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 ISO 9000 For Small Companies

ISO 9000 for Small Companies

With creative use of resources and the help of experts, small companies can overcome obstacles on the path to ISO 9000 registration.

by Nancy Callaghan and Les Schnoll

A small business, as defined by the U.S. Department of Commerce, is one that employs 500 people or less. Organizations in this category make up a vast majority of the businesses in the United States today and constitute the segment with the most rapid growth.

Many small companies employ less than 100 people -- companies like the local hardware store or plumbing supply company. Many of them feel overlooked by the ISO 9000 movement. Who looks after these organizations' interests? What level of input do these companies have?

The number of small businesses has increased dramatically with the downsizing of corporate America. Many former Fortune 500 employees have been given early retirement packages, incentives or large separation bonuses and are now able to strike out on their own to form their own companies. Latest figures from a study co-produced by McGraw-Hill and Dun & Bradstreet show that about 25 percent of all ISO 9000-registered companies have less than 150 employees, and 29 percent of registered companies have between 150 and 500 employees. In other words, more than half of ISO 9000-registered companies in the United States are considered small businesses.

Within the last 10 years, registration to the ISO 9000 series of quality standards has become a growing trend in the United States and has had an impact on a large part of the business community. Larger companies saw the immediate benefits of becoming registered, particularly those expanding into the global marketplace. Smaller companies, however, have not been as quick to jump on the bandwagon. Several factors seem to have come into play for this difference in attitude.

Why consider ISO 9000 registration?

By far, the most common reason that small businesses (which we will define as those organizations that employ less than 100 people) use to explain why they do not want to pursue registration is cost. The hearsay and inaccurate secondhand and thirdhand information is that "it's going to cost you at least $50,000 to become registered and another $25,000 a year to keep it." Nothing could be further from the truth. The reality is that external costs associated with the process are directly proportional to the company's size (number of employees). Several other factors come into play, but company size has the largest impact on the number of days that must be spent in the registration and surveillance process. Logically, therefore, the smaller the company, the smaller the fees associated with the registration process. Of those companies registered since 1987, about 50 percent were able to recover their ISO 9000 implementation costs in three years or less, according to the McGraw-Hill/Dun & Brad-street study.

      To further increase the perceived trauma associated with registering an organization's quality system, the customers of these small businesses may require registration. Pressures may come to bear from industries, such as the automotive or aerospace industries, which are requiring their subcontractors to become registered to industry-enhanced versions of the ISO 9000 standards. Data from the McGraw-Hill/Dun & Bradstreet study show that nearly 85 percent of companies are at least "encouraging" their subcontractors to become registered.

For Precision Printers, a screen printer in Grass Valley, California, the reasons for registration were more pragmatic. A small company (72 employees) in a small town in Northern California, Precision Printers designs and manufactures screen printed front panels, overlays, nameplates, labels, touch sensors and membrane touch switches. The company wanted a system in place to help them manage their growth while maintaining control of quality, explains Quality Team Leader Justin Belsito. He recognized that "growth was not possible without a quality system model," and ISO 9000 provided the model that suited his company's needs.

The company is a supplier to Freightliner Corp., a manufacturer of large trucks in Portland, Oregon. Precision Printers quickly recognized that ISO 9000 fit with Freightliner's requirements as well as their own. Since that time, Freightliner has mandated that all of their suppliers become ISO 9000-registered.

The Technical Training Center for the Central Connecticut State University Institute for Industrial and Engineering Technology runs a program that offers support to small companies seeking ISO 9000 registration. "The reasons that small businesses should implement a quality system and have it registered are: system improvement, market expansion and retention of existing business," says Rick Mullins, the center's director. "We have also observed that more companies are joining ISO 9000 training networks to enhance learning and share successful strategies."

Small businesses may meet a variety of both
internal and external obstacles on their road to registration.
Help is there for the companies that search for it.

Benefits of registration

Those organizations that have experienced the euphoria of being officially informed that they are registered to the ISO 9001 or ISO 9002 standard have had the opportunity to reflect on the process and articulate the benefits of registration to their companies. Some of the perceived -- and actual -- benefits to those companies include:

 Documentation of the company's quality management system.

