ISO 9000

ISO 9000 is a set of international standards of quality management that have become increasingly popular for large and small companies alike. "ISO is grounded on the 'conformance to specification' definition of quality, " wrote Francis Buttle in the International Journal of Quality and Reliability Management. "The standards specify how management operations shall be conducted. ISO 9000's purpose is to ensure that suppliers design, create, and deliver products and services which meet predetermined standards; in other words, its goal is to prevent non-conformity." Used by both manufacturing and service firms, ISO 9000 had been adopted by more than 100 nations as their national quality management/quality assurance standard by the end of 1997.

This quality standard was first introduced in 1987 by the International Organization for Standards (ISO) in hopes of establishing an international definition of the essential characteristics and language of a quality system for all businesses, irrespective of industry or geographic location. Initially, it was used almost exclusively by large companies, but by the mid-1990s, increasing numbers of small-and mid-sized companies had embraced ISO 9000 as well. In fact, small and moderate-sized companies account for much of the growth in ISO 9000 registration over the past several years. The total number of ISO 9000 registrations in the United States increased from a little more than 2, 200 in 1993 to more than 17, 000 in 1998; of those 17, 000 registrations, nearly 60 percent were held by companies with annual sales of $100 million or less.

The increased involvement of small and midsized firms in seeking ISO 9000 registration is generally attributed to several factors. Many small businesses have decided to seek ISO 9000 certification because of their corporate customers, who began to insist on it as a method of ensuring that their suppliers were paying adequate attention to quality. Other small business owners, meanwhile, have pursued ISO 9000 certification in order to increase their chances of securing new business or simply as a means of improving the quality of their processes. "The pressure for companies to become ISO 9000-certified is absolutely increasing and will continue to increase, " predicted one management consultant in an interview with Nation's Business. "The question many smaller companies have to ask is when, not if, they [will] get ISO 9000-registered."

ELEMENTS OF ISO 9000 QUALITY MANAGEMENT SYSTEMS

The standards of ISO 9000 detail 20 requirements for an organization's quality management system in the following areas:

* Management Responsibility
* Quality System
* Order Entry
* Design Control
* Document and Data Control
* Purchasing
* Control of Customer Supplied Products
* Product Identification and Tractability
* Process Control
* Inspection and Testing Control of Inspection, Measuring, and Test Equipment
* Inspection and Test Status
* Control of Nonconforming Products
* Corrective and Preventive Action
* Handling, Storage, Packaging, and Delivery
* Control of Quality Records
* Internal Quality Audits
* Training
* Servicing
* Statistical Techniques

MODELS OF ISO 9000

The ISO 9000 quality standards are broken down into three model sets—ISO 9001, ISO 9002, and ISO 9003. Each of these models, noted Industrial Management contributors Stanislav Karapetrovic, Divakar Rajamani, and Walter Willborn, "stipulate a number of requirements on which an organization's quality system can be assessed by an external party (registrar)" in accordance with the ISO's quality system audits standard. "A quality system, " they added, "involves organizational structure, processes, and documented procedures constituted towards achieving quality objectives."

Each of the three sets concentrates on a different quality area. ISO 9001 is the most wide-ranging, for it specifies the various operating requirements in such areas as product design and development, production, installation, and servicing. ISO 9002 is concerned with quality assurance at the production and installation stages. ISO 9003 covers testing and inspections. As Karapetrovic, Rajamani, and Willborn noted, "if the minimum requirements are met [for the above operating areas], a registrar accredited by a national accreditation institution issues a certificate of compliance and the organization's quality system becomes ISO 9001, 9002, or 9003 registered."

It is worth noting that certification is handed out for individual quality systems, not companies; this means that one company may hold more than one ISO 9000 registration. Moreover, Harvey R. Meyer pointed out in Nation's Business that "the standards do not certify the quality of a product or service. Rather, they attest that a company has fully documented its quality-control processes and consistently adheres to them. If that's done, quality products and services generally follow."

In addition to ISO 9000, two related quality standards emerged in American industries in the late 1990s. ISO 14000, also known as the Environmental Management Systems Standards, is intended to combine environmental management systems with the ISO 9000 quality system. The second system, QS9000 is an adaptation of ISO 9000 to meet the specific needs of the "big three" American automobile manufacturers—Ford, General Motors, and Daimler Chrysler. Both systems were expected to have a substantial impact on U.S. companies.

