability inconforming to contract requirement.

(ii) Greater Quality Awareness is the secondmost important internal benefit on the list. Itseems that many perceived certification of ISOas eventually improving quality awareness of theiremployees. Perhaps as organizations practise andfulfill all clauses specified in ISO, it is expectedthat the general perception on quality wouldchange and be improved. However, this may notbe true as many hold that ISO is weak oncontinuous improvement (Chin et al. 1995; Pun1998). Moreover, claim has been made that ISOis more toward process and customer focus. Itlargely depends on an organization's ability tofulfill customer requirement. It would bepresumptuous to claim that practices that aim tofulfill contract specifications lead to greaterquality awareness.

(iii) Improved Measurement System isanother important benefit that has been highlyexpected. ISO stresses the meeting of defined

TABLE 4Reliability analysis of internal and external benefit

Internal Benefit Mean Std. Dev Alpha if itemdeleted

Cronbach'sAlpha

Reduced scrap 3.81 1.00 0.8360 0.8388Enhance inter-company communication 3.87 0.87 0.8187Improve departmental cooperation 4.02 0.87 0.8052Better documentation 4.44 0.72 0.8330Improved measurement system 4.13 0.79 0.8202Positive cultural change 3.87 0.89 0.8099Greater quality awareness 4.24 0.74 0.8084Increase prevention action 4.03 0.86 0.8155

External Benefit Mean Std. Dev Alpha if item Cronbach'sdeleted Alpha

Improve customer satisfactionIncreased market shareHigher perceived qualityGlory for the companyCompetitive edgeQuicker time to marketReduced quality audits

4.433.914.313.984.273.553.16

0.741.050.801.070.831.061.22

0.76420.76360.75490.76260.75700.73220.7691

0.7851

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requirements stipulated in ISO principal clauses.In order to assess and verify the actualperformance with standards spelt out by ISO,empirical data must be at hand. Hence,comprehensive measurement system must beestablished in this connection. With this essentialsystem in place, the basic requirement of ISOcould be attained; measurement system enablesorganizations to document process andprocedures that ensure conformity tospecifications. However, caution was noted onthe objectives of collecting and processing data(Lee et al. 1999). Pouring in all these effortswithout clear objectives would be a waste ofresources.

External Benefit

Views that ISO enables establishments of effectivequality systems which enhance and facilitatetrade, have been expressed (BSI 1994; Mahoneyand Thor 1994). Many buyers and traders in themarkets, irrespective of national or international,display vested interest in those organizationsthat have ISO certification. Possessing thiscertificate to some extent reflected organization'scommitment to quality and dedication ofperforming in accordance with customerrequirements. Hence, the result of (i) ImproveCustomer Satisfaction ranked at top positionshould not be surprising at all. Customers orbuyers appreciate organizations that displayattractive and beautiful performance in regardto products or services. Thus, owning thecertification consequently improves existingcustomer satisfaction upon product and itsproducer.

(ii) Higher Perceived Quality falls in secondposition. This benefit is the result of generalpublic perception on ISO. Contention has beenmade that in future, businesses and organizationsshould possess ISO certification in order tooperate and sustain in operation (Garver andLucore 1994). These beliefs and the recognitionof ISO means that those holding this particularcertification would display greater qualitycommitment and dedication than those that didnot have this certification. Thus, holders of ISOcertification generally yield higher perceivedquality before certification.

The reasoning presented above is alsoapplicable for (iii) Competitive Edge. With themajority of the public upholding the ISO, thiscertification has actually turned into a strategic

tool or weapon in outperforming competitors.Furthermore, holders of certification sent amessage that their products followed thestringent requirement of ISO clauses and henceshould perform better than their competitors.This particular competitive edge becomesvaluable for those who intend to penetrate intothe European community. The Europeancommunity has strongly advocated theimplementation of ISO (Sun 1999; Chelsom1997) .

Relationship between Intention and Perceived Benefit

The hypothesis advanced by Jones et al. (1997)was tested here in order to compare and contrastthe present study with the prior one. Thehypothesis that is of interest here is:

H: Organizations that apply ISO certificationfor non-developmental reasons perceivedfewer benefits obtained from ISOimplementation than those organizationsthat apply ISO certification fordevelopmental reasons.

To categorize the reasons gave byrespondents, the grouping was based onparadigms proposed by Jones et al. (1997):• Non-developmental reasons: requirement of

major customer(s), desire not to be lockedout of future tendering processes or markets,realization that it is progressively becominga requirement of doing business, marketingand public relations tool.

• Developmental reasons: desire to improvethe company's internal processes, desire toenhance the overall competitiveperformance of the company.

• Mixed reasons: constitutes the combinationof developmental and non-developmentalreasons.

Independent sample t-test (Table 5) wascarried out upon these three pairs: mixed andnon-developmental, mixed and developmental,developmental and non-developmental. Theresult for pair mixed and non-developmentalwas omitted here as none of the items forexternal and internal benefits exhibited statisticaldifferences.

