ISO 9000 Implementation and Value-Addition

8/10/2019 ISO 9000 Implementation and Value-Addition

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ISO 9000 implementation and value-addition

John Seddon,April 1996

John Seddon is an occupational psychologist, researcher, author and consultant. Heis the author of the widely acclaimed "I want you to cheat: the unreasonable guide to

service and quality in organisations" and is presently publishing a cd-rom for

managers entitled: "Change management thinking". The cd-rom is designed to help

managers understand the problems associated with traditional, 'command and

control' management thinking and how to take practical action for improvement by

treating the organisation as a system. For information telephone (44) -(0)1280 -

822255, fax -822266,http://www.vanguardconsult.co.uk,e-mail:[email protected]

Introduction

In 1993, Vanguard Consulting published the first major study of the impact of ISO9000 (then BS 5750) on organisation performance (executive summary: appendix 1).The results cast doubt on the claims made for ISO 9000 registration. More recently wehave seen the publication of two studies sponsored by organisations with a pecuniaryinterest in ISO 9000. (see appendices 2 and 3).

A weakness common to all three studies is that they were (in the main) studies ofopinion. The reliability and validity of such data will be influenced by respondents'

knowledge, perception and emotional investment. The Manchester Business Schoolreport (appendix 3) makes claims which go beyond what can be interpreted from theavailable data.

Following the publication of our 1993 research, we visited five of the companies inthe small group which had claimed ISO 9000 registration to be positive in all respects.In every case we found activity which we would argue to be damaging economic

performance, which was present specifically because of registration to the Standard(see appendix 4).

To date, there has been no research which teaches us about cause and effect - what arethe likely consequences to an organisation if it goes about registration to ISO 9000?Seventeen years have passed since the ISO Standard first appeared (as BS 5750) andwe have no knowledge of its impact on organisation performance and competitive

position. These three case studies were undertaken to learn more about cause andeffect.
http://www.vanguardconsult.co.uk/http://www.vanguardconsult.co.uk/http://www.vanguardconsult.co.uk/mailto:[email protected]:[email protected]:[email protected]:[email protected]://www.vanguardconsult.co.uk/


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In each case, the companies had argued that ISO 9000 registration had beenbeneficial. Perhaps all registered companies would feel obliged to make such a claimas they have invested the time and effort and have the 'award' to prove theirworthiness. The purpose of each case study was to understand what registration hadmeant in practice and how it affected performance.

While each of the cases is different, they show similarities in their approach to ISO9000 registration. It is argued that ISO 9000, because of its implicit theory of quality,will lead to common problems in implementation; problems which damage economic

performance and which may inhibit managers from ever learning about quality'spotential role in improving productivity and competitive position.

For readers who would like to know more about the origins of the Standard, a briefhistory is provided in appendix 5. Many advocates of the Standard cite its history asthough it bestows legitimacy. In this appendix we explore how the Standard's history

illuminates where we went wrong.

Case 1

Background

'Tech. Co.' is a sales and distribution organisation based in the UK. All products soldby the company are manufactured by its parent company overseas. The products arehigh-technology products, they are sold to business and government customers.

Tech. Co. decided to register to ISO 9000 three years ago. The primary reason forseeking registration was that Government customers were insisting on it. It was alsofelt that the company might achieve some benefits from clarity of working

procedures.

Tech. Co. took advice from a consultant. The work to first registration took threeyears and registration was successful.

Originally the company had seven divisions (organised by product) and each divisionhad its own sales order function. It had recently centralised the sales order functions -

in a structural sense - but the people who worked within product divisions stillprocessed orders for the same products. The primary change with centralisation wasstandardisation of working procedures.

Registration to ISO 9000 meant the creation of nine manuals of procedures. One foreach type of product, one called quality and one for the warehouse. The manualsdocumented what should be done at each stage of an order, nothing had been left out.


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The manager of sales administration took the view that sales administration was nowcontrolled, the standard procedures meant that people wouldn't get things wrong. Healso viewed salespeople as needing to be controlled - "They won't be able to get awaywith giving administrators inadequate information and what they provide has to bewritten down". He also saw advantages in controlling customers: "Because we have

controlled procedures we can prove to them what they have ordered if there is anydispute".

Has ISO 9000 contributed to performance?

The first operational problems were felt by sales. The attitude presented to them byadministration was 'nothing proceeds without the right paperwork'. Furthermore,

because of a new procedure introduced to 'comply' with ISO 9000 (see later), thewarehouse would demand that sales 'sign-off' returned goods before they could bemade available as inventory.

There had been a cultural tradition of sales being 'heroes', they had treated 'backoffice' staff work as drudgery, they were always seeking last-minute changes andrarely were accurate with their form-filling. But now administration had beeninstructed to work exactly to procedures. Some took the view that working to

procedures would teach salespeople to pay more attention to putting the rightinformation on their paperwork. Sales behaviour did not change, the same conflictsexisted between sales and administration, they were sometimes more acute becauseadministration had a specific stick with which to beat them.

The causes of these conflicts were many, but the one cause which appeared to behaving the most influence was the complexity of pricing. Salespeople faced a varietyof different circumstances when contracting with customers; the result was a need forflexible administrative practices. The complexity of current practices had beendocumented in the manuals. It would be unlikely that the administrator would befamiliar with all situations and, furthermore, the manual would be unlikely to cover allsituations (and would have to be continually up-dated). The consequences were anincreasing sense of 'drudgery' amongst administrators and none of the original

problems solved.

The sense of drudgery in administration was caused by the way the new procedureshad been introduced (it was said that they were 'dumped' on administrative staff withthe directive: you are to work to these procedures). The attitude in administration soon

became 'work to procedures' (rather than serve customers). Furthermore, it was aperspective which valued working to procedures above finding and removing errors orthe causes of errors.


