Impact of ISO 9000 on Business
Performance
Galin Zhelyazkov
Design, Manufacture & Engineering Management; Strathclyde University of Glasgow
email: galin.zhelyazkov@strath.ac.uk
Abstract
Purpose – This paper will summarize the research on ISO 9000 certification impact on
business performance done during the last two decades and will group the results based on
variables affecting it. Sources from case studies, statistical reports and empirical studies have
been analysed in order to provide the best answer to the question: Does ISO 9000 affect
business performance?
Design/methodology/approach – An analysis on the most cited ISO 9000 sources was
performed. All the hypothesis were extracted and the outcome of it was used to define variables
affecting business performance of certified companies.
Findings – After implementing the ISO 9000 standard companies have raised sales, which
resulted in higher profit. For many of those companies, higher profit was the main goal. The
targeted goal for implementing the standard plays a key role in the outcome of the certification.
According to the results company size and post certified period does not affect ISO 9000
implementation and business performance.
Research limitations/implications – Testing other researches analysis brings some
limitations. The methods, data and approach taken differ from one research to another. The
sample data is from different business area, region, period and years. These aspect variations
may result in statistical error. On the other hand this study used limited number of research
papers, which does not grasp all possible findings in the area.
Originality/value – The paper identified the most common variables affecting business
performance. It summarize findings from the last two decades and provide a nice overview of
the current state of the art in respect to ISO 9000.
Keywords ISO 9000, business performance, TQM, ISO 9000 hypothesis, ISO 9000 process
variables
Paper type Literature review
1. Introduction
For the last two decades there were more than 1064785 ISO 9000 certified companies
around the world (ISO, 2009). “Globalisation has radically changed the competitive landscape
and process flows of business” (Chow-Chua et al.,2003).This proves the importance of
standardization for the business world-wide. One way for achieving this is by implementing
total quality management (TQM), such as ISO 9000 in all companies. Anyhow there are many
studies done on ISO 9000 impact on business and still the outcome is unclear (Chow-Chua et
al.,2003; Dick et all, 2008). This paper will attempt to review the most acknowledged studies
done in the area and to summarize their findings.
ISO 9000 is a quality management framework developed by the International Organization
for Standardization (ISO) in 1987. The standard is developed in such a way to be able to suit
small and medium size companies as well as different businesses areas. Since its first draft,
the standard has been revisited twice in 1994 and 2000. The 1994 version introduced ISO
9001, 9002 and 9003. The last improvements update the standard to the nowadays changes in
the business world and the three parts of ISO 9000:1994 were merged into ISO 9001 in 2000
version. This was required because version 1994 was often criticized for moving the focus from
quality improvement to process documentation (Emeka et al.,2008).
ISO 9000 is “designed to provide a basis for establishing, documenting and maintaining a
consistent and demonstrable quality assurance system” (Emeka et al., 2008). Another aspect
of ISO 9000 is that it doesn’t guarantee final product quality, because it originated as a quality
management framework applicable for organizations and not for products.
In order to obtain ISO 9000, a company has to go through a heavy burdensome process, which
is known to be expensive and time consuming. Corbett et al. (2005) said that price and time
vary depending on the organization. On top of that bottom line, the standard requires yearly
maintenance budget as well.
The section two, following this introduction, will present related research work. Section three will
list all variables affecting business performance identified. The outcome will be presented in the
section four. Section five will discuss the findings and their origin. Finally, a conclusion will be
drawn in section six, followed by section seven, cited sources.
2. Related Research
There are many studies done around the world about impact of ISO 9000 on business
performance and the results are still not the same. This paper will review studies done by
different researchers. The methodologies used in the studies vary from one researcher to
another. One is taking certified and non certified companies having the same business and
measuring certain parameters. Other is measuring the same company parameters before and
after certification. Third one is doing empirical analysis based on public companies data. The
papers examined base their findings on companies from US, Canada, UK, Singapore, Spain,
Greece, Australia, Japan and Denmark.
