Giving-up Management System Certification: a Potential Early Warning Signal?

Abstract

Giving-up Management System Certification: a Potential Early Warning Signal?The paper presents the dynamics in number of top management system certificates (ISO 9001, ISO 14001) focusing on the situation in Slovenia in the last two years when a significant increase of cancelled certificates was noticeable. We studied this phenomenon in order to find out its reasons and effects on the performance of the organizations. Some recognized relations between quality management systems and company performance from literature review were used for setting hypotheses which were analytically proved. We assumed that quitting management system certificates was related to decrease in business performance. Empirical part of our research was based on the data of Slovenian certification bodies and on published annual financial reports of Slovenian organizations. In the survey some characteristics and performance of the organizations which gave up certification were analysed. We came to interesting findings that cancelling certificates was related to decrease in business performance and often even to closing of organizations. The downsizing of the business was increasing through the time. So, 2 years after cancelling certificates only 8% of the organizations still present growth in their income and revenue, besides almost 40% of them quit or would have to quit their business. It was also found out that the business performance after cancellation of the certificates was related to the business performance before it and to the reason for cancellation as well. Two years after cancellation there was a 3-times higher proportion of failed organizations (= 45% of previously non-profitable organizations) among the organizations that had operated at a loss before the cancellation of their certificates, compared to those previously having a profit. Among the claimed reasons for certificate cancellation organizational changes (in 35% of all the organizations losing certificates) and cancellation of certificates by certification bodies (in 41% of these organizations) were the most common ones related to the failure of these organizations.

Impact of ISO 9001 certification cancellation on business performance: a case study in Slovenian organisations

“…Similarly, we assumed that giving up certification of QMS followed by abandoning the QMS step-by-step would lead to a decrease in business performance, which will gradually increase through the time. Therefore, we suggest the following hypotheses that were already empirically proved on a limited sample (including 44 cancellations of ISO 9001 certificates and 16 cancellations of other MS certificates) in our preliminary research (Alič, 2012):…”

“…The study was based on the data of the Slovenian certification bodies, the ISO Surveys and published annual financial reports of Slovenian organisations. It was a continuation of a survey in Slovenia from the year 2011 (Alič, 2012) where the analysed group of organisations was limited to the data of only one certification body in the period from 2009 to 2010. This time we invited all certification bodies (each of them covering more than 5% of the Slovenian certification market) to participate in the survey.…”

“…We tested them by testing more sub-hypotheses taking different indicators and samples (a whole group of 291 CCOs and a limited group of 44 CCOs that were already included in preliminary research (Alič, 2012)). In support of Hypotheses H1 and H2, a x 2 -test was used for statistical test of the structure of the addressed CCOs and for testing relationships between business performance before and after cancellation of the certificate.…”

“…Additionally, losing ISO 9001 certification negatively impacts the organisation's reputation (Joubert, 1998;Van der Wiele et al, 2005). Omitting or absence of QM praxes can significantly affect revenue (Alič, 2012;Liapis, Theodorou, & Zannikos, 2013). Therefore, losing ISO 9001 certification can be a worse signal than not achieving it at all (Joubert, 1998).…”

“…This research is based upon a preliminary study which was carried out in Slovenia one year ago analysing a shorter two-year period of cancellations on a limited sample of organisations with cancelled certificates (CCOs) (Alič, 2012). The preliminary study showed a statistically proven relationship between cancellation of MS certificates and a decrease in business and financial performance (such as growth of business, profit, etc.…”