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When asked whether the new procedures had improved performance, no-one couldsay. There had been no collection of data on the performance of the administrative

practices prior to the new procedures and hence it was not possible to determinewhether things were better or worse.

The administration manager's attitude to customers ("The procedures will enable us toprove what the customer ordered if there is a dispute") was positively dangerous.What matters when the customer disputes, or for any reason wants a change, to anorder is that the need is dealt with promptly and courteously. The last thing thecustomer wants to hear is someone seeking to prove the customer is wrong.

The thinking behind the new 'goods returned' procedure is also revealing. Goodsreturned stayed at the same level as prior to registration (suggesting no change to the

performance of the system). What did change was the way returned goods werehandled. ISO 9000 has a requirement to control product which is returned by

customers ('control of non-conforming product'). All goods returned by customerswere now held in 'quarantine', pending authorisation for release into the warehouse(for re-use).

There had been considerable debate about what to do with returned product. Tech.Co.'s products are sensitive to excesses of temperature and light. If they had beensubjected to adverse conditions while on the customers' premises, they would beruined. If product was tested on return it would be destroyed - the nature of the

product precluded testing (or sampling) -any test would result in destruction. Thechoice was simple: return product to the warehouse or destroy it.

In the event, a compromise was developed. It was argued that product returned withinfifteen days would be likely not to have been subjected to adverse conditions. The

procedure for returned product required the warehouse supervisor to check date ofreceipt against date of despatch and, where it fitted the new rule, to send a list ofreturned product to a director for signature. Signatories were hard to find. When theywere available, they were not inclined to think of signing forms from the warehouseas their top priority.

But no-one asked: Why do we have product being returned? - with a view to

eradicating it. And, more interestingly, nobody had asked the question: Have we everhad a problem with product being returned and then sent out as another order? Theanswer, when asked, was no. There had been no need to create this 'quarantine'

procedure. It would have been perfectly OK to place all returned goods in inventory.All of the available evidence showed there was not a problem. Tech. Co. had set up a

procedure for an uncommon occurrence assuming it to be a common occurrence, in


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that way problems were now created. The result was losses to the system: at the timeof this study, product to the value of half a million pounds was not available for sales.

If they had viewed their organisation as a system, they would have known thatreturned product had not shown signs of fault and would have taken the view that

customers' receiving faulty goods would have been an unlikely occurrence. In theunlikely event of a customer receiving faulty goods, the organisation could respond byengaging in excellent 'repair'. A good way to show customers what matters to you.

There is little that can be said in support of the view that ISO 9000 contributed toorganisational performance in this case. It seems the implicit purpose of registrationwas to create a 'quality system', rather than help the business. The emphasis on writtenwork procedures was entirely unnecessary - a simple flow-chart would have beensufficient (and may have been more use in clarifying purpose). The manuals producedfor administration should not have been necessary. If they had a purpose at all they

should have been used for job training. Used in the way they were being used onlyexacerbated the problems between sales and administration.

This was a classic 'bomb factory' approach (see appendix 5) to ISO 9000implementation. The purpose of this organisation is to sell. How? By creating valuefor customers, developing loyal customers, attending to customers' needs. Nothingwas being done to understand and improve the core processes of achieving theorganisation's purpose. ISO 9000 was making achievement of the purpose moredifficult and more expensive.

Case 2

Background

'Laserco' is a high-tech manufacturer, employing 150 people. Five years ago, a seniordirector (now MD) wanted greater 'discipline' in the engineering function. Quality waschosen as a means.

The quality manager wanted to introduce continuous improvement but needed a startand felt that ISO 9000 would provide the foundations.

The organisation has three main functions/divisions: manufacturing, engineering andsales. Engineering had a pattern of high staff turnover and it was felt that the 'wheelwas continually being reinvented' - the organisation did not retain 'how we did it lasttime'. Another influence was that bigger customers were starting to 'make noises'about the need for a quality system..


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They took advice from a consultant. They found his advice 'dogmatic'. It was alsofound to be misleading - the consultant told them that traceability was a requirementof the Standard. They agonised over this for six months. Eventually, re-reading theStandard, they discovered that traceability was only important if the customer requiredit; theirs did not. They soon learned to work on their own interpretation of the

Standard and not rely on the consultant.

They knew, as they went into the exercise, that they wanted to avoid too muchbureaucracy.

Implementation

Manufacturing found implementation to be very easy. The personnel in manufacturingwere all used to working in a structured way; they used work tickets, time sheets andhad a structured management information system (MRP). The focus in manufacturing

was on writing down what they did. As this was happening the quality manager had tostop people in manufacturing from improving things - as they documented their

procedures, people found obvious things to change. He was concerned that peopleshould actually write down what they did (initially without instant modification).Having got the more complete picture, he then encouraged review and improvementswhich were seized fairly eagerly.

In Engineering, implementation was more difficult. The prime purpose of introducingISO 9000 into Engineering was to establish a unified design process across thevarious groups. There was, prior to this, no predefined method. Furthermore the

personnel in these groups had previously worked in fairly ill-defined environments.To a large extent this meant starting the implementation from scratch. There was, forexample, an engineering change process and ISO 9000 implementation forced areview if it. People learned just why the engineering change process had to be soinvolved - there were so many consequences stemming from engineering changes.With effort, implementation produced 'remarkable' changes in engineering, mostly asa consequence of introducing procedures which would minimise the 'reinventing ofwheels'.

Consistent with their desire to minimise bureaucracy, the implementation team

dumped their procedures manuals in favour of flow-charts. It kept the processes infocus in a simple and meaningful way.