 Reduction and variability resulting both from documentation and the use of statistical techniques to monitor the system.

 Using their registration to help develop and expand business, particularly those areas where registration is a prerequisite for doing business.

 Reduction or elimination of customer audits.

 Increased profitability/reduced costs.

 Improved communications, both internal and external.

 Greater awareness of quality by employees, accompanied by enhanced pride in their jobs and contribution to the company's quality system.

 Provision of training to all personnel.

 Ability to remain/become competitive in the markets.

 Realization that meeting the requirements is not rocket science but common sense.

 Elimination of redundancy.

Belsito agrees that there were benefits to his organization. "Certification allowed us to gain entrance to large customers that would not have given us the time of day before we became ISO 9002-registered," reports Belsito. "Also, our employees are more content with their jobs due to better training, which resulted in greater pride in their work. We have also begun to shift from corrective actions to a process improvement model that allows us to solve problems before they arise, thus eliminating the frequency of corrective actions."

Problems and challenges

With most benefits, there are also problems and challenges to attain those benefits; registration of an organization's quality system is no exception. Many issues may impact a company in its registration efforts.

No doubt the primary issue facing small businesses today is one of limited resources. Most companies, when asked, will identify money, personnel and time as their most problematic resources. The financial stability of many small companies may constantly be teetering between solvency and bankruptcy, which limits the financial resources that can be focused on areas like training, computer systems and, ultimately, implementation of an ISO 9000 quality system. Financial stability, or instability, may also be pivotal in allowing a company to take advantage of state and local funding for training as it leads to implementation of a quality system.

In a small company, each employee most likely wears a number of hats, thus limiting the amount of responsibility that can be placed on each person. When implementing a quality system, this obviously causes overlapping of responsibilities. The challenge for the company becomes in finding ways not to overburden its employees. An ISO 9000 quality system may be the answer for many companies by allowing the company to focus on problem areas and helping to streamline those processes as well as eliminate duplication of tasks. Belsito and Ed Downs, one of the members of the original implementation team and now the production manager, observed that they are just now realizing that the quality system is intended to help production rather than the other way around.

Time can become a severe limitation for a small business. Implementation of a quality system and, ultimately, registration of that system, may take anywhere from six to 18 months, depending on a variety of factors, including resources, management commitment and employee buy-in. The company may be pressured by customers to implement ISO 9000 within a certain time frame or potentially lose their business. It behooves small companies to become aware of external pressures within their industry and become proactive rather than end up behind the eight ball.

"It was difficult to start, but once deadlines were set, the whole process from beginning to end took less than one year," notes Belsito. "However, awareness of the need to become ISO 9000-registered began more than a year before any documentation was actually written."

Another pitfall that small businesses seem to fall into rather frequently is the "external consultant syndrome." Large organizations usually can utilize their own personnel when implementing quality initiatives -- not always so for the small company. The current downsizing trend has unleashed into the marketplace a plethora of external consultants whose sole focus appears to be "helping" small businesses become registered to the ISO 9000 standards. Many small companies hire and rely on these external consultants. Unfortunately, they may discover along the way that the consultant does not understand the organization's business or processes, resulting in a documented system that has little or no merit. Although there are many excellent consultants out there, a company's limited financial resources may become the deciding factor between choosing a consultant who is cheap or a consultant who is capable.

The greatest challenge for the quality manager in a small company could be executive commitment. When the upper management in a company gives that quality manager a directive to become ISO 9000-registered, they may have little or no knowledge of the standard. This could result in lack of support when they discover that the quality manager cannot implement ISO 9000 alone and in a vacuum.

 "The company's management representative, working from a position of power, can drive the entire organization to change to a more participative management style with open communication paths," explains Mullins. "However, without that kind of authority sanctioned by executive management, efforts to manage culture change inevitably are doomed."

Belsito confirms that their path to registration had its share of problems, but he adds that Precision Printers' culture helped the process along. "The internal culture of the company and commitment by the owner, Donald C. Marshall, helped to smooth the way for acceptance of ISO 9000," recalls Belsito. "Our greatest challenge was knowing our customers and recognizing that their quality systems have become more sophisticated and require greater control of supplied products. It became obvious that we needed a documented quality system."