For pair developmental and non­developmental, statistical differences (p<O.l) arefound for four items in internal benefits, namely:

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TABLE 5Independent sample t-test result

Develop and mixed Develop & on-develop

T SIG. cliff T SIG. diff

External BenefitImprove customer satisfaction 0.875 0.383 0.10 1.095 0.275 0.11Increased market share 0.662 0.509 0.11 0.060 0.952 0.01Higher perceived quality 0.925 0.356 0.12 0.313 0.754 0.04Glory for the company 0.151 0.880 0.03 -0.560 0.576 -0.08Competitive edge -0.526 0.599 0.590 0.556 0.07

0.07Quicker time to market 0.834 0.406 0.14 0.903 0.368 0.14Reduced quality audits -0.246 0.806 0.058 0.953 0.01

0.04Internal BenefitReduced scrap 0.621 0.536 0.10 1.744 0.083 0.24Enhance inter-company communication 0.339 0.735 0.04 1.492 0.137 0.17Improve departmental cooperation 0.342 0.733 0.04 2.016 0.045 0.24Better documentation -0.447 0.655 1.145 0.253 0.11

0.05Improved measurement system 0.125 0.901 0.02 0.542 0.588 0.06Positive cultural change -0.125 0.901 0.561 0.575 0.07

0.02Greater quality awareness 2.986 0.003 0.33 2.370 0.019 0.23Increase prevention action 0.321 0.749 0.04 1.824 0.070 0.22

reductions in scrap, improve departmental co­operation, greater quality awareness, and increaseprevention action. For pair developed and mixed,statistical difference is evidenced only for greaterquality awareness. In contrast to Jones et al.(1997) fmdings, mixed and non-developmentalpair did not exhibit any form of significantdifference for all items under internal andexternal benefit. In addition, findings of statisticaldifference in pair developmental and mixedalso contradicted with Jones et at. (1997) studywhere the opposite has occurred. However, thedivergence of fmdings is considered mild as onlyone item (greater quality awareness) showedstatistical difference.

The plausible explanation for no statisticaldifference for external benefit for all three pairsmight rest on the factors themselves. As externalbenefits are exogenous variables for ISOcertificate organizations, the endogenous variableof seeking certification should not cast anysignificant influence upon perceived externalbenefits. In other words, the external benefitsperceived are more of reflection upon currentbusiness development and internationalcommunity perception of ISO. Hence, no

significant differences should be expected, andthis is what happened here, in respect of reasonin seeking ISO certification.

The same argument is implied for internalbenefits. Motives of applying ISO certificationexert salient impact upon perceived internalbenefit. This is shown through statisticaldifferences in internal benefit for pair developedand non-developmental, and a slight extent forpair developmental and mixed. For organizationsthat explored further into the realm of qualitywith the purpose of internal improvement, itwas mostly initiated by top management. Thecase of operation or supporting level employeesurging top management to pursue qualityimprovement is very rare in reality, hence itwould not be assumed here. With strong drivefrom top management, an organization's qualityawareness improved consequently. Proactiveimplementation of ISO exercise usually requiredinterdepartmental involvement and collaboration.As a result, an organization with a more seriousattitude toward ISO exercise naturallydemonstrates higher perceived benefit ofinterdepartmental co-operation.

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Organizations concerned with internalefficiency normally keep an eye open on defectrates of products during the production process.ISO exercise generally produces adequate qualityrecord and product performance data, whichmay be of use in fixing line errors andformulation of preventive actions. Lee et al.(1999) have contended that ISO registeredorganizations exhibited better performance inemploying quality records, which enable thesefirms to pinpoint the exact training needed toavoid repetition of errors. From here, theargument is clear. Statistical differences forreduced scrap and increase preventive actionhave buttressed forwarded claims.

Absence of significant differences for bothimproved measurement system and betterdocumentation in three different pairs might bedue to weight allocated upon these two elementsby ISO certificate. Notable weight is placed uponauditing through document for ISOimplementation when certifying the ISOapplicant. Hence, regardless of what motivatesthe applicant of ISO, adequate attention andresources are directed toward establishment ofproper measurement and documentationsystems. As for inter-company communication,this is not strongly emphasized by ISO. Thisexplains the insignificant difference for thisparticular item. Finally, positive cultural changesseemed likely soon as the shift of organizationculture is apparent and identifiable.

To sum up, developmental companiesperceived higher degree of beneficial outcomesas compared to non-developmental companies.As for mixed companies, its intention of seekingISO certification may have caused theinsignificant differences for all items.

CONCLUSION

The present paper has found that these threeinternal benefits were expected from ISOcertification: (1) Better Documentation (2)Greater Quality Awareness, and (3) ImprovedMeasurement System. For external benefits, theseitems were identified: (1) Improved CustomerSatisfaction, (2) Higher Perceived Quality, and(3) Competitive Edge. The identified internalbenefits represent the core or thrust of ISOcertification, which imply that the samples seekcertification to derive the essence of ISO andinstill it into their companies. Result for externalbenefits were in line with existing literatures, in

which the recognition of internationalcommunity upon ISO certification hastransformed this certificate into a tool that helpsincrease customer satisfaction, perceived qualityand competitive edge.

Investigation of the relationship betweenreasons seeking certificate with perceived benefitshas arrived with the following results:• For internal benefits: significant differences

are found for pair developmental and non­developmental in: (1) reductions in scrap,(2) improved departmental co-operation, (3)greater quality awareness, and (4) higherprevention action. For pair developmentaland mixed, significant difference was onlyfound for greater quality awareness. Finally,for pair mixed and non-developmental, noneof the items has significant differences.

• For external benefits: not significantdifferences were identified for any pair ofreasons seeking certification.

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