Results


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The whole effort took two and a half years. Laserco claims reductions in time,reductions in errors and reductions in waste. These were not quantified during ourdiscussion.

Their view now, five years on, is that ISO 9000 is the foundation for other things to

happen. They felt that without it, they would have been unable to get a company-widefocus for the quality effort.

It was through the endeavours of two managers that this progress had been achieved.The two of them had to 'make it happen'. They felt it took a lot of 'getting through to

people', the MD's interest waned at times (especially at end of quarter/year).

At the end of our discussion, the quality manager expressed the view that the wholeprocess had one essential driver - the need to improve efficiency in an environment ofa recession economy and headcount reductions.

Has ISO 9000 contributed to performance?

At the outset of this discussion, the efforts of the two people who behaved as'organisational entrepreneurs' - working across organisational barriers to make thingshappen, should be recognised. It requires commitment and effort to make change inour organisations, usually because you are fighting the current culture or modusoperandi.

The managers argued that ISO 9000 registration produced benefits. Processes were

more clearly defined and that resulted in less waste or more efficiency. They hadrecognised and sought to avoid unnecessary bureaucracy, and even went a further stepaway from the norm by getting rid of procedures, using flow-charts to provide clarityof focus.

Without doubt, this is a case where much of the usual damage from ISO 9000implementation has been avoided (for example excessive bureaucratisation andcontrol through procedures). Should that lead us to declare it a success? ISO 9000, ifit is to make a contribution, should improve economic performance, both internally inhow the company works and externally in respect to the company's competitive

position.

The extent to which ISO 9000 can or will improve economic performance will dependon features of the Standard (and their interpretation) and features of the company'scurrent culture. For this case, it will be helpful to first consider the impact of thecurrent culture on performance.


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This culture has various components, some of which we have learned directly fromthe case study and some that we can guess at from the clues we are given. Let's look attwo:

Management by attention to output

That the top management's attention wavers from quality at the end of financialperiods is a sure sign that the company is run on output data. It will follow thatdepartments have budgets, targets, variance reporting (this month versus last etc.) andit then follows that time will be given over to discussion, defending, promoting andsurviving the 'budget issues'.

Management works this way when it has no understanding of the concept of variation.Enormous quantities of time are given over to irrelevant and stressful activity. Thecompany does not benefit, it loses.

The managers leading this implementation had continuous improvement as their long-term goal. Continuous improvement starts from an understanding of variation - it isnot an unending series of little 'fixes' - and there is no measurement of variationanywhere in this system.

Work methods

Manufacturing found ISO 9000 straightforward because the methods were similar tothe methods in use; it is normal in manufacturing to have work instructions, job sheets

and so on. By contrast, what is normal in high performance or World Class systems?One example works to four principles: single piece flow, pull not push, control in thehands of operators (including the right to stop the line) and 'automatic stops' on theline (if defective performance is automatically detected).

While this company had cut time for internal processes, the total order - fulfilmenttime had not changed and looked inefficient when 'activity time' was compared to'total time'.

The first fundamental of World Class thinking is to understand what matters to your

customers. This company had no such data. ISO 9000 concentrates on 'contractreview' ('can we do what the customer wants'), customers don't - they make their

judgement of organisations from the total sum of transactions they have. Thiscompany has no idea what matters, other than internal opinion - and this is alwaysfound to be unreliable.


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Another fundamental principle of World Class thinking is process management. InLaserco the work methods are functionally designed and controlled and, byimplication, there is no true process management.

Has ISO 9000 helped?

The ISO 9000 advocates would say that it has and in this case we might have beenpersuaded to agree. After all, they have gained clarity, improved efficiency (a little)and avoided some common pitfalls. The avoidance of pitfalls is not a credit to ISO9000, but to the two managers who implemented it.

Gaining clarity and improving efficiency are no more than the kind of gains sought bythe founders of this movement in the Second World War (see appendix 5). The result,then as now, is the control of output. But quality is not concerned with the control ofoutput, it is concerned with the improvement of output.

What is worrying is that the managers in this system might tell you they've 'donequality', after all they went through the steps as directed and achieved registration.How would this community respond if they were told there is an enormous amountstill to do and it requires a fundamental re-think of current operating assumptions?This is a system which does not know what matters to its customers, is thereforeunable to turn such data into useful measures and shows no understanding of theimportance and measurement of variation. This is not a quality system, it is a'command and control' system. It is bound to be sub-optimised.

The chances are they would rationalise the current position - after all they have 'gotISO 9000' - and hence any real opportunity for performance improvement would belost. And that is, perhaps, one tragedy associated with ISO 9000, people think theyhave 'done quality' and they haven't even started.

Quality methods are diametrically opposed to methods used in functional, 'commandand control' systems. This is a company which has avoided the worst of ISO 9000,and yet it has been unable to avoid the fact that ISO 9000 registration has led themanagement community to a place from which it will be difficult to influence morefundamental change. ISO 9000 has reinforced some aspects of 'business as usual', it

has not been the start of a quality journey.

Even more disturbing is that this process took two years. A company of only 150people could make a change to improve economic performance in months, not years.ISO 9000 has decreased the probability that change will be possible in this case. If thisseemed a good case of ISO 9000 registration, we can only hope their competitors areas complacent.


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Case3

Background

'Systems Co'. is an engineering services organisation which manufactures handling

systems and installs the same on customer sites. The customers use the systems intheir manufacturing and packaging operations. Systems Co. has been registered toISO 9000 for a number of years.

To achieve initial registration, Systems Co. sought the help of an accreditedassessment body. Having interviewed a number, they chose one which they feltdemonstrated the least 'bureaucratic' attitude and showed the most desire to be helpfuland constructive in the relationship.

