2010-8
Effectiveness of ISO 9001 System Implementationin Japanese Companies
Tomoaki Shimada Nobuki Okamoto

Effectiveness of ISO 9001 System Implementation in Japanese Companies

Tomoaki Shimada and Nobuki Okamoto

ABSTRACTISO (International Organization for Standardization) management systems are represented by
ISO 9001:2000. Since the establishment of the ISO 9000 series in 1984, many manufacturers inJapan that perform international transactions have adopted the ISO management systems, andnow, companies in various industries, including those in the service sector, have implemented
ISO management systems. The ISO 9001 system specifies operational procedures that reflectbusiness policy, organizational characteristics, environmental factors, etc., and conformance tothe international standard has been the requirement of ISO 9001 certification. In recent years,
increasing importance has been attached to the effectiveness of ISO 9001 system implementationfrom the management perspective. In this study, we analyze the impact of ISO 9001 system
implementation on operational effectiveness with management philosophy, MBO (management
by objectives), management control, and management justice. We also introduce external
characteristics to examine the effectiveness of ISO system implementation under the trading
partners' strong/weak pressure on the company to implement the ISO system. We conducted amail survey with corporate heads and administrative managers, and obtained 511 effective
responses from 1,250 unlisted Japanese companies.

Keywords:
ISO 9001, quality management, management by objectives, survey research, Japan

Version: August 24, 2009(This version is an extended summary describing our study under the constraint of 12 pages.)1

Introduction
ISO (International Organization for Standardization) management systems are
represented by the Year 2000 edition of the ISO 9001 quality management system (i.e., ISO
9001:2000). The ISO 9000 series was established in 1984. Since then, many manufacturers inJapan that perform international transactions have adopted the ISO management systems, andnow, companies in various industries, including those in the service sector, have implemented
ISO management systems. The ISO Survey indicates that as of 2006, Japan has 80,518 ISO
9001:2000 certificates, and this number is the third largest in the world, after China and between
Italy and Spain (ACNielsen, 2007).

ISO management systems support business operations that utilize business policy andMBO (management by objectives) as part of their corporate philosophy. One of the requirementsof ISO certification is conformance to the international standard. Increasingly in recent years,
great importance has been attached to the effectiveness of the ISO management system. The
system is considered effective if an organization achieves its anticipated results. In order toanalyze the impact of ISO 9001 system implementation on operational effectiveness from the
management perspective, we primarily consider the following two factors as the determinants ofthe effectiveness of the implementation of the ISO system: ISO system characteristics andmanagement characteristics. Furthermore, we divide management characteristics into four
categories: management philosophy, MBO, management control, and management justice. We
also introduce another factor––external characteristics––to examine the effectiveness of ISO
system implementation under the trading partners' strong/weak pressure on the company toimplement the ISO system.

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There are two main contributions of this study: (1) We study the relationships between
four types of management characteristics and the effectiveness of ISO 9001 system
implementation; (2) we also analyze the influence of the management characteristics on theeffectiveness of its implementation in light of the trading partners' pressure for the company toadopt the system

Literature Review
Sila and Ebrahimpour conducted an extensive literature review of TQM (total quality
management) survey research. They analyzed 347 articles published between 1989 and 2000,
and many of these papers are related to the ISO 9001 series system (Sila & Ebrahimpour, 2002).
Similar to our study, many recent studies on the ISO 9001 system implementation incorporated aquestionnaire survey that was administered to organizations in a particular country. For example,
Bhuiyan and Alam conducted a mail survey to examine the difficulties faced by firms in Canada
regarding the implementation of ISO 9001:2000 (Bhuiyan & Alam, 2004). They analyzed these
difficulties with respect to company size, the number of years that the company has been
operating, geographical markets that the company serves, etc. Focusing on the public sector in
Taiwan, Chu and Wang conducted a questionnaire survey to investigate successful ISO 9000
implementation (Chu & Wang, 2001). They found several differences between executives andemployees with regard to the perceived benefits of ISO implementation. Yeung et. al.
administered a questionnaire survey to companies in the Hong Kong electronics industry toanalyze the effectiveness of ISO 9000 system implementation (Yeung, Lee, & Chan, 2003).

