ISO 9001 Value Study

A Harvard Business School working paper reports the results of the first large-scale study to examine the organizational benefits of adopting ISO 9001. It turns out these organizations are more likely to stay in business and to experience faster sales growth than those that do not pursue certification.

The HBR paper, titled “Quality Management and Job Quality: How the ISO 9001 Standard for Quality Management Systems Affects Employees and Employers” was written by David Levine and Michael Toffel. Their study will be published later this year in Management Science.

Their conclusion summarizes a number of benefits. ISO 9001 adopters had far lower organizational death rates than matched firms within their industries. Sales and employment grew substantially more rapidly post-certification at firms with ISO 9001 than at matched firms. Total payroll and (to a lesser extent) annual earnings per employee grew substantially more rapidly post-certification at firms that adopted ISO 9001 than at matched firms.

Some benefits of ISO 9001 adoption were much more pronounced in smaller firms than in larger firms. And, adopters were more likely to report no injuries for workers’ compensation in the years following adoption.

Their finding that ISO 9001 certification does benefit employers bolsters prior research on the standard. They felt their results were particularly credible because they analyzed a larger sample of ISO 9001 certifications than almost any previous study, had performance data at the workplace level, measured performance using third-party (rather than self-reported) data, used a panel dataset that enabled them to measure performance over time, and developed carefully matched sets of non-adopters. Plus, their results regarding the benefits of ISO 9001 certification on employment, payroll, and average annual earnings are new.

Critics of ISO 9001 who express concerns that benefits to employers derive largely from the deskilling and routinization of tasks, hypothesize that employer gains consequently come at the expense of employees’ earnings. However, their results showed total payroll rose faster than employment, which implies an increase in average annual earnings and therefore do not provide evidence of deskilling.

Non-experimental data cannot definitively attribute the better outcomes experienced by ISO 9001 adopters relative to matched controls to adoption, as opposed to unobserved advantages that might account for both ISO adoption and better outcomes. However, the strength and consistency of their findings led them to decide ISO 9001 adoption was more beneficial than they had anticipated.

For managers, the lessons are that the process of ISO 9001 certification appears to be valuable to most adopters. The authors cannot be sure how broadly these lessons apply to non-adopters, but the considerable benefits of adoption (e.g., roughly 10% increases in sales) suggest that far more employers could benefit from ISO 9001 adoption than currently do. Their results further suggested that smaller enterprises are particularly likely to benefit from adoption.

The substantial improvement in outcomes post-ISO 9001 adoption also has lessons for organizational scholars. Some academics have characterized quality programs such as ISO 9001 as management fads, unlikely to benefit employers or employees. Fashion might well play a role in the adoption of many management practices, but the authors say the results indicate that ISO 9001 appears to deliver value for many organizational stakeholders.

To see the full 46 page working paper, go to this web site and click on the download button.