In this case, we followed a routine surveillance audit being conducted by the firm of

outside assessors. Our purpose was to learn about what the auditor looked for andwhy. The assumption is that this would tell us about how the auditor (and client) thinkof the Standard and how their thinking relates to quality issues in the organisation.

Prior to meeting the auditor, the client informed us that the auditor was 'one of thebetter ones'. We took this to mean that he would take a view of the organisation as abusiness system rather than be pedantic about (his) interpretation of the Standard. Wehad been told that the auditor's organisation had 'recognised that their market hasmoved to wanting focus on things which had benefit to the business'. The client sawthe audit process as one of 'support and assistance' to the business.

In this routine surveillance (described as a 'health check' by the auditor), the auditorfocused on several 'mandatory' issues and then two selected areas of the business:engineering and customer service. The purpose of the audit was to raise any items ofnon-conformance which, if found, would be given an agreed date for resolution.

The mandatory issues were:

Changes to personnel. We probed why. We were told that change to a significantposition (for example the chief executive) would require investigation as to whether

this could adversely impact the quality system. The criteria for choosing whether toinvestigate such changes was specified in a manual produced by the assessingorganisation's quality system.

To summarise the discussion which ensued: If the chief executive were to change howcould an auditor determine whether to record what he sees as a non-conformance? Itseems the auditor would seek evidence of the new leader's commitment to the quality


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system through words and deeds. But what chief executive would not assert that he orshe was 'up for quality'? Would chairing quality reviews be sufficient to be evidencethat he or she was doing things in support of the quality system?

It seems to us that this is a method which relies on anecdote and interpretation. A

judgement must be made. Any decisions are based on the auditor's view of the world.

Changes to equipment. This follows the same logic as above to the extent that theauditor takes a view on what equipment changes should be subject to review.

Changes to the documented management system. Any changes should be reviewedto ensure they are consistent with the requirements of the Standard. Once again,decisions are based on the auditor's view of his own quality system, the client's qualitysystem and above all his view of the application of the Standard.

Results and corrective actions from internal audits. It is relevant to note that at thetime of first registration the client had established a group of internal auditors(according to advice from the original consultants). Now the department has beendisbanded. When the current chief executive was appointed he charged the qualitymanager with changing the way quality was working away from 'quality control' andtowards prevention. He took the view that control should be in the hands of peopledoing the work.

It is also relevant to note that the chief executive has subsequently charged the qualitymanager with reducing the documented quality system from two manuals to fifteen

pages.

Feedback from customers. Complaints, returns and any corrective actions. Again,this relies on the auditor's interpretation (of, for example, whether problems should betreated as 'special-cause' or 'common cause').

Management review. To stand back and determine the effectiveness of the qualitysystem. Again, subject to interpretation by the auditor. What might be the auditor'smental model of the purpose and mechanics of the management review?

Use of the assessor's logo. Apparently, the assessing organisation was implementinga directive from the UK Accreditation Service which dictated requirements for the

proper use of 'quality badges' on stationery and the like. In this case the issue wasirrelevant, the chief executive had already decided that he saw no value in 'advertisingfor the assessor'.


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The two areas of the business the auditor looked at in detail were engineering andcustomer service.

Engineering

In engineering, he took a detailed look at an enquiry file. The file records customerinformation and he was interested in how the system made sure the customer got whatwas expected: how drawings got given numbers, how you'd know you were workingon the right drawing, that the right information went to the right places and how, ifchanges were made, they were accommodated.

The auditor followed the progress of a file through to manufacturing. He wasinterested in how the jobs 'came in', how the system tracked changes and how workwas planned through the manufacturing resources

This is what we would call 'bomb factory' quality (see appendix 5) - adherence toprocedures. It is a means of control. It really has little to do with quality. In bombfactories it dealt with the immediate problem, it controlled output. It is plausible,indeed reasonable, to presume that the control of drawings, changes and relevantcustomer information will help ensure that the customer gets what the customerwants. It clearly could affect quality if these things went wrong and were not repaired

before something got to the customer, but if we are controlling these things it shouldbe because we have demonstratedtheir influence over the quality of output. Weshould question whether the right things are being controlled.

Quality is concerned with improvement. Improvement requires action on the system.The only action on the system encouraged by the introduction of ISO 9000 wasauditing for non-conformance and the management review. The system was assumedto be in control if people behaved according to procedures. These procedures may notrelate to what matters to customers and may or may not tell us more about the

performance of a process.

Why did the organisation have this 'control of activity' approach to quality? Becausethey had learned it from their consultants and auditors. Even though they are cutting

back on it, it is still the principle means of quality control - and all it can do is control

output, it should be termed management control not quality control.

It is fundamental to quality thinking that measures (and controls) should be related topurpose. What is the purpose of this system? If it is to be a quality organisation, themeasures in use should tell us how well it works and tell us whether things areimproving. To take two examples: how often do we deliver assembled product on-time as originally committed? There were no data readily available (and in use);


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everybody estimated 75%. How often can the engineers complete their work on-sitewithout recourse to manufacturing for something which should have been foreseen?There were no data; estimates ranged from hardly ever to nearly always.

Manufacturing

In manufacturing the manager used measures of labour hours. The purpose was tocharge hours to jobs. It is not an unusual measure, many organisations treat theirlabour as though it is to be 'bought and sold'. The manager's task is to ensure that jobskeep to budget. This is the classic problem of 'budget management': the startingnumber is a reasonable guess from contracting, and any variation between the startingnumber and the final number could be due to a variety of causes. Minor variations areignored, major variations are reported (although there is no evidence of whether this iscommon-cause or special-cause) and then acted on. Acting in such a way could distortthe system, as could 'being seen to come in on budget' and other consequences of

managing with a departmental measure (for example, shifting labour around to suitbudgets not customers). Naturally the managers told me that "No distortion of data orother dishonest actions occurred here" and that may be so. The point is it's more likelythat they will. More importantly, these are the types of data which could be dangerousif used to drive a 'get costs down' understanding of improvement.

