RETURN ON INVESTMENT FOR ISO 9001 CERTIFICATION
If you are going to invest all the needed time, effort, money, and resources into the development, implementation, and certification of an ISO 9001 management system, then there better be some type of payoff in the end. This is often in the form of new market opportunities, customers, or revenue streams. However, many organizations fail to realize and recognize the internal benefits and value of ISO 9001.
While we touched on the value and benefits of ISO 9001 in a previous article, for this deep dive article installment, we’ll further explore the potential return on investment that might be achieved through ISO 9001 certification. And just to be clear, you really don’t even need to be ISO certified to realize the value that ISO 9001 offers. Many organizations forget that ISO 9001 can be used as a framework for establishing a robust management system within their organization without the extra cost, hassle, and stress of obtaining ISO certification. Of course, the addition of the ISO 9001 certificate can and will bring value and benefits beyond just implementation of and compliance to the ISO 9001 standard.
Reasons to Pursue ISO 9001
Most organizations make the decision to obtain ISO 9001 certification to open, expand, or maintain specific markets or customers. Whether it is to penetrate a new market where ISO 9001 certification is prevalent or perhaps even a barrier to entry, or to satisfy a specific potential customer and open new revenue opportunities, most organizations adopt ISO 9001 due to external pressures and forces.
Please note that pursing ISO 9001 just to gain the prized certificate and open up new markets or customers can and often results in less than effective management system implementation and missed internal improvements and value.
Occasionally we run into an organization that chooses to implement ISO 9001 just because they want a strong management system that will help maximize organizational performance and growth. These are the companies that most often see and realize the full return on investment for ISO 9001 certification. These organizations embrace the ISO standard and apply the necessary time and resources to embed the system into their culture. They don’t look at certification as another hoop to jump through to gain a new customer, but understand that ISO 9001 can deliver numerous benefits to their organization including:
- Open new markets where ISO is prevalent or almost even required,
- Increase revenue streams via new customers, contracts, and sales orders,
- Increase operating efficiencies and effectiveness,
- Improve customer satisfaction and stakeholder relationships, and
- Provide differentiation from competitors.
Before we dive further into the ROI and benefits of ISO 9001, let’s explore the some of the foundational ISO 9001 structure, practices, and principles.
ISO 9001 Principles
We already mentioned the seven ISO 9001 Quality Management Principles in a previous article (ISO Overview – ISO 9001 Benefits and Value), however, these certainly should be considered again in the context of this article as they clearly support some of the core value and benefits of the ISO standard.
- Customer Focus: The primary focus of quality management is to meet customer requirements and strive to exceed customer expectations.
- Leadership: Leaders at all levels should establish unity of purpose and direction and create conditions in which people are engaged in achieving the organization’s objectives.
- Engagement of People: Competent, empowered, and engaged people at all levels throughout the organization are essential to enhance its capability to create and deliver value.
- Process Approach: Consistent and predictable results are achieved more effectively and efficiently when activities are understood and managed as interrelated processes that function as a coherent system to produce a result or outcome.
- Improvement: Successful organizations have a continuous ongoing focus on performance and improvement.
- Evidence-based Decision Making: Decisions based on the analysis and evaluation of data and information are more likely to produce desired results than those based on guesses and emotions.
- Relationship Management: For sustained success, an effective organization manages its relationships with interested parties, such as suppliers, customers, employees, and other key stakeholders.
You can learn more about the seven ISO principles here.
Fundamental Business Practices
As we discussed in our article “ISO From the Corner Office – An ISO 9001 Executive Summary” ISO 9001 really defines a framework for establishing and executing many of the core foundational practices for running an effective business, such as:
- Strategic management (environmental analysis + strategic planning),
- Risk management in the context of a risk-based operating culture,
- Performance monitoring, measurement, and evaluation,
- Continuous improvement based on performance evaluation results,
- Total focus and commitment towards customers and customer satisfaction,
- Management of resources (people, facility, equipment, environment, etc.),
- Supply chain management with focus on mutually-beneficial relationships,
- Management and dissemination of knowledge deemed necessary to effectively operate the company, and
- Organizational planning at all levels (strategic, resources, development, production, etc.).
