Link between ISO 9000 certification and business performance in Sri Lankan companies

Abstract

The purpose of this study was to assess the link between ISO 9000 Quality Management System Certification and business performance of Sri Lankan companies. Organizations of different sizes, industries, with different ownership, public as well as private and profit making as well as non-profit making, are pursuing ISO 9000 series of Quality management system Certification. A total of ISO 9001:2000 certificates have been issued worldwide in over 175 countries and economies and in Sri Lanka almost above 500 companies have been certified by year 2008. Until the end of year 2005 there was a reasonable increase in the certification but after 2005 the annual growth rate of certification has declined. Therefore it is of importance to analyze the relation to understand the benefits or costs associated with implementation of the standard. From worldwide research conducted it is evident, that enhanced quality of product is the most widely gained advantage through adoption of ISO 9001:2000 certifications. However analysis of standard indicates many other benefits like improved market share, optimized resource utilization, improved and efficient process management, high employee productivity, adherence to applicable regulations, and providing a basis for benchmarking. According to the research finding, benefits like improved sales, improved management of processes, improved quality of product and many other benefits listed above were identified. However any increase in profitability or returns to the shareholders was not found for Sri Lankan Public listed companies, after certification. It was viewed that companies with higher profitability seek certification rather than companies with low returns. Also, documentation required for implementation was viewed by many companies as a difficult process to implement. In this analysis we used the method oft-test for testing significant differences in means of certified and not certified firms. Time series analysis was conducted taking year of certification as the year zero. Also benefits other than financial benefits were analyzed using descriptive statistics