As noted earlier, the data which might help learning and improvement (thus get costsdown andimprove service) were not in use: how predictable is our delivery versusfirst commitment; how often are engineers able to fit the customers' equipmentwithout returning for something which should have been catered for; what are the typeand frequency of customer and engineer demands on the organisation?

In the manufacturing side of the organisation, the prevailing attitudes were more intune with the implicit attitude of the Standard. People placed a high value on havingthe correct procedures, the right documentation (doing things right rather than doingthe right thing). When we discussed some of the features of the system which, ifunderstood, might lead to improvement, the general response reflected an assumptionthat these things were normal. There were no good data, only opinions.

As this organisation has stepped back from the bureaucratisation of the management

system (even though they always thought it minimal), it has begun to take more of an'improvement' approach. We begin looking at these areas by ending our journey withthe auditor - customer service was his final item to audit and it is fair to say that hesaid something which surprised us.

The auditor was interested in the client's approach to customer service. What thismeant was:


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whether the client had determined how often to conduct customer surveys how the results of such surveys were being built back into the management

system how the organisation knew what mattered to its customers

It was the last item which surprised us. Having seen so many organisations (includingthis one) dwelling on control of the customer's order, because of the emphasis placedon this by the 'contract review' clause of the Standard, it was a nice surprise to hear anauditor emphasise that 'what mattered to the customer' mattered.

The auditor was primarily concerned to relate customer survey data to themanagement system. This line of thought usually results in 'corrective' actions andtheir reporting. The chief executive preferred to see the data as something whichwould drive action in the relevant part of the business, without a formal managementdecision-structure over it (he subscribes to the view that action is of more value than

reports). This approach was characteristic of the changes the chief executive had madeto the way the organisation worked.

It would have been of greater value to the client if the auditor had focused on themethods employed to gather customer data and the development and use of relatedmeasures to improve performance. For example, customer data showed that customerswanted quotations at the time they wanted them (not within a period). The contractingdepartment controlled this with the use of a white-board and improved performanceimmediately; they had acted on what mattered to customers. Note that the use of awhite-board would make this procedure difficult to audit - this auditor did notcomment but many others might have. As an aside, with all documented procedures(which by definition are to be audited), it is worth asking whether the documentationis only in place so that the auditor can do his job. That is to say, the procedures

provide no operational value to the organisation and may even detract value. Whenyou discover such procedures and find that they are in place at the insistence of theauditor, you start to wonder just how widespread these problems are.

To return to the contracting department: it had also been noticed that 75% of allquotations work resulted in no order. It was a healthy perspective to take, the sort ofview a systems-thinker would take. The department had started doing work onunderstanding the causes but this work had, so far, not included data from customers.But it was typical of the way things were working in the more progressive parts of theorganisation - people had the right (systems) perspective and only needed help (if any)with method.

When we asked how people were measured in the contracting department, we weretold there were no individual performance measures. We regarded this as a good


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response. Typically in such departments one finds 'activity measures' used in such away as to undermine performance. The measures in use in contracting related to

purpose (quotation on-time as committed, revenue), the use of these will be morelikely to contribute to a climate of improvement.

In other parts of the organisation, more traditional attitudes prevailed. It is not tosuggest that people differed in their commitment and potential contribution. Ourexperience has taught us just how much behaviour is conditioned by features of theorganisation (we call these things 'system conditions').

Had ISO 9000 been beneficial?

The quality manager would claim so. He would argue (as do many others) that ISO9000 was a good starting-place for the quality journey.

There is no doubt that clarity (of procedures) is an aid to good performance. But ifwith clarity comes unnecessary documentation and inappropriate controls, has it been

beneficial? This organisation has spent the last three years drawing back from anderadicating dysfunctional aspects of registration to ISO 9000. Should this be regardedas a necessary cost? Surely not.

It was argued that ISO 9000 gave the organisation the impetus. Wouldn't it have beenmore beneficial to have customers be the impetus? If so, wouldn't the organisationhave moved more quickly along the road of discovering the right methods andmeasures to improve performance?

Systems Co. is an organisation which is learning to behave as a 'customer-drivensystem'; was this learning facilitated or hindered by registration to ISO 9000? It couldonly have been hindered. ISO 9000 registration had focused on documentation of, andadherence to, procedures. There was no evidence (other than anecdote) as to theconsequences on performance.

Conclusions

In each of the three cases we find evidence of ISO 9000 registration damaging

organisation performance. In the first case the damage was palpable. In the secondand third it is pertinent to note how they were 'moving away' from the worst aspects ofthe Standard. By implication, these activities had caused sub-optimisation. And worse,the work associated with the Standard blinded the managers to the real opportunitiesto improve quality and productivity.


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In every case it was observed that third parties (assessors or consultants) wereresponsible for leading the organisations to act in ways which undermined

performance. Furthermore, in every case registration to ISO 9000 involvedconsiderable time and resources.

If the best that can be said for ISO 9000 is that it has features which organisationslearn to move away from, it would serve organisations well to move away from itquickly.

To satisfy ourselves of any causal relationship we need an underlying theory thatexplains (and thus predicts) what will happen. The ethos of ISO 9000 is one ofcontrol. Control of work through adherence to procedures; the establishment of

procedures which are assumed to affect quality of output; and control through the useof internal and third-party audits. It is an ethos which was established in the firstStandards in response to a crisis. It is an ethos which may have solved the problem of

its time but which now has become a problem itself.

