ISO 9000 Implementation And Its Impacts On Business Performance

Determinants of Adopting ISO 9000 and its Impact on Performance

Discuss about the Determinants of the Adoption of ISO900 for Firm Performance.

ISO 9000 has been adopted by a significant number of companies to improve the quality of customer services and relations with stakeholders. These are among the many factors which determine the success of a business. The ISO 9000 includes quality management guidelines which help the organisation management in governance which is focused on improvements towards the set goals and objectives. Among the main focus of doing business is understanding the core needs and expectations of the customers. In this way, the products and services offered will correspond to the expectations, hence leading to increased chances of making more sales. Further, understanding the expectations of the customers helps in shaping and restructuring the objectives into more focused and achievable ones, which puts the business in a better position of success. Working towards understanding and restructuring business focus on customer-oriented strategies helps in improving customer satisfaction, which eases the cost of business by reducing the amounts spend on advertisements. Further, the sales and profits increase, which translates to higher returns on sales, assets, more investments and increased equity of the company.

A lot of strategic management approaches need to set in place to achieve the main goal satisfying the customer. The organisation need to employ qualified personnel – who are in a position to handle the customer needs effectively and develop goods and services which meet their requirements. Therefore, performance in an organisation is a joint activity which involves all round resources personnel, money and time among others. For instance, the number of employees with a doctor’s degree might be a determinant of the quality of products developed and services offered. In this case, organisations will wish to employ more of them to meet their objectives. However, this will be trading off with the expenditure of the company because high qualified individuals will be paid more compared to the others. Nevertheless, firms and organisations will wish to employ individuals with significant professional experience. As a result, most of the organisations have adopted a strategy of equipping their employees with knowledge by sponsoring their education to boost their professional capacity. This paper is focused on evaluating the determinants of adopting ISO9000 and its impacts on the performance of firms.

To evaluate the determinant of adopting ISO9000 and its impact on firms performance

1. To check whether there is a difference in the education of employees between certified and non-certified firms
2. To evaluate business performance and compare between certified and non-certified firms
3. To check whether there is an association between firm type and certification status

The management standards in a company can be streamlined by adopting quality guidelines, which provide support for decision making and methods of effective governance(Fikru, 2016). Firstly, it is important for a company to employ qualified individuals or help in equipping their capacity investing in training and education.  Hassan (2009) conducted a cross-sectional study which aimed at the understanding difference in perceptions of human resource management for ISO certified and non-ISO certified companies. It was found that ISO-certified companies were better in analysing contexts of set goals, management of career systems, and quality alignment(Fikru, 2014). The recommendation of the study indicated that there was a need for quality management, which should work along with quality assurance. Studies have shown that ISO certification encourages and guides firms to improve their service delivery strategies, hence significantly raising the general standards(Pekovic, 2010; Wu, Chu, & Liu, 2007). Renuka (2006) did a comparative study to assess the difference in performance between non-certified and certified small manufacturing companies in India. It was found that smaller companies have better ICT systems and better technologies compared to the non-ISO certified firms. This shows that ISO-certification helps companies to develop and embrace technology more, which is associated with better performance(Boiral, Guillaumie, Heras-Saizarbitoria, & Tayo Tene, 2018a).

Importance of Renewing ISO 9000 Guidelines

Din, Abd-Hamid, and Bryde (2011) did a study to check the performance of financial and project management among certified and non-certified construction companies in Malaysia. They found that ISO-certified companies had enhanced performance on financial and project management compared to the non-ISO-certified. This is a clear indication that ISO certification help organisations in improving their general performance(Du, Yin, & Zhang, 2016). It also important to renew the guidelines because there are successive improvements which are supported by research and case scenarios. Boiral, Guillaumie, Heras-Saizarbitoria,  and Tayo Tene (2018b) did a systematic review on the importance of ISO certification and they found that managers find it worthy to renew their certification because the improved guidelines would help to make informed decisions. This was also highlighted by Hoyle (2009) in the 2015 ISO certification guidelines.