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They found that organizational performance was associated with the senior managers'
operational-based objectives.

In 2000, METI (Ministry of Economy, Trade and Industry) of Japan administered aquestionnaire survey to 680 Japanese companies operating in China. Their main objective of
adopting the ISO 9000 series was to establish quality management in their operations (METI
Chugoku, 2000). Other objectives included improving the corporate image and increasing
product quality. Most companies agreed that they could achieve these objectives after they
implemented the ISO quality management system. Although Japanese companies, especiallymanufacturers, continue to advocate ISO 9000, few, if any, of the studies on the effectiveness of
ISO 9001 system implementation were conducted recently. In our study, we also introduce MBO
in quality management to analyze the effectiveness of the ISO system in Japanese companies.

Hypothesis Development
Figure 1 illustrates a conceptual model with scales in this study. We consider two
dimensions that will influence the effectiveness of ISO 9001 system implementation from the
management perspective: (1) ISO system characteristics and (2) management characteristics. The
ISO system characteristics are measured by earnest use of the ISO system and frequent use of the
ISO system. On the other hand, there are four factors of management characteristics:
management philosophy, MBO, management control, and management justice.

Advocating MBO, Peter F. Drucker argued that one of its advantages is that it enables
management by self-regulation instead of management by rule (Drucker, 1985). In fact, MBO is4

employed as a quality objective item in the ISO 9001:2000 quality management system. It is
supposed to be incorporated into general management based on TQM (total quality management)
concepts. However, MBO, especially in Japan, is used in only the personnel management systemgoverned by a company's personnel department. In Japan, there are two perspectives of MBO: afunctional perspective, that is, top-down control, and a participation perspective, that is, bottomup management. Thus, in this study, we use the participation perspective of MBO, the functional
perspective of MBO, and the linkage of ISO principles to MBO.
FIGURE 1
Conceptual Model with Scales
External Characteristics(Trading partners' pressure for
ISO system implementation)

ISO System Characteristics(Management's support for the ISO
system and the employees' earnest useof the ISO system)

Effectiveness of ISO System
Implementation(Management's perceived
benefits from theimplementation of the ISO
system)H1
H2
H3

Management Characteristics
Management Philosophy(Influence of the
management philosophy on
employees)

Management by Objectives(Participation perspective of
MBO, functional perspective of
MBO, and strategic perspectiveof MBO)

H4
Management
Control(Number ofmanagers)

H5Management
Justice(Job responsibility
explicitness)

In addition to MBO, we use management philosophy, management control, andmanagement justice to analyze management characteristics. They are measured by the degree of
the influence of the management philosophy on employees, degree of job authority, and degreeof explicitness of job responsibility, respectively. Some organizations are mechanistic, whileothers are organic. One of the characteristics of a mechanistic management system is explicit job
responsibility, which is also stipulated in the ISO management system.

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The external characteristics are measured by the degree of pressure from trading partners
for a company to implement the ISO system. Although the ISO 9001 system is not interorganizational, it affects the operations of trading partners (i.e., suppliers and buyers). Thus, it isnormal for trading partners to apply pressure in this regard. We also introduce the number of
employees as a control variable. The control of company size is required in this study because
the economies of scale will affect the effectiveness of the implementation of the ISO 9001
system.

Table 1 summarizes the scales and the number of items to measure them. We developed
scale items, and thus, we conducted an exploratory factory analysis, which will be explain in the
results section. All the data were obtained from the questionnaire survey except for number of
employees; these numbers were obtained from the database, which will be explained in the datacollection section. Based on these concepts, depicted in Figure 1, we formulated the following
five hypotheses:(From the perspective of ISO system characteristics)
Hypothesis 1. The more earnestly employees use the ISO 9001 system, the more benefits
management perceives from the implementation of the ISO system.