The quarantine procedure discussed in case 1 illustrates how the control ethos leads to'just in case' controls. The same thread is found in the other cases, it is assumed, a

priori, that documentation and control of people's behaviour in procedures will'prevent' problems. Yet there is no evidence to support this view. However, such afocus leads to people behaving in ways which value procedures over purpose (whetherthey like it or not). It is easy to see how registration can lead to demoralisation and nillearning.

We would argue that ISO 9000 is a step in the wrong direction, not a first step on theroad to becoming a quality organisation (as is so often argued). Any of these threecases could have made great strides in improving quality and improved performancein a much shorter time. ISO 9000 registration blinded them to their opportunities and,what's worse it led people to assume they had 'done quality' when nothing could befurther from the truth.

Are these cases unusual or unrepresentative? Not in our experience. As we stated atthe outset, every organisation we have worked in which is registered to ISO 9000shows evidence of activity which is damaging economic performance and is present

because of the perceived requirements of the Standard. We have yet to find anorganisation which is registered to ISO 9000 which does not show such evidence.Given the nature of the thinking (about control), one would predict that anyorganisation registered to ISO 9000 would have evidence of sub-optimisation, throughthe establishment of inappropriate activity ('doing things right', according to theStandard) and/or through lost opportunity (not doing the 'right thing', according to theneeds of customers and the business).


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To those who would claim that these cases are unrepresentative, we would ask: Howmany cases do we need to study to confirm or deny the proposition that ISO 9000 isdamaging economic performance? In other words, how many more cases like thethree reported here would be necessary to establish that we have a serious problem?We are confident that these cases are representative of the experience of registering to

ISO 9000 (indeed we have discussed these observations with hundreds of managersand have yet to find one who is a keen supporter of the Standard - the support comesfrom those who make a living from it). We would argue that ISO 9000 registration

predictably leads to the types of consequences reported here, because of its inherenttheory of quality.

If UK plc were a quality organisation and its product the quality Standard, on the basisof what we know about the impact of this Standard, we would 'stop production' now.

Appendix 1 Executive summary, Vanguard research 1993

The growth in registrations to BS5750 has been paralleled by growth in the level ofdebate about the Standard's fitness for purpose. The Director General of the BSImakes claims for the benefits of registration, but there has been little research into theimpact of BS5750 on business performance.

This research gathers perceptions on BS5750 implementation from 647 registeredorganisations.

The results can be summarised as follows:

Only 15% of the organisations surveyed believe they achieved all of the benefitsclaimed by the Director General of BSI. 69% report an improvement in proceduralefficiency, but the results for improvements in measurable aspects of efficiency (costs,waste etc) are only half as good, suggesting that procedural 'clarity' does notnecessarily also result in improved efficiency. Of particular interest, is the finding thatonly 25% attributed an improvement in overall costs and 15% of the organisations

perceived costs to have worsened.

The results attributed to the Standard raise questions as to whether the problems lie

with the Standard, the implementors (managers) or both.

General perceptions of the Standard are that it is, on the whole, a good thing, but itsuffers from problems of flexibility and interpretation. Governmental 'customers' aremore inclined to insist on supplier registration to the Standard than private sectororganisations and the results show that standards are set more from an 'internal'

perspective than being driven by customer requirements. People report that a change


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in culture is required to achieve success with BS5750 but there is a diversity of viewsas to whether the Standard encourages the practice of listening to customers andwhether it is important to introduce the concept of continuous improvement prior toimplementation.

People feel that the Standard has spawned many rogue consultants and many also feelthat British management does not really understand it. The problems ofunderstanding, interpretation, flexibility and so on suggest educational needs amongstBritish management.

Comparisons of organisations on the dimensions of 'value added' and 'impact on costs'show that those who have succeeded with the Standard undertook it for broader

purposes than those who undertook it for reasons of obligation and opportunism. Thenarrower perspective seems to have resulted in a failure to achieve much real benefit.

Smaller organisations have more concerns about costs and have greater expectationsof improved market share as a result of registration. They also have more doubtsabout the Standard's relevance to their business.

The results show that the Standard is achieving less than it should. One reason is theway it has been tackled. Organisations reporting positive results took a different

perspective from those which achieved less. But the results also suggest problemswith the Standard. Aside from issues of comprehension and flexibility, the focus ofthe instrument can be argued to be more internal than external.

By emphasising control of procedures, people are likely to lose focus on the purposesof their work (to serve customers by the most efficient means). The purpose ofinspection against the Standard is to police deviation from procedures. Whereas, its

proper function should surely be to assess whether procedures are 'in control' andgenerating improvement.

The conclusions offer suggestions for simplifying and improving our approach toquality standards.

Appendix 2

A comparison of Surrey University research (conducted for L.R.Q.A.) and Vanguardresearch into opinions of ISO 9000 registration.

Introduction


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The reader should bear in mind that the following comparison is subject to differencesin method which make direct comparison difficult in some circumstances. We haveworked from the Surrey report and have not had access to their raw data. The Surreyreport is more limited in its scope (ie the range of questions asked) and uses differentscales.

Vanguard included data on the following areas not covered by Surrey:

Costs involvedTimingExpectationsWhat needed to changeInterpretation of the StandardMeasurement / implementationValue to the organisation

Opinion / perception data

The Surrey results were reported as percentages 'yes' and 'no'; Vanguard used a scaledresponse (1 to 7).

Reasons for registration

The Surrey results reflect the same feeling of 'obligation' that Vanguard found(although their commentary does not highlight this) - 81% of companies say theydecided to obtain registration to stay in business / to be considered for tenders.