The sources for this study on ISO 9000 impact on business are coming from case studies,
statistical reports and empirical data analysis coming mainly from International Journal of
Quality & Reliability Management. Other sources are Journal of Global Business Issues,
International Journal of Operations & Production Management, British Journal of Management,
Journal of Manufacturing Technology Management, Journal of Operations Management,
European Journal of Operational Research and Journal of Managerial Issues.
The table below present hypothesises from 15 papers examined in a literature review. They are
marked as either green or red. The green correspond to true and red to false.
Paper by
Hypothesis / Theoretical framework
Robert Jones, Guenter Arndt,
Richard Kustin, (1997)
H1.That those companies which seek ISO QCert for non-developmental reasons perceive
that they obtain fewer beneficial outcomes from the exercise than those companies which
seek ISO QCert for developmental reasons.
H2. That longer-certified companies perceive to have experienced greater benefits from
QCert than recently-certified companies.
White, Margaret A. (1999)
H1: ISO 9000 companies experience higher levels of operational performance than nonISO 9000 companies in their industry.
H2: ISO 9000 companies experience higher levels of foreign sales than non-ISO
companies in their industry.
H3: ISO 9000 companies are more profitable than non-ISO 9000 companies in their
industry.
Hongyi Sun, (2000)
H1. TQM has a positive impact on the improvement of business performance.
H2. ISO 9000 certification has a positive impact on the improvement of business
performance.
H3. ISO certification has a positive impact on the implementation of TQM.
Tord Häversjö, (2000)
H1. ISO 9000 registered companies are more profitable than other companies.
Shams-ur Rahman, (2001)
H1. TQM impact on organizational performance is greater for SMEs with ISO 9000 than
for SMEs without ISO 9000.
Iñaki Heras, Gavin P.M. Dick, Martí
Casadesús, (2002)
H1. ISO 9000 registration’s impact on sales and profitability.
Mile Terziovski, Damien Power,
Amrik S. Sohal (2003)
H1. There is a significant and positive relationship between the quality culture of an ISO
certified organization and the benefits derived from the certification process.
H2. The motivation for ISO 9000 certification is a significant and positive predictor of the
benefits derived from certification.
H3. A facilitation style of the quality auditor, has a significant and positive relationship with
the ben- efits derived from ISO 9000 certification.
H4. The covariates company size, and the number of years an organization has been
certified have an impact on the strength of the relationship in H1, H2, and H3.
Clare Chow-Chua, Mark Goh, Tan
Boon Wan, (2003)
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.
Efthalia Dimara, Dimitris Skuras,
Kostas Tsekouras, Stavros
Goutsos, (2004)
H1. Firms pursuing a cost leadership strategy will adopt ISO 9000 due to latent
(unobserved) cost reduction reasons and the effect of adoption will be reflected on
financial performance indicators marking increased profitability. Whether such increased
profitability is also reflected on other financial indicators of performance is inconclusive.
H2. Firms pursuing a market differentiation strategy will adopt ISO 9000 due to latent
(unobserved) marketing reasons and the effect of adoption will be reflected on financial
performance indicators marking increased growth of sales. Whether such increase of
the firm’s market is also reflected on other financial indicators of performance such as
profitability is inconclusive.
H3. Firms pursuing a focus strategy will adopt ISO 9000 due to latent (unobserved)
focused marketing reasons and the effects of adoption will be reflected on financial
performance indicators marking increased growth of sales. If the focus strategy has a
strong element of cost leadership, the firm may also show improvement in profitability or
other indices of financial performance.
Charles J. Corbett, María J.
Montes-Sancho, David A. Kirsch
(2005)
H1. ISO 9000 certification leads to an increase in return on assets (ROA) and in return on
sales (ROS).
H2. ISO 9000 certification leads to an increase in Tobin’s Q.
H3. ISO 9000 certification leads to lower COGS/SALES ratios.
H4. ISO 9000 certification leads to higher relative SALES growth and to increased asset
turnover (SALES/ASSETS).
Mei Feng, Milé Terziovski, Danny
Samson, (2007)
H1. There is a significant and positive relationship between implementing procedures of
ISO 9000 certification and operational performance.
H2. There is a significant and positive relationship between implementing procedures of
ISO 9000 certification and business performance.
