1.1 ISO9001 Certification and Organizational Performance Bhattacharyyaand Sanghamitra (2010) describe organizational performance as a measureof well management of the organizations and the importance they give tocustomers and rest of the stakeholders. Laihonen (2013) related the performanceof an organization to the achievement of its objectives. In fact, it is hard tofind one clear definition of organizational performance in the literature,however, it can be concluded that it relates to the degree by which the goalsand objectives of an organization are fulfilled. These objectives are primaryand secondary ones.
Primary measures are related to internal performance of theorganization and secondary measures are related to the meeting the needs of thecustomers (Slack et al., 2001). Measuring the Performance is a very importantmanagement instrument, because measurement is the first requirement to improvesomething (Salaheldin, 2009). The way to perform measurement in qualitymanagement system is to identify and measure the impact of ISO 9001 practices.The parameters to be measured must consist of all the operations and processesrequired to perform the tasks of a modern organization and must not be limitedto financial parameters only, otherwise it would be a partial depiction of thefirm overall performance. Hence, performance is a highly critical means ofevaluating the responsibility of management, especially in the competitivemarket of the modern era. A number of studies have created a framework tomeasure organizational performance, containing different measuring parameters.
Some has used financial measures only and others have used additionalparameters. This study is not limited to measuring the financial parametersonly as the literature review shows that the ISO certification may have animpact on various measures of performance. On the basis ofliterature review (Vasileios & Odysseas, 2015; Gilberto et al, 2013;Corbett et al, 2003), it can be said that performance measures can be broadlygrouped into two categories, that is, Internal and External performancemeasures. Internal measures are related to the parameters which happen withinthe company, for example, product quality, cycle time, etc. Whereas, externalmeasures are related to the image and functions outside the company, forexample, market share, opportunity for export, etc.
The measures in this studyhave been taken from the research work of Corbett et al. (2003), in which 15countries around the world were studied to find the motivations and benefits ofimplementing ISO 9001 standard. The Internal Performance Measures includes thecost reduction, environmental and quality improvement, improvement inproductivity, profit margin, internal procedures and employee morale. TheExternal Performance Measures include the improved corporate image, increasedin market share, customer satisfaction and on time delivery to thecustomers, Improvement in relation with communities and authorities. Theexternal measures may also be further classified into two categories, that is,Marketing performance (corporate image, increased in market share, customersatisfaction and on time delivery to the customers) and Relationshipperformance (relation with communities and authorities). OrganizationalPerformance Measures are tabulated in Table 3.1:Table 3.
1PerformanceMeasures for the Impact of ISO 9001 Certification Main Categories Performance Measures Internal Performance Measures Cost Reduction Environment/Quality Improvement Increased Productivity Maintained/ Increased profit margin Improved Internal Procedures Improved Employee Morale External Performance Measures Improved corporate image Increased market share Increased customer satisfaction Increased on time delivery to the customers Improved relation with communities Improved relations with authorities Note: Adapted from Corbett, Luca, and Pan (2003)1.2 Motivationsfor ISO 9001 Certification Edward L. Deci, a well-known name in psychology, suggested aCognitive Evaluation Theory and recommended two motivational subsystems: anintrinsic subsystem and an extrinsic subsystem. Intrinsic being the internaland Extrinsic being the external form of Motivation. Similarly, the motives forimplementing ISO 9001 have been grouped into two categories by most of thestudies on this topic, that is, internal and external motives (Prajogo, 2011; Dong-Younget al., 2011; Paulo et al., 2009; Martinez-Costa et al., 2008; Jang and Lin,2008).
Internal motivations are associated with the objective of achievingimprovement in the organizational, whereas external motivations are mostly associatedwith promotional and marketing concerns, customer demands, enhancement ofmarket share etc (Paulo et al., 2009). Internal motives are focused onimplementing the structured approach of ISO 9001 to build a useful and provenquality assurance program that includes procedure, documentation andmonitoring, traceability, rework reduction, customer communication, and postsales service (Prajogo, 2011).
Internal motivation factors may include the costreduction, environment improvement and employees’ satisfaction. Externalmotives usually drive company to undertake ISO 9001 certification to improvetheir quality reputation or to meet customer expectations. In this case, theunderlying motive for certification is in response to the pressures fromexternal factors. These factors may include the corporate image, marketingadvantage, customers demand and certified competitors. Customers have beliefthat quality of the products will be high because of ISO 9001 certifiedorganization. Therefore, these external motives direct the organizations toadopt ISO 9001 standard because of external pressure and demands.
It results inadoption of ISO 9001 for certification purpose only rather than itsimplementation in true sense. Contrary to this, internal motivations are as aresult of members feeling for the organizations to become certified. The measures inthis study have been taken from the research work of Corbett et al. (2003), inwhich 15 countries around the world were studied to find the motivations andbenefits of implementing ISO 9001 standard. The measures of Internal motivesinclude cost reduction, environment and quality Improvement, capturing workers’knowledge, benefits experienced by others. Measures of External Motivationinclude corporate image, marketing advantage, customers pressure and demand, certifiedcompetitors, avoid potential export barriers, relations with communitiesand authorities. External motives may also be further classified into Marketingmotives (corporate image, customers’ demand and certified competitors) andRegulatory motives (avoid potential export barriers, relations with communitiesand authorities).
Organizations’ motives for ISO 9001 certification are tabulatedin Table 3.2. Table3.
2Organizations’ Motivesfor ISO 9001 Certification Main Categories Motives Internal Motives Cost Reduction Environment/Quality Improvement Capturing workers’ knowledge Benefits experienced by others External Motives Corporate image Marketing advantage Customers pressure/ demand Many competitors already certified Avoid potential export barrier Relation with communities Relation with Authorities Note: Adapted from Corbett, Luca, and Pan (2003) 1.3 ResearchModel Based on above comprehensive review ofliterature and identified variables including internal and external motives,internal and external performance measures; Research model of the study isshown in figure 3.1. Impact of the ISO 9001 certification on organizationalperformance will be studied through items mentioned in Table 3.1. Similarly,the main motivational factors for ISO 9001 certification will be determinedthrough items mentioned in Table 3.
2. Internal Motives Internal Performance H01 H01 External Motives External Performance H02 H02 Figure 3.1: Proposed research model of the studyFigure 3.1 shows two dependent and two independentvariables. In hypothesis Ho1 comparison of impacts of internalmotives and external motives on internal performance of the organization willbe made. The purpose is to find which of the two categories of motives (i.
e.internal or external motives) is more strongly related to internal performanceof the organization. In hypothesis Ho2comparison of impacts of internal motives and external motives on externalperformance of the organization will be made. The purpose here is to find whichof the two categories of motives (i.e.
internal or external motives) is morestrongly related to external performance of the organization. 1.4 Hypotheses Following are the null hypotheses of the study; H01: Internalmotives for ISO 9001 certification are more strongly related to the internalperformance measures than external motives. H02: Externalmotives for ISO 9001 certification are more strongly related to the externalperformance measures than internal motives.