(From the perspective of MBO)
Hypothesis 2. The more management by objectives is introduced in quality management, themore benefits management perceives from the implementation of the ISO system.

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(From the perspective of management philosophy)
Hypothesis 3. The more influential the management philosophy is on employees, the more
benefits management perceives from the implementation of the ISO system.

(From the perspective of management control)
Hypothesis 4. The more managers a company hires, the more benefits management perceives
from the implementation of the ISO system.

(From the perspective of management justice)
Hypothesis 5. The more explicitly an employee's job responsibility is defined, the more benefits
management perceives from the implementation of the ISO system.
TABLE 1
Mean and Standard Deviation of Scale Scores
Category

Scale NameISO System
Characteristics

Management's support for the ISO system
Employees' earnest use of the ISO system

Management
Characteristics

Influence of management philosophy on employees
Participation perspective of MBO in quality
management
Functional perspective of MBO in quality
management
Strategic perspective of MBO in quality management
Number of managers (obtained from the database)Job responsibility explicitness
Management's perceived benefits of ISO system
implementation

Effectiveness of
ISO System
Implementation

No. of
Scale
Items
2
2
4

N

Mean

Standard
Deviation

511
511
511

3.99
3.63
4.45

0.90
0.86
0.63

10

511

4.21

0.57

4

511

4.59

0.49

2
1
2

511
511
511

3.89
N/A
3.95

0.84
N/A
0.79

6

510

3.77

0.62

External
Characteristics

Trading partners' pressure for ISO system
implementation

2

511

2.98

1.21

Control Variable

Number of employees (obtained from the database)

1

511

N/A

N/A

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Data Collection
In the database of 4,300 Japanese unlisted companies, Shikihou, 1,250 companies that
acquired the ISO 9001:2000 certification were identified (Toyo-Keizai, 2007). The database
contains company profiles, including the company's contact information, the president's name,the number of employees, etc. We did not consider listed companies because they may havemore than one ISO 9001:2000 certification; for example, each factory, each division, or eachsubsidiary may be ISO 9001:2000 certified. Such situations are not ideal for this study because
each ISO certificate may have different characteristics.

We sent a questionnaire survey to the presidents of the 1,250 companies by mail. Almost
all the questions were asked in a Likert-scale format (i.e., 1: disagree, 2: somewhat disagree, 3:
neutral, 4: somewhat agree, and 5: agree). Although the recipients were not forced to answer thequestionnaire survey, we received 512 responses before the first deadline. Many of the
respondents requested the aggregate data from the survey; thus, their interest in the survey results
increased the response rate. Only one response was not usable for data analysis due to the large
number of blanks left in the questionnaire. Thus, we obtained 511 effective data points and an
effective response rate of 41%.

The respondents' profiles are as follows: 54 presidents, 118 directors, 175 managers, 163
other positions, and 1 unknown position. Their authority under the ISO management system is asfollows: 84 managements, 237 supervisions, 59 deputy supervisions, and 131 others (e.g., an ISO
secretariat). We compared the industrial distribution of the responses across the total of 1,250
companies, using JAB (Japan Accreditation Board for Conformity Assessment) data as of July8

20, 2007. JAB classifies 54,908 ISO 9001 certified organizations in Japan into 39 industries. We
observed that the industrial distribution of the respondent companies was almost the same as thatof the JAB data except for a few industries such as the machine and equipment industry, theconstruction industry, and the IT (information technology) industry. We also compared theindustrial distribution of the 511 companies that responded across the 1,250 selected companies
to determine if there was any response bias. However, we did not observe any large difference inthe 39 industrial categories.

Results
First, we conducted factor analysis using a varimax rotation. This process is required for
new scale development. As a result, we eliminated some original scales or items and created newscales or added items. Table 1 shows the mean and standard deviation of each scale. We
calculated the score of each scale by computing the average of each item without imposing any
weight on it. Table 1 also includes two variables that were obtained from the database rather thanfrom the survey. They are the number of mangers and the number of employees, and thesevariables were used to test the hypotheses.