H3. There is a significant and positive relationship between organizational commitment to
implementing ISO 9000 certification and operational performance.
H4. There is a significant and positive relationship between organizational commitment to
implementing ISO 9000 and business performance.
H5. There is a significant and positive relationship between planning for ISO 9000
certification and operational performance.
H6. There is a significant and positive relationship between planning for ISO 9000
certification and business performance.
H7. The relationship between implementation of ISO 9000 and organizational
performance strengthens when covaried for company size.
Emeka S. Dunu, Michael F.
Ayokanmbi (2008)
H1. ISO 9000 certification will increase revenues. Since changes in revenues did not
control for acquisitions and divestitures, we also examined the changes in the ratio of
revenues to the firm's total assets.
H2. ISO 9000 certification will increase the ratio of revenues to firm's total assets.
H3. ISO 9000 certification will increase the operating income of the firm.
H4. ISO 9000 certification will increase the ratio of operating income to firm's total assets.
Micaela Martinez-Costa, Thomas
Y. Choi, Jose A. Martinez, Angel R.
Martinez-Lorente (2009)
H1. ISO 9001/2000 certified companies perform better than ISO 9000/1994 certified or
non-ISO companies.
H2. ISO 9001/2000 certified companies show a higher level of improvements in TQM
practices compared to ISO 9000/1994 certified or non-ISO companies.
Lafuente, E., Bayo-Moriones, A.
and García-Cestona, M. (2010)
H1a: Firms with higher rates of permanent employees are more likely to adopt ISO-9000
certification.
H1b: Less labour-intense firms are more likely to adopt ISO-9000 certification.
H2: Firms participating in foreign markets are more likely to adopt ISO-9000 certification.
H3: Firms producing intermediate goods are more likely to adopt ISO-9000 certification.
H4a: Firms with a more standardized production process are more likely to adopt ISO9000 certification.
H4b: Firms that have incorporated JIT practices are more likely to adopt ISO-9000
certification.
H5a: Poor performance increases the probability of adopting ISO-9000 certification.
H5b: The adoption of ISO-9000 certification positively impacts firm performance.
H6: Firms controlled by multinational firms are more likely to adopt ISO-9000 certification.
H7a: Ownership concentration positively impacts firm performance.
H7b: The relationship between ownership concentration and performance is stronger for
those firms where the main shareholder is a multinational firm.
Milena Alic, Borut Rusjan, (2010)
H1. Internal audits contribute to the achievement of a company’s business goals and thus
to business efficiency.
H2. Internal audits have more positive than negative effects on business performance.
3. ISO
9000 aspects influencing business performance
ISO 9000 adoption reason
Jones et al. (1997) did a study in the US, which output showed that companies trying to obtain
ISO 9000 for non-development purposes obtained less benefits from it, than those who seek
it for development reasons. Another study by Dimara et al. (2004) provides more evidence to
support that fact. According to them companies should be examined separately and categorized
according to their objectives. The results shows that ISO 9000 certified companies pursuing
a cost leadership strategy results in profit increase, while pursuing a market differentiation
strategy results in sales increase. Terziovski et al. (2003) also mentions in his study that the
motivation for ISO 9000 certification is a significant and positive predictor of the benefits derived
from certification.
ISO 9000:2000 and ISO 9000:1994
The newer version of ISO 9000:2000 was released to update the standard, mainly due to the
critics that ISO 9000:1994 was a bureaucratic process focused on documentation and not that
much on quality improvements (Emeka et al., 2008). A recent research by Martinez-Costa
(2009) prove that ISO 9001:2000 certified companies show a higher level of improvements in
TQM practices compared to ISO 9000:1994 certified or even non-ISO companies. On the other
hand the same study did not prove ISO 9001:2000 certified companies to perform better than
ISO 9000:1994 certified. This fact questions if the new standard succeeded to fulfil its objective.