Methodologies / Approaches
ISO 9001 promotes the use of a several proven methodologies which can deliver tremendous value to just about any organization. These methods are the Process Approach, Plan-Do-Check-Act (PDCA) Cycle, and Risk-Based Thinking. These must be implemented effectively to achieve desired results, which means that they must be embedded into the culture throughout the entire organization. We will cover these methods in greater detail in future articles but if you must know more now, check out these resources:
Risk-Based Thinking (MS Word document download)
While some businesses can get away without effective implementation of these practices for a while, in the end there really is no way to effectively and consistently grow and operate an organization without these fundamental business practices. Consider how adoption of these business methods could improve the performance of your organization.
ISO 9001 BENEFITS AND VALUE
Ok, so what do all these principles, methods, and practices really mean to your organization and its bottom line? That’s hard to say as it will depend on numerous variables concerning your organization’s current structure, age, industry, markets, customers, competitors, products and services, market position, culture, leadership, management style, existing processes, process maturity, and many other factors. With that said, even if your organization has mature, well established processes and performs at a relatively high level of excellence, an ISO 9001 management system can still establish and drive improvement into your organization.
By adopting a robust continuous improvement approach, the sky is the limit concerning performance and value to be gained. The things that will limit what can be achieved are self-imposed limitations such as ineffective system implementation, poor leadership, and a disruptive and detrimental corporate culture. However, if most of these issues already exist within an organization and if left unchecked, any new management system will mostly fail to produce desired results or a favorable return on investment. In other words, ISO 9001 won’t address and fix poor leadership and cultural issues by itself. These changes must be initiated by management regardless of new or existing management systems.
Assuming strong organizational leadership and management, an effective culture, and effective management system implementation, ISO 9001 can certainly impact the organization in many different and positive ways including, but not limited to:
- Senior management engagement,
- Alignment and optimization of key business processes,
- Improved brand recognition / perception,
- Identification of organizational and process deficiencies,
- Holistic management system governing and aligning the entire organization,
- Increased / improved organizational efficiency and effectiveness,
- Improved customer satisfaction,
- Development / expansion into new markets,
- Increased market share,
- Decreased costs and expenses (efficiencies / waste reduction),
- Improved profitability,
- Increased revenues,
- Better employee engagement / productivity,
- Improved supplier relationships, and
- Repeatable / consistent process outputs, products, and services
Review the list above along with any other additional potential benefits to determine and prioritize those areas within your organization where performance improvement is needed.
There are many studies that have been conducted over the years which demonstrate a positive return on investment for ISO 9001 management system implementation and certification. There is no doubt that when done right, ISO 9001 will provide positive value to just about any organization. Quoting a Harvard Business Review article:
“Companies that adopt ISO 9001 subsequently grow faster in sales, employment, payroll, and average annual earnings than a matched control group. ISO 9001 adopters are also more likely to remain in business.” (Harvard Business Review – Quality Management and Job Quality: How the ISO 9001 Standard for Quality Management Systems Affects Employees and Employers, 12/11/2008).
The American Society for Quality (ASQ) claims that every $1 invested in a management system could return an additional $6 in revenue, $16 in cost reductions, and $3 in profit increases.
We’ve also seen ISO 9001 implemented in the wrong way for the wrong reasons resulting in ineffective management systems that fail to deliver desired positive outcomes. Without strong support and engagement from senior leadership, effective implementation, and a culture and employees that embrace the system, organizations will struggle to realize maximum performance and returns. Its all too easy to just establish the necessary procedures and supporting documentation and game the system to obtain ISO 9001 certification, but in the end fail to realize the full benefits and value of the ISO 9001.
The bottom line is that ISO 9001 can deliver tremendous value and benefit to just about any organization, but it does need to be implemented properly to be effective. This requires strong and engaged leadership, effective established processes, and an organizational culture that accepts and embraces the management system. The return on investment for ISO 9001 certification is a real thing but will differ for each organization based on numerous factors and variables. This is the very reason that our eCoach ISO 9001 learning system includes lessons which help organizational leadership evaluate and define the goals, objectives, and value to be obtain with their ISO 9001 system before starting the actual system implementation activities.
How can an effective ISO 9001 management system benefit and bring value to your organization?