Benefits of registration

It appears that the Surrey data are directly comparable with Vanguard's regardingbenefits of registration (although the Vanguard research looks at both improvementand worsening as a result of ISO 9000 registration, the Surrey research reportsimprovements only).

Surrey report the following benefits:

49% improved market share69% able to stay in business / not excluded from tenders63% public relations / advertising / marketing benefits

Vanguard report the following (comparable) changes:


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31.1% say market share has improved33.4% say number of new customers has improved

Although the figures are illustrated in the report, Surrey does not draw attention tothese lower rated items:

12% report improved efficiency / less wastage.9% report increased customer satisfaction.14% report greater discipline / order.4% report more quality aware / improved quality.

The benefits section in the Surrey report does not include (reduction in) costs. Costsappear in the disappointments section. Items measured differ for disappointments and

benefits. (Vanguard measured all items for improvement versus worsening). TheSurrey report includes one short paragraph towards the end entitled 'disappointments

with certification'.

Benefits of installing a Quality Management System

Five of the eight benefits reported in the Surrey research are directly comparable tothe Vanguard data:

Improved efficiency / productivitySurrey - 69%, Vanguard - 69%

Reduced wasteSurrey - 53%, Vanguard - 37%

Improved customer serviceSurrey - 73%, Vanguard - 49%

Reduced costsSurrey - 40%, Vanguard - 25%

Improved staff motivation

Surrey - 50%, Vanguard - 31%

The Vanguard and Surrey results are broadly similar. When one takes into account theproblems of reliability and validity of opinion research amongst those who have anemotional investment in ISO 9000 registration, these results ought to cause alarm.They are equivocal about the Standard's contribution to say the least.


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Appendix 3

A discussion of the Manchester Business School research (conducted for SGSYarsley).

The Manchester report is entitled: "ISO 9000 - Does it work?" The answer provided inthe foreword by SGS is ".a qualified but confident 'yes'". The following 'keyfindings' have led to this conclusion:

69% felt that their expectations of the Standard had been met or exceeded; only5% claimed to be very dissatisfied.

We can learn nothing from the report about what people's expectations were and thedata on 'expectations met' is not presented. However, data concerning level ofsatisfaction with impact of ISO 9000 is presented and it shows that 53% were

satisfied, 26% were neither satisfied nor dissatisfied and 21% were dissatisfied. Theseresults show a similar 'equivocal' attitude to ISO 9000 as found in the Surrey andVanguard research.

The three most important benefits of ISO 9000 were seen as better managementcontrol, greater awareness of procedural problems and promotional value.

Given that the approach to control encouraged by the Standard can itself cause sub-optimisation (see conclusions), this finding ought to raise concern. The report presentsthe 'top ten' benefits as follows:

Better management controlImproving awareness of procedural problemsUsing the Standard as a promotional toolImproving customer serviceFacilitating elimination of procedural problemsImproving efficiencyKeeping existing customersIncreasing customer satisfactionAiding induction of new staff

Improving market share

None of the results is quantified and we must remind ourselves of the problems ofvalidity with such data. Even so, it is not an impressive list. Improved quality and

productivity should perhaps be top of such a list, and improved customer satisfactionshould go beyond satisfying 'obligations' - the report also tells us that mostorganisations focused on 'external reasons' when asked why they sought the Standard


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in the first place, supporting the previous research showing that 'market-placeobligation' is driving registration (78% say our future customers will demand it, 58%report customer pressure).

Those most satisfied with the impact of ISO 9000 on their organisations had

sought the Standard for better management control and improved customerservice.

Given the nature of control encouraged by the Standard this could be telling us thatthose who are most satisfied have done themselves the most damage. We also can'thelp feeling that 'customer service' in this sentence means satisfying market-placeobligation as the Standard takes a strong 'conformance' approach to customer servicewhich in many organisations gets translated into practices which result in poor service(you are expected to be happy that your problem/request/need is in the right

procedure).

More respondents believed the Standard to be cost-effective than not.

Behind this statement lies more equivocation. The data reported show 468 casesclaiming cost-effectiveness (over different periods), 399 cases claiming it was notcost-effective and 215 cases saying it is too soon to say. The headline could have said:Data shows doubts about the cost-effectiveness of ISO 9000.

This is an interesting paradox. What we know is that quality leads to increasedproductivity, reduced costs, improved market share and customer satisfaction. If the

results from ISO 9000 registration are equivocal it lends support to the need toquestion whether ISO 9000 has anything to do with quality.

Companies with ISO 9000 certification showed a significantly higher rate of salesgrowth than the national average and were four times more likely to havesurvived the recent recession.

This was the finding that received the most attention from the pro-ISO PR fraternity.'You make more money if you are registered to ISO 9000' is the claim. The first claimis made on the basis of comparing sales growth with GDP. Any undergraduate

researcher would note that this tells us nothing about cause and effect. One possiblereason for sales growth in registered companies is that only registered companies areable to tender for contracts.

The second claim is made from analysing the progress of 185 companies which hadISO 9000 in 1991. Of the 185, 130 were still registered, 53 were still in business butnot registered to ISO 9000 any longer and 2 were no longer in business. These data


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are used to argue that the failure rate of ISO companies is 1.1% which comparesfavourably with the national average for failures (5.2%). What a terrible abuse ofstatistics. One could equally have reported 'stopping registration to ISO 9000 won'tharm your business'. It might have been valuable to explore why the 53 decided theyno longer needed it.

Chief concerns with ISO 9000 included time commitments and volume ofpaperwork, as well as the cost of implementing and maintaining the Standard.

What is the value of this time spent on the quality bureaucracy? Does it achieve apurpose which fits with the organisation's purpose or is it a necessary evil? Theseproblems give support to the view that ISO 9000 has nothing to do with quality. It iscontrolling output in a manner which could add to costs and become a barrier toquality improvement.