Company post-certified period
Another aspect of ISO 9000 certification is the time. Companies certified for longer time has
shown better TQM improvements results. On the other hand companies with longrer ISO 9000
tradition did not experience greater benefits from the certification compared to recently-certified
companies (Jones et al., 1997; Terziovski et al., 2003). Controversy Corbett (2005) evidence
that, when analyzing ISO 9000 companies data, its important to use the 3 to 5 year postcertified period, to actually see the business performance improvement.
Company size
ISO 9000 has been adopted by small, medium and big size companies. Anyhow the company
size does not influence the process of ISO 9000 adoption and its impact on business
performance (Terziovski et al., 2003; Lafuente et al., 2010). Even more, there is no evidence
that companies with a higher rate of employees are more likely to get certified. Feng (2007)
confirms that company size does not affect the relationship between implementation of ISO
9000 and organizational performance.
Internal audit
Internal audit can contribute to an improvement in business performance. This statement
derives from the following “companies are internally motivated for the introduction and for
efficient performance of the ISO 9000, the quality objectives are connected to the business
objectives and consequentially the internal audit’s objectives can also be connected to the
business objectives through quality objectives” (Alic and Rusjan, 2010). In contrast to it
Terziovski et al. (2003) argues that “a facilitation style of the quality auditor, has not a significant
and positive relationship with the benefits derived from ISO 9000 certification."
Higher profit
Certified companies have higher profit than non-certified (White, 1999; Torn, 2000; Chow-Chua,
2003; Corbett, 2005). White (1999) is supporting the believe that “because of the potentially
high certification costs, firms that have slack resources may be more likely to add ISO 9000 to
their repertoire than firms without slack resources” and therefore the higher profit is not linked
with the standardization. Emeka (2008) confirms that certified companies have higher profit than
non-certified, but still cannot conclude this is result of ISO 9000 certification. Heras et al.(2002)
saw a progressive increase in sales and profitability for certified companies, but also confirmed
that those companies were performing better before certification compared to non-certified
ones.
Operational performance
According to Feng (2007) ISO 9000 certification has a positive and significant effect on
operational performance, however just by itself it does not lead to improvement in business
performance. What he also finds true is that management commitment and planning for ISO
9000 certification have positive impact on operational performance. Lafuente (2010) also
supports the view that ISO-9000 certification positively impacts firm performance.Controversy
White (1999) concluded in her study that ISO 9000 does not have impact on operational
performance. Her thesis is supported by Rahman (2001), who found out that impact on
organizational performance does not differ between certified and non-certified firms.
Higher sales
Lloyd’s Register Quality Assurance (LRQA, 1993) concluded ISO 9000 certification brings
mainly external benefits to an organization, e.g. it enabled companies to improve their business
performance by allowing them to bid for tenders (Terziovski et al, 2003). Tord’s study (2003), on
certified Danish companies, confirms better business performance based on increased sales.
Another study conducted by Heras (2003) supports the fact that ISO 9000 implementation have
a positive impact on sales and profitability. The opposite outcome comes from White (1999),
who evidences that ISO 9000 have no impact on operational performance and foreign sales.
Business performance
Does ISO 9000 has positive impact on business performance? All listed above has affect
ISO 9000 adoption and consequently have impact on business performance. Anyhow there
are not many researchers, who testes that hypothesis. Sun (2000) and Chow-Chua (2003)
did not found ISO 9000 certification to have positive impact on the improvement of business
performance. Opposite to them Feng (2007) found a significant and positive relationship
between ISO 9000 certification and business performance. His study also found relationship
between organization commitment and planning for ISO 9000 and business performance.
4. Results
The summary of the findings is presented in the table below.
Paper
Charles J. Corbett, María J.
Montes-Sancho, David A. Kirsch
(2005)
ISO
9000
adot
ion
reaso
n
ISO
9000:
2000
vs.
1994
Postcertifie
d
period
Yes
Com
pany
size
Inter
nal
audit
High
er
profit
Yes
Oper
ation
al
perfo
rman
ce
High
er
sale
s
Clare Chow-Chua, Mark Goh, Tan
Boon Wan, (2003)
Efthalia Dimara, Dimitris Skuras,
Kostas Tsekouras, Stavros
Goutsos, (2004)
Yes
Yes
Emeka S. Dunu, Michael F.