Before we tested our hypotheses, we divided the data into two groups according to thescale score of the "trading partners' pressure for ISO system implementation." A company cannot
control the external characteristics; thus, these characteristics should be taken into considerationin the evaluation of the effectiveness of the ISO system. In one group, the scale score was 3 andabove, and the companies belonging to this group were pressured strongly by their trading
partners to implement the ISO system. In the other group, the scale score was less than 3, and the9companies in this group received weak pressure from their trading partners. A t-test indicatedthat the means of the scale score of "management's perceived benefits of ISO system
implementation" are significantly different in the two groups at the 0.1% significance level, as
shown in Table 2. Thus, it is reasonable to categorize the data according to the degree of the
trading partners' pressure.
TABLE 2
Trading Partners' Strong/Weak Pressure Regarding ISO System Implementation
Scale score of"Trading Partners'
Pressure for ISO
System
Implementation"
Trading Partners' Strong Pressure for ISO
System Implementation

3 or more

Trading Partners' Weak Pressure for ISO
System Implementation

Less than 3

Scale score of "Management's
Perceived Benefits of ISO System
Implementation"N
MeanStandard
Deviation
262

3.85

0.633

248

3.67

0.593

Table 3 summarizes the results of the hypothesis testing at the 5% significance level.
Hypotheses 1 and 3 are supported, while Hypotheses 2 and 4 are rejected. This means that
employees' earnest use of the ISO system, and management philosophy that is influential toemployees lead to management's perceived benefits from ISO system implementation. In
addition, Hypothesis 5 is supported only under high pressure from trading partners. This meansthat the management has to stipulate the employees' job responsibility well under high pressure
for the ISO 9001 system adoption from the trading partners in order to benefit from the system
implementation.

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In Hypothesis 2, our further study shows that both the participation perspective of MBO
and the strategic perspective of MBO are positively related to management's perceived benefits
from the implementation of the ISO system at a significance level under low pressure fromtrading partners. Similarly, only the participation perspective of MBO is positively related to
management's perceived benefits at a significance level under high pressure from trading
partners. Thus, only the participation perspective of MBO is positively related to management's
perceived benefits, regardless of the level of pressure applied by the trading partners. Thisimplies that bottom-up management is a key to effective ISO system implementation in Japan. In
fact, Toyota, the largest car manufacturer in Japan, also emphasizes bottom-up management
rather than top-down strategic management.
TABLE 3
Summary of Hypothesis Testing Results
Trading partners'
Test Resultspressure for the
implementation of the Supported Rejected
ISO system

Hypothesis

H1: The more earnestly employees use the ISO 9001 system, themore benefits management perceives from theimplementation of the ISO system. (ISO System
Characteristics Perspective)
H2: The more management by objectives is introduced in quality
management, the more benefits management perceives fromthe implementation of the ISO system. (MBO Perspective)
H3: The more influential to employees the management
philosophy is, the more benefits management perceives fromthe implementation of the ISO system. (Management
Philosophy Perspective)
H4: The more managers a company hires, the more benefits
management perceives from the implementation of the ISO
system. (Management Control Perspective)
H5: The more explicitly the employees' job responsibility isdefined, the more benefits management perceives from ISO
system implementation. (Management Justice Perspective)

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Weak
Strong

×
×

Weak

×

Strong×

Weak×

Strong×

Weak×

Strong×

Weak×

Strong×Conclusions
The results show that regardless of the level of pressure for the ISO 9001 system
adoption applied by the trading partners, employees' earnest use of the ISO system, andmanagement philosophy that is influential to employees lead to management's perceived benefits
from ISO system implementation. In addition, the participation perspective of MBO leads tomanagement's perceived benefits from ISO 9001 system implementation, which implies thebottom-up management is crucial to effective ISO system implementation. Another implicationfrom this study is that the management has to stipulate the employees' job responsibility wellunder high pressure for the ISO 9001 system adoption from the trading partners in order tobenefit from the system implementation.
[2010.2.22 958]

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