ADVANTAGES OF ISO 9000

The advantages associated with ISO 9000 certification are numerous, as both business analysts and business owners will attest. These benefits, which can impact nearly all corners of a company, range from increased stature to bottom-line operational savings. They include:

* Increased marketability—Nearly all observers agree that ISO 9000 registration provides businesses with markedly heightened credibility with current and prospective clients alike. Basically, it proves that the company is dedicated to providing quality to its customers, which is no small advantage whether the company is negotiating with a long-time customer or endeavoring to pry a potentially lucrative customer away from a competitor. This benefit manifests itself not only in increased customer retention, but also in increased customer acquisition and heightened ability to enter into new markets; indeed, ISO 9000 registration has been cited as being of particular value for small and mid-sized businesses hoping to establish a presence in international markets.
* Reduced operational expenses—Sometimes lost in the many discussions of ISO 9000's public relations cache is the fact that the rigorous registration process often exposes significant shortcomings in various operational areas. When these problems are brought to light, the company can take the appropriate steps to improve its processes. These improved efficiencies can help companies garner savings in both time and money. "The cost of scrap, rework, returns, and the employee time spent analyzing and troubleshooting various products are all considerably reduced by initiating the discipline of ISO 9000, " confirmed Richard B. Wright in Industrial Distribution.
* Better management control—The ISO 9000 registration process requires so much documentation and self-assessment that many businesses that undergo its rigors cite increased understanding of the company's overall direction and processes as a significant benefit.
* Increased customer satisfaction—Since the ISO 9000 certification process almost inevitably uncovers areas in which final product quality can be improved, such efforts often bring about higher levels of customer satisfaction. In addition, by seeking and securing ISO 9000 certification, companies can provide their clients with the opportunity to tout their suppliers' dedication to quality in their own business dealings.
* Improved internal communication—The ISO 9000 certification process's emphasis on self-analysis and operations management issues encourages various internal areas or departments of companies to interact with one another in hopes of gaining a more complete understanding of the needs and desires of their internal customers.
* Improved customer service—The process of securing ISO 9000 registration often serves to refocus company priorities on pleasing their customers in all respects, including customer service areas. It also helps heighten awareness of quality issues among employees.
* Reduction of product-liability risks—Many business experts contend that companies that achieve ISO 9000 certification are less likely to be hit with product liability lawsuits, etc., because of the quality of their processes.
* Attractiveness to investors—Business consultants and small business owners alike agree that ISO-9000 certification can be a potent tool in securing funding from venture capital firms.

DISADVANTAGES OF ISO 9000

Despite the many advantages associated with ISO 9000, however, business owners and consultants caution companies to research the rigorous certification process before committing resources to it. Following is a list of potential hurdles for entrepreneurs to study before committing to an initiative to gain ISO 9000 certification:

* Owners and managers do not have an adequate understanding of the ISO 9000 certification process or of the quality standards themselves—Some business owners have been known to direct their company's resources toward ISO 9000 registration, only to find that their incomplete understanding of the process and its requirements results in wasted time and effort.
* Funding for establishing the quality system is inadequate—Critics of ISO 9000 contend that achieving certification can be a very costly process, especially for smaller firms. Indeed, according to a 1996 Quality Systems Update survey, the average cost of ISO certification for small firms (those registering less than $11 million in annual sales) was $71, 000.
* Heavy emphasis on documentation—The ISO 9000 certification process relies heavily on documentation of internal operating procedures in many areas, and as Meyer stated, "many say ISO's exacting documentation requirements gobble up time. Indeed, there are horror stories about companies losing substantial business because a documentation obsession redirected their priorities." According to Nation's Business, small business owners need to find an appropriate balance between ISO documentation requirements, which are admittedly "one is ISO 9000's hallmarks, " and attending to the fundamental business of running a company: "Strike a balance among obsessively writing down every employee's task, offering training for the work, and letting common sense dictate how a task is to be performed."
* Length of the process—Business executives and owners familiar with the ISO 9000 registration process warn that it is a process that takes many months to complete. The 1996 Quality Systems Update survey indicated that it took businesses an average of 15 months to move from the early stages of the process to passage of the final audit, and that processes of 18-20 months or even longer were not that uncommon.

SELECTING A LEADER FOR THE ISO 9000 REGISTRATION PROCESS

ISO 9000 experts and businesses that have gone through the rigorous process of certification agree that businesses that appoint someone to guide the process are much more likely to be able to undergo the process in a healthy, productive manner than are firms that have murky reporting relationships. Hiring an outside consultant is one option for businesses. "An ISO 9000 advisor could give you a rough sketch of the registration process and help you get started, " stated Nation's Business. "Or the consultant could counsel you through the entire process, writing the company's quality policy statement and even specific operating procedures." In addition, firms should hire an ISO-9000 registrar with a background in their industry, legitimacy with international customers, and knowledge of small business issues.

Some small firms choose to appoint an employee as their ISO 9000 representative rather than hire an outside consultant. Many companies have done this successfully, but small business owners should take great care in making this decision. "The ISO 9000 representative [should be] a person who encompasses a genuine and passionate commitment to quality and success, knowledge of processes and systems within the company, and power to influence employees at all levels, " wrote Karapetrovic, Rajamani, and Willborn. "He should be familiar with the standards. If this is not the case, there are ample training opportunities available to acquire sufficient expertise."

For more information on ISO 9000 registration, small business owners can contact several different organizations, including the American Society for Quality and American National Standards Institute.

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