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by Laura Smith

Doing business today requires careful attention to detail and customer service, and ensuring that all those details are seen to is no small job. Becoming certified to an established international standard is one way organizations can prove and publicize their quality control efforts, but the certification process can be long, complicated and expensive. There are also a lot of options: Is it better to hire an independent auditor, or would it be better to retain a certification body that provides one of its own auditors? Which certificate holds more cachet with potential clients? Does any of this really matter, as long as the certification process is successful? Finally, how much is all this going to cost?

There's no question that auditing has changed over the years, a shift that has been led by the changing needs of clients. Attaining certification to ISO 9001, ISO 14001 or any of the dozens of the derivative standards used to be an operational function of doing business, and, in many cases, it was treated as such: something to be checked off of executives' to-do lists, with little expected value from the auditing process. All that has changed. As profit margins have tightened and international business has become more competitive, organizations have increasingly come to expect added value from their certification investments. This has led to changes in the market for quality-system certification. Increased competition has commoditized certification and allowed a small number of certification bodies, usually unaccredited and some of dubious intent, to provide cut-rate certification that's more of a rubber-stamp than an indication of improved business processes and outcomes. It has also caught the attention of accreditation bodies. The result is a certification process that is evolving to compete for clients through value-added services and results, rather than through price alone.

The wild west
Attaining certification can be an enormous cost to an organization in terms of time spent on preparing for third-party auditing, required reports and related meetings. It's also costly financially. Predictably, organizations want to get the most "bang for their buck." Focusing only on the cost of certification, though, can be a slippery slope. Increased competition has made auditors--especially those who work independently--more willing to negotiate on their day rates, and although retaining an inexpensive auditor may save money in the short term, it almost certainly will cost more in the long term.

This was a topic discussed at the International Accreditation Forum's March meeting held in San Francisco, with participants from around the world noting that widespread cut-rate certification could undermine the credibility of all certifications--even those that result in measurable improvements in process and product. Nigel Croft, convener of ISO/TC 176 (which oversees the ISO 9000 series of standards and is currently revising ISO 9001 and ISO 9004) went so far as to separate certification bodies into the "good guys" and the "bad guys."

"The bad guys are almost completely commercially driven, and only concerned with increasing their market share," Croft says. "The good guys, the ones we need to promote and encourage, consider the needs of their client, as well as the client's customer. They protect the consumer's interest by ensuring that their clients produce well-made products. They are rigorous but fair.… There are a lot of minimalist organizations out there [that don't care if] bad certification organizations give them certifications that don't mean anything. We need to get angry and get those bad guys out of the business because they are doing us all a disservice."

Finding the balance between these characteristics--detail-oriented and careful without being too tough--can be challenging. Although delivering high-quality, careful audits with attention to detail is supremely important to maintaining a good reputation as an effective quality auditor, very few auditors want the reputation of being nitpicky documentation commandos who make the auditing process a lot more stressful than it needs to be. On the flip side, being too lax with clients--which may result in almost certain certification, with few if any nonconformances--isn't any good either. Leaning too far this way could lead into the "bad guy" territory Croft warns against.

"This is a free market, and there is no requirement (sector-specific standards like AS9100, ISO/TS 16949, etc., excluded) to have any form of accreditation or oversight," says Bill Sullivan, DNV Certification North America director of marketing. "This means that any company can set itself up as an ISO 9001 or ISO 14001 certification body, conduct audits and issue certificates. It is very much a buyer-beware situation."

The cost of the audit is usually determined by the number of days an auditor or audit team spends on-site. Therefore, the only negotiable part of a rate quote is the auditor's day rate. This fee generally includes the auditor's per diem expenses (for lodging, if necessary, and for meals), and can vary widely. An auditor who has to travel out of town for an on-site audit will naturally cost more, as the client will be responsible for his or her lodging. Auditors with experience in a client's specific industry will also cost more, because their feedback is considered more valuable.

A decade ago, there were approximately 10 certification bodies operating in North America; now, there are almost 100. Worldwide, reports the ANSI-ASQ National Accreditation Board (ANAB), there are more than 750 certification bodies operating. As the market has become more crowded, more auditors and registrars are willing to negotiate on their day rates. This can be good and bad, and clients should be vigilant when selecting an auditor.

"Choosing based on price alone is a very bad idea," says Denise Robitaille, an independent auditor with more than 15 years of experience. "That will almost certainly end up costing the client extra in the future because, while they might get a certificate, they most certainly won't be improving, and their competitors will be. The certificate is important, but it's not as important as the process improvement that it should indicate."

Why certify?
The reasons for attaining certification are as varied as industry needs. According to a survey conducted by the Independent Association of Accredited Registrars, the main reasons organizations cited for quality management system certification are as follows:

Customer mandate: 29 percent

Competitive pressure or advantage: 17 percent

Continuous improvement based on customer requirements: 16 percent

Improve quality: 14 percent

 

Less frequently cited reasons also included "implementation of best practices" (10%) and "corporate mandate" (9%); reduced cost and legal reasons were each cited by 1 percent of respondents. In the IAAR survey, 84 percent of certified companies realized a positive return on their investment (ROI) in certification. Eleven percent of these reported an ROI from their certification of more than 20 percent, 15 percent of organizations had an ROI of 10-20 percent, and 27 percent attained an ROI of 6-10 percent. For 31 percent of respondents, the ROI on certification was 5 percent or less.

Although the bottom line may mean a