Ayokanmbi (2008)
No
Yes
Gavin P.M. Dick, Iñaki Heras, Martí
Casadesús, (2008)
Hongyi Sun, (2000)
Iñaki Heras, Gavin P.M. Dick, Martí
Casadesús, (2002)
Yes
Yes
Lafuente, E., Bayo-Moriones, A.
and García-Cestona, M. (2010)
No
Yes
Mei Feng, Milé Terziovski, Danny
Samson (2007)
No
Yes
Micaela Martinez-Costa, Thomas
Y. Choi, Jose A. Martinez, Angel R.
Martinez-Lorente (2009)
Mile Terziovski, Damien Power,
Amrik S. Sohal (2003)
Yes
Yes
No
No
Milena Alic, Borut Rusjan, (2010)
Robert Jones, Guenter Arndt,
Richard Kustin, (1997)
No
Yes
Yes
Yes
No
Shams-ur Rahman, (2001)
No
Tord Häversjö, (2000)
Yes
Yes
White, Margaret A. (1999)
Yes
No
No
Yes
3
1
1
0
1
6
2
3
No
0
1
2
3
1
0
2
1
5. Discussion
The certification process leads to change management. Change management is probably the
most difficult, time and money consuming operation in a company, so only strong arguments
can push the staff to accept it faster and smoother. This requires solid prove that ISO 9000
implementation can bring certain benefits, which are the targeted goal of that particular
organization. It can be increasing sales, improving product quality or customer satisfaction. In
any case those goals are to be obtained only by continuous senior management involvement.
The organizations using ISO 9000 for non-organization goals, e.g. marketing purposes, do not
benefit from the certification. The reason for this can be that such a change in organization can
happen only if the whole company employees are focused in that direction. To do so, a clear
understanding is needed and direct positive effect on their daily work should be visible.
The ISO 9000 standard was questioned from its origin and even nowadays. Anyhow the newer
version of its seems to resolve the found issues. That can be clearly result of the vast amount
of companies data. How the standard was implemented is still another aspect which should
be taken into consideration, as well as post certification period. We can expect that the longer
certification tradition a company has, the better quality output it gives. However this does not
apply for ISO 9000 certified companies. One reason could be that companies understand ISO
9000 as a target goal and not as a continuous process. Another is that the certification criteria
does not not evolve as fast as the business in our days.
An aspect this study eliminated is certified company size impact on business performance. ISO
9000 aims to be a flexible standard, that can be applied in both small, medium and large size
companies. The main distinctions are budget, time and effort for those organizations to get
certified. It is known that well performing companies get ISO 9000 certified and afterwards their
business performance continues to raise. While companies with bad performance aim to obtain
the certification as a saving mechanism, but they do not show distinctive improvements. Main
hope is not only the profit increase, but also the operational performance raise. Nevertheless
ISO 9000 does not seem to fulfill this goal. One reason could be that when measured, the
organization’s targeted goals were not taken into consideration. On the other hand operational
performance is difficult to measure in different organizations.
6. Conclusion
Based on the research outcome in the field we can conclude that ISO 9000 gives opportunities
for company internationalization, penetrating foreign markets and gaining market share,
consequently increasing sales, but it does not affect product quality.
This paper proves that company size does not play a role when measuring the business
performance of companies implementing ISO 9000. Next proof is that certified companies have
higher profit than non-certified companies, nevertheless most of those had higher profit prior to
the implementation process, so this is not a result of the certification. There are various reasons
for a company to get certified, but it got proven that if the intention is non-development the
overall organization benefits less than if the certification was used for company development
purposes.
There were some traces found that post certified period does not affect business performance,
but data is insufficient to draw such a conclusion.
Future research
The study presented in this paper is statistical analysis on research done about ISO 9000 in
the last two decades. The methodology, region, aspects measured and many other variables
differ from one study to another. In order to minimize error percentage, all studies should be
conducted again using the same methodology. Only then we can conclude 100 % truly the
results shown above.