Company certificationhas grown by 10,000 certificates a year since1992certification in Europe has doubled every nine months since 1993 andthere are now 95,000 certificates world-wide.

If the results from the case studies are generalised to the world stage we are guilty ofcausing massive economic damage to our organisations. The good news is that ofsome three million businesses in the UK, less than fifty thousand are registered andthe rate of growth in registrations has slowed.

Appendix 4

Vanguard visited five of the companies which had participated in our 1993 research.All of these companies had regarded ISO 9000 registration to have been a success inevery respect. In every case we found evidence which would suggest the contrary:

1 Design changes

In a manufacturing organisation, the time to effect design changes grew from threedays to three months with the introduction of ISO 9000.

A requirement of the standard is to control design changes. The organisation chose tocontrol changes through the introduction of committees which met quarterly. It usedto be resolved by the operator and his boss. It could have stayed the same - why didthese people get over-elaborate with controls?

2 Quotation time


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A printer used to supply a quote over the 'phone within two hours of the customermaking a request. He became registered to ISO 9000 and now takes days with formsgoing back and forth by fax. It could have stayed the same. Why did these people getover-elaborate with procedures?

3 Waste maintained

A manufacturer with highly automated processes chose to implement the Standardwithout introducing measures of process control (section 20 of the Standard). Thecompany elected to ignore this requirement on the grounds that it did not directlyaffect customer requirements. 2% of its turnover is wasted in scrap. The measure isstable over time - it is predictable. It could have been improved.

4 Waste created

A building repair organisation implementing ISO 9000 chose to control surveyors'reports by registering them and counting them by volume and value. They ignored thequality of surveyors' reports. Waste created in administration (re-working errors onsurveyors' reports) amounted to approximately 15% of working-time. No-one knew.

5 Reinforcing functional thinking

A small manufacturing organisation implemented ISO 9000 by having a consultantand the quality manager draw up a manual of procedures. It was given to staff andthey were told 'work to these procedures'. The writers had specified functional

relationships (how you record/control your inputs and outputs). It reinforced afunctional perspective and led to greater allocations of blame, not greater solving of

problems.

Appendix 5

A brief history of BS 5750

In order to understand organisations, it is often helpful to look into their history. Wewill do the same with the Standard to understand more about the tensions being

experienced today. What was relevant and important at the time of the Standard'sgenesis has changed as markets and organisations have evolved; the Standard hasbecome an anachronism, bestowed with legitimacy by the institutions which havegrown around it, but of questionable relevance to the everyday problems of

performance management and improvement in modern times.


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One has to go back further than 1979 (the year BS 5750 was introduced) tounderstand the Standard. Its earliest predecessor was a defence industry standard, inuse during the Second World War, which in time was adopted by NATO and becameknown as the AQAP series (Allied Quality Assurance Publications). The Standardwas introduced to solve a problem of the time: munitions were exploding in factories.

It solved the problem by ensuring that munitions were made strictly according toprocedures (the procedures being documented and independently checked).

At that time, thinking about the organisation of work was strongly dominated bynotions of work specialisation and standardisation. Specialisation of work had its rootsin the work of Frederick Winslow Taylor and Adam Smith, they showed how

performance could be improved by structuring work in specialist functions.Standardisation was the secret of success for Henry Ford. It enabled significantreductions in cost. These tenets of management thinking still remain in most of ourorganisations. They have been challenged in recent years by quality theorists and have

been shown to be impediments to performance improvement , but new and differentideas have made little headway against the status quo.

When organisational thinking is governed by ideas of specialisation andstandardisation, the managerial role is to specify the standards and procedures towhich people will work. Documenting procedures formalises this thinking and

provides a means of control (have people done what the procedures say they shoulddo?). It is a means of control which controls output (bombs don't go off in thefactory), quality thinking, by contrast, would lead to improved output. It is ironic thatwhile many munitions factories in the UK were using such methods to control output,Deming was working with munitions factories in the United States to improve outputthrough reducing variation.

Following the war, the idea that performance could be improved through 'preventionof defects' took hold in industry. The view was that prevention required planning and

planning implied predetermining procedures. Verification (do they do what they saythey do?) was conducted by the customer (usually the government department makingthe purchase). To save taxpayers' money, the government decided that surveillanceshould be conducted by the private sector.

Industry's response was to pass responsibility to their suppliers and conductverification using their own inspectors. Naturally, there were differing views as to thenecessary contents of a quality system and the establishment and assessment ofdiffering systems consumed increasingly greater resources.

In 1972, the first British Standard, BS 4891, was published in an attempt to providecommon guidance to industry. BS4891 contained clauses which were peculiar to


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defence requirements and was replaced by BS 5179 in 1974. Many non-defencecontractors, however, still had difficulties with this document.

In 1977, Sir Frederick Warner reported to the government on the use of qualitystandards in British industry. Warner recommended a common standard for quality

assurance, independent assessment and a register of those companies assessed asmeeting the requirements. Hence the ISO 9000 (originally BS 5750) industry was

born.

The birth of this industry coincided with large-scale redundancies of governmentinspectors. A Department of Trade and Industry scheme provided financial assistanceto some firms which sought the advice and assistance of this new army of qualityconsultants. The consultants subscribe to the view on which ISO 9000 was originally

based, that prevention requires planning and the evidence of planning should bedocumented procedures which can be independently verified. It is a method which, if

successfully applied, will control output.

Deming, by contrast, taught the Japanese to manage their organisations as systems andto continuously improve performance by managing and reducing variation. It is a

body of knowledge beyond the experience of the army of what Tom Peters called 'theprocedures merchants'.

Documents

ISO 9000 Implementation and Value-Addition