Small Firms and the ISO 9000 Approach to Quality Management

Abstract

DR. FRANCIS CHITTENDEN IS SENIOR FELLOW in business development, Dr. Pannikos Poutziouris and Dr. Syeda-Masooda Mukhtar are fellows in SME management, all at Manchester Business School, England. This paper reports the findings of a large survey about the international quality standard ISO 9000. The paper compares the characteristics of small businesses that use ISO 9000 with firms that do not and explores the reasons why businesses decide to seek registration under the standard. The benefits and disadvantages experienced by the small firms that have registered are also considered. A number of policy recommendations are presented that argue that ISO 9000 should be adapted so that more small firms can enjoy the advantages of registration. ISO 9000 is a quality management system that relies on the formal documentation of operating procedures. However, most small businesses are managed informally through the personal attention of the owner(s) and they perceive ISO 9000 to be expensive to operate and too bureaucratic for their needs. Informally-managed small businesses that adopted ISO 9000 reported increased costs as a result of implementing the standard. The formality required by ISO 9000 prevents many small firms from enjoying the benefits of registration even though, in most cases, the quality of their products and services is satisfactory.

The use of financial accounting information and firm performance: an empirical quantification for farms

“…Chittenden et al (1998), for example, pointed out that the costs of operating formal procedures, such as record keeping systems or I S 0 9000 implementations, may represent a significant additional burden for small business. Although our findings show that the performance impact of the use of financial reports is small in relative terms, it must be highlighted that according to our third model it contributed on average approximately three percentage points to the return on assets of farms in our sample (more than four percentage points, when cases of extreme intervals are removed from the sample).…”

Long-run performance following quality management certification

“…We leave any operating performance analysis which may justify such differences for future study. Table 4 Size decile analysis for the value-weighted portfolios [long-run returns following quality management certification announcements (ISO 9000)] Table 4 continued Long-run performance following quality management certification 107 Table 4 continued Size deciles 8 through 10 OLS The t-statistic is significantly different from 0 at the 5% level c The t-statistic is significantly different from 0 at the 10% level Consistent with the Chittenden et al (1998) findings, for the large-size sample firms, we document that the long-run benefits of the certification have outweighed the cost by providing higher returns, while for the small-and mid-size firms, those benefits are not evident as seen from the shareholder wealth perspective. Our results show that largesize firms, which obtained ISO 9000 certification between 1991 and 2003, tend to have post-announcement calendar-time abnormal returns significantly positive over the 1-, 2-, and 3-year horizons.…”

“…After surveying over four thousand firms Chittenden et al (1998) find that firms that adopt and realize the most operational benefit out the ISO certification are large business that have formal structure for management. They also find that some smaller business observe more advantages than disadvantages, since informally managed smaller firms may find costly to implement the ISO 9000 quality standards.…”

An International Index for Customer Satisfaction in the Construction Industry

“…Moreover, maintaining mutual relationship between the contractor and the customer [68], [69] and preserving a collaborative environment between the construction tea m [73], [74] helps reducing conflicts and increasing trust which ultimately keeps the customer satisfied. Furthermo re, adopting a strategy for reducing project waste, energy consumption and down time [75] and adhering to H&S pr ocedures to reduce or eliminate site accidents and injuries [68], [69] are cornerstone elements that when adopted by t he construction team helps achieving customer satisfactio n. For example, Morgan Lovell, UK's leading interior des ign office, fit out and refurbishment specialist provides en ergy management solutions to its customers and believes t hat implementing systems such as ISO5001 is a powerful means for achieving customer satisfaction through monito ring and managing energy usage as well as working to be st practice in terms of environmental performance [76]. Fi nally, providing contractors with accurate and timely info rmation and having agreed procedures about managing ch ange orders [2] ensures smooth construction process and r educes disputes and conflicts between the project team.…”

“…Another example, Hewden construction company, UK adopted the SWOT analysis to increase its competitiveness and Vol.4, No.4 / Dec 2014 innovation in a difficult market which enabled the company to fulfill its customers' needs [83]. Moreover, Improving communication transfer amongst participants or project network [84] and continuous examination of qu ality system to ensure its response to ever-changing custo mer requirement and expectation [5] helps organizations t o gain customer satisfaction through flexible and prompt handling of customer queries and complaints [26], [29], [75] as well as resolving conflicts [79]. For example, Connaught Partnership ltd. which provides a range of asset management and compliance services in the UK, improved the communication with its customers through using the latest technology, a WEB based system that controls the way maintenance work is allocated and delivered, measures residents satisfaction and presents a complete audit trail visible to involved parties [85].…”