Topics, which benefit from further research are:
Does ISO 9000:1994 has better impact on business performance than ISO 9000:2000?,
Does internal audit facilitates better certification implementation, which results in better business
performance?,
Does ISO 9000 increases operational performance?.
7. References
1. Charles J. Corbett, María J. Montes-Sancho, David A. Kirsch (2005), “The Financial
Impact of ISO 9000 Certification in the United States: An Empirical Analyzis”,
MANAGEMENT SCIENCE, Vol. 51, No. 7, pp.1046-1059
2. Clare Chow-Chua, Mark Goh, Tan Boon Wan, (2003) "Does ISO 9000 certification
improve business performance?", International Journal of Quality & Reliability
Management, Vol. 20, No. 8, pp.936 - 953
3. Efthalia Dimara, Dimitris Skuras, Kostas Tsekouras, Stavros Goutsos, (2004) "Strategic
orientation and financial performance of firms implementing ISO 9000", International
Journal of Quality & Reliability Management, Vol. 21, No. 1, pp.72 - 89
4. Emeka S. Dunu, Michael F. Ayokanmbi (2008), “The Impact of ISO 9000 Certification
on the Financial Performance of Organizations”, Journal of Global Business Issues, Vol.
146, No. 3, pp.580-595
5. Gavin P.M. Dick, Iñaki Heras, Martí Casadesús, (2008) "Shedding light on causation
between ISO 9001 and improved business performance", International Journal of
Operations & Production Management, Vol. 28, No. 7, pp.687 - 708
6. Hongyi Sun, (2000) "Total quality management, ISO 9000 certification and performance
improvement", International Journal of Quality & Reliability Management, Vol. 17, No. 2,
pp.168 - 179
7. Iñaki Heras, Gavin P.M. Dick, Martí Casadesús, (2002) "ISO 9000 registration’s impact
on sales and profitability: A longitudinal analyzis of performance before and after
accreditation", International Journal of Quality & Reliability Management, Vol. 19 Iss: 6,
pp.774 - 791
8. Lafuente, E., Bayo-Moriones, A. and García-Cestona, M. (2010), “ISO-9000 Certification
and Ownership Structure: Effects upon Firm Performance”, British Journal of
Management, Vol. 21, No. 3, pp. 649–665
9. Mei Feng, Milé Terziovski, Danny Samson, (2007) "Relationship of ISO 9001:2000
quality system certification with operational and business performance: A survey in
Australia and New Zealand-based manufacturing and service companies", Journal of
Manufacturing Technology Management, Vol. 19, No. 1, pp.22 - 37
10. Micaela Martinez-Costa, Thomas Y. Choi, Jose A. Martinez, Angel R. Martinez-Lorente
(2009), “ISO 9000/1994, ISO 9001/2000 and TQM: The performance debate revisited”,
Journal of Operations Management, Volume 27, No. 6, pp.495-511
11. Mile Terziovski, Damien Power, Amrik S. Sohal (2003), “The longitudinal effects of
the ISO 9000 certification process on business performance”, European Journal of
Operational Research, Vol. 146, No. 3, pp.580-595
12. Milena Alic, Borut Rusjan, (2010) "Contribution of the ISO 9001 internal audit to business
performance", International Journal of Quality & Reliability Management, Vol. 27, No. 8,
pp.916 - 937
13. Robert Jones, Guenter Arndt, Richard Kustin, (1997) "ISO 9000 among Australian
companies: impact of time and reasons for seeking certification on perceptions of
benefits received", International Journal of Quality & Reliability Management, Vol. 14,
No. 7, pp.650 - 660
14. Shams-ur Rahman, (2001) "A comparative study of TQM practice and organizational
performance of SMEs with and without ISO 9000 certification", International Journal of
Quality & Reliability Management, Vol. 18, No. 1, pp.35 - 49
15. Tord Häversjö, (2000) "The financial effects of ISO 9000 registration for Danish
companies", Managerial Auditing Journal, Vol. 15, No. 1/2, pp.47 - 52
16. White, Margaret A. (1999), “The relationship between ISO 9000 and business
performance: does registration really matter?”, Journal of Managerial Issues, Vol. 146,
No. 3, pp.580-595