Overcoming obstacles to registration

Small businesses may meet a variety of both internal and external obstacles on their road to registration. Knowing that these obstacles exist will greatly simplify the path to ISO 9000 registration. Help is there for the companies that search for it.

State and local funding for ISO 9000 training is available in many states, particularly those that recognize the importance of ISO 9000 in boosting the economy by allowing small businesses to expand into other lucrative markets. Some of the more progressive states are even beginning to see the value in offering funding for the registration process itself. In Connecticut, Mullins has been instrumental in recommending some creative ways for state agencies to offer help to small businesses "to enhance the business climate." His recommendations include: a one-time tax incentive or subsidy to ISO 9000-registered companies through state agencies or local chambers of commerce; and identifying low-cost manufacturing sites, or brown sites, that could be converted to green sites for ISO 9000 companies.

The federal government, through the Small Business Administration, offers low-cost business loans to companies for a variety of uses, from training to large equipment purchases. These loans could be used to supplement a small company's ISO 9000 initiative from training and implementation through to registration.

A recent development in the ISO 9000 world primarily directed toward small companies is the creation of small business consortiums that are cropping up around the country. The advantages in joining a consortium are readily recognized by the companies that have taken this route. Small businesses come to the Institute for Industrial and Engineering Technology program to help reduce costs associated with developing the quality manual, procedures, internal auditor training, implementation and registration, says Mullins.

Through the program that Mullins runs, small businesses can come together in a classroom setting that allows them to share ideas, network and provide support to one another as they proceed through the training and registration of their quality system. The classroom training spans a period of about four months, with qualified outside consultants conducting the training and a registrar to interpret ISO 9000's elements and provide insight to the auditing process.

As a company approaches the registration process, selecting a qualified registrar can become a daunting task. Companies should keep in mind that the registrar which they select should be accredited by a qualified accreditation body, such as the Registrar Accreditation Board in the United States or the Raad Voor Accreditatie in the Netherlands, which is well-recognized internationally. The registrar should be knowledgeable in the organization's business and industry, and be willing to work with the company to minimize costs.

"One of the things we did was to establish a team that included Mr. Marshall; Debi Moore, our print production team leader; Ed Downs, the quality specialist; and myself to implement the ISO 9000 standard," explains Belsito. "We emphasized the importance of training and communication to our employees by using ISO 9000 as a model. ISO 9000 doesn't dictate and therefore allows the flexibility that we needed."

The bottom line is that the resources are out there; it's just a matter of identifying and integrating those resources into the overall implementation plan.

"Business owners need to change their business philosophy," advises Mullins. "They need to shed their traditional conservative management styles and share ideas, principles and philosophies that work. Companies that pursue registration of their quality systems without being fully committed to the process have little chance of success in achieving the long-term goals of quality. Worse, without genuinely committing to the process, they waste valuable resources on a futile quest."

These changes are critical to the small business, where people often wear several hats on a daily basis. It is imperative that small companies resist the urge to make things more complex than they need to be. It is often a challenge to develop and implement a system that does not result in a bureaucratic avalanche of paperwork.

Where to Get Assistance

 The U.S. Department of Commerce's Manufacturing Extension Partnership Program, with 60 facilities throughout the United States. Contact MEP at (800) 637-4634.

 Local chambers of commerce

 Local small business development centers (local government agencies)

 Local colleges

 The publication The Handbook for Small Businesses: Advice on the Interpretation and Application of the ISO 9000 Quality System Standards may be purchased through the American National Standards Institute at (212) 642-4900.

About the authors

Nancy Callaghan, director of external training for KPMG Quality Registrar, is responsible for the development of external training programs with a focus on small- to mid-sized businesses. She has 15 years' experience in program management.

Les Schnoll, director of regulated industries for KPMG Quality Registrar, is responsible for directing all business development activities in those industries. He has 25 years' experience in quality assurance/quality control, auditing, regulatory compliance, management and microbiology in medical, pharmaceutical, clinical, industrial and food areas. Prior to working for KPMG, Schnoll was with Dow Corning Corp. as the ISO program and quality auditing manager.


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