Effective business and management environment is a core factor in determining the success of a business. Further, a good business environment and relations will translate to more profits, hence more investments. To achieve this, ISO 9000 guidelines are needed to assist in informed decision making, which will propel the performance of the business. Therefore, the chances of investing further will be improved for the certified organisations compared to the others(Ferrón Vílchez & Darnall, 2016; Jabbour, Jabbour, Latan, Teixeira, & de Oliveira, 2014).

This is a cross-sectional census study which includes data of service industries in China whose data was collected in 2008. Descriptive statistics of service firms in China as at 2008 in reference to ISO 9000 certification are presented in this paper, which includes frequency statistics, measures of location and deviation. Also, inferential statistics – chi-square, Pearson’s correlation, and t-test and ANOVA test were conducted to answer the research questions. SPSS statistical software version 23 was used to analyse the data.

Table 1: Frequency statistics table

	Frequency	Percent	Valid Percent	Cumulative Percent
Certification	Not Certified	5257	92.0	92.0	92.0
Certified	460	8.0	8.0	100.0
Total	5717	100.0	100.0
Overseas investment	No	5546	97.0	97.0	97.0
Yes	171	3.0	3.0	100.0
Total	5717	100.0	100.0
Two digit industry code	storage and transportation	392	6.9	6.9	6.9
telecommunication	184	3.2	3.2	10.1
computer service	365	6.4	6.4	16.5
software	390	6.8	6.8	23.3
business services	2722	47.6	47.6	70.9
Research and Development	222	3.9	3.9	74.8
specialized technology services	1200	21.0	21.0	95.8
technology exchange and promotion	242	4.2	4.2	100.0
Total	5717	100.0	100.0

 Table 2: Descriptive statistics of education by certification status

Certification dummy	Number of employees with master or doctor	Number of employees with bachelor	Number of employees with diploma	Number of employees with high school education	Number of employees with junior high school or below
Not Certified	Mean	1.10	9.49	11.34	11.63	6.54
N	5257	5257	5257	5257	5257
Std. Deviation	4.713	23.266	20.950	28.711	25.923
Certified	Mean	4.54	38.83	31.00	19.52	6.64
N	460	460	460	460	460
Std. Deviation	11.735	55.588	44.440	51.921	26.653
Total	Mean	1.38	11.85	12.92	12.26	6.54
N	5717	5717	5717	5717	5717
Std. Deviation	5.688	28.453	24.306	31.290	25.980

Table 3: Descriptive statistics on the performance of the company

	Mean	Standard Deviation	Variance	Median	Range	Mode	Count
Sales of the company	11699	32874	1080674168	4205	868176	1500	5717
Profit of the company	2068	7158	51242940	692	296159	300	5717
Total asset of the company	16473	54667	2988432750	3972	977548	2000	5717
Equity of the company	7694	31012	961749073	1600	879356	1000	5717
Total capital	4766	17120	293100401	1000	402100	1000	5717
Capital from government	1201	11265	126898793	0	402110	0	5717
Capital from overseas	349	4599	21149093	0	150000	0	5717
Capital from other sources	3216	11766	138428250	1000	400000	1000	5717
Return on sales	.191	.124	.015	.170	.492	.240	5717
Return on assets	.224	.209	.044	.155	1.008	.040	5717

Table 4: Independent test of difference in means of a number of employees between certified and non-certified

	t	Degree of Freedom	Sig. (2-tailed)	Mean Difference	95% Confidence Interval of the Difference
	Lower	Upper
Number of employees with master or doctor	-6.242	472.041	.000	-3.439	-4.522	-2.357
Number of employees with bachelor	-11.235	473.170	.000	-29.341	-34.473	-24.210
Number of employees with diploma	-9.396	477.010	.000	-19.658	-23.769	-15.547
Number of employees with high school education	-3.220	483.860	.001	-7.898	-12.717	-3.078
Number of employees with junior high school or below	-.081	5715	.935	-.103	-2.579	2.374

Table 5: Independent test of firms’ average performances by certification status

	t	Sig. (2-tailed)	Mean Difference	95% Confidence Interval of the Difference
	Lower	Upper
Sales of the company	-7.446	.000	-19458.787	-24593.361	-14324.214
Profit of the company	-5.712	.000	-2519.411	-3386.031	-1652.791
Total asset of the company	-6.078	.000	-18543.423	-24537.504	-12549.343
Equity of the company	-6.069	.000	-9873.213	-13069.046	-6677.381
Total capital	-5.574	.000	-4895.218	-6620.504	-3169.932
Capital from government	-1.711	.088	-780.928	-1677.387	115.532
Capital from overseas	-1.227	.220	-239.396	-622.733	143.940
Capital from other sources	-5.109	.000	-3874.894	-5365.116	-2384.673
Return on sales	6.750	.000	.040528	.028757	.052299
Return on assets	7.368	.000	.061691	.045246	.078136
Percentage of overseas investment in the total investment	-.105	.916	-.000765	-.015004	.013473

Capital from government and overseas and the percentages of overseas investment in the total investments are not significantly different between the ISO-certified and non-ISO-certified firms.

Table 6: Contingency table of certification status and firm type

	Certification dummy	Total
Not Certified	Certified
Two digit industry code	storage and transportation	Count	378	14	392
% within Two digit industry code	96.4%	3.6%	100.0%
telecommunication	Count	180	4	184
% within Two digit industry code	97.8%	2.2%	100.0%
computer service	Count	335	30	365
% within Two digit industry code	91.8%	8.2%	100.0%
software	Count	314	76	390
% within Two digit industry code	80.5%	19.5%	100.0%
business services	Count	2650	72	2722
% within Two digit industry code	97.4%	2.6%	100.0%
Research and Development	Count	189	33	222
% within Two digit industry code	85.1%	14.9%	100.0%
specialized technology services	Count	981	219	1200
% within Two digit industry code	81.8%	18.3%	100.0%
technology exchange and promotion	Count	230	12	242
% within Two digit industry code	95.0%	5.0%	100.0%
Total	Count	5257	460	5717
% within Two digit industry code	92.0%	8.0%	100.0%

Previous literature has shown that ISO 9000 has been of great importance in improving the general performance of organisations. According to the analysis of this report, all the findings have concurred with the findings of various previous research work (Chatzoglou, Chatzoudes, & Kipraios, 2015; Du et al., 2016). It was found that the number of an employee with education levels above high school degree was significantly higher in firms which were certified compared with the others. Only the variation of the number of employees with junior high school or below was homogeneous between the certified and non-certified firms. On average, the number of employees who had master or doctor, bachelors, diploma and high school education were significantly high in ISO-certified companies compared to those that were not certified. This is an indication ISO-certification encourages employment of qualified personnel which improves customer services and general performances of the firms.

Descriptive Statistics of Education and Company Performance

The analysis on the general performance of the firms indicates that there were significant differences in means of the sales, profits, and equity of the companies, with certified companies recording higher figured compared with the others. Also, total assets, return on assets and sales were significantly different. Although capital from other sources was significantly different between certified and non-certified companies, capitals from overseas and government were not. Further, the percentage of overseas investments on the total investment was not significantly different with a p-value of 0.916. This shows that overseas investments are not much influenced by ISO certification. Further, a chi-square test of independence was conducted to check whether there was an association between the firm type and certification status. The Pearson’s Chi-square statistic is 381.455 with a p-value < 0.001, indicating that there is a significant association between firm type and the ISO certification status. Only 8% of the firms were ISO certified (460 firms compared to 5257 companies).

In conclusion, we can affirm that most of the findings in this papers have coincided with previous research findings. It is evident that having ISO certification influences firm’s employment criteria, hence improving the quality of their products and services. The managerial leadership of service firms should consider ISO certification because it will improve their financial performance. This is because the quality management guidelines will help in informed decision making – which is the key to effective development. 

This study was limited to service firms only, which limits the study results, hence they might not be generalizable to the entire population. More research should be performed to cover the gap in the future. 

References

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Boiral, O., Guillaumie, L., Heras-Saizarbitoria, I., & Tayo Tene, C. V. (2018b). Adoption and Outcomes of ISO 14001: A Systematic Review. International Journal of Management Reviews, 20(2), 411–432. https://doi.org/10.1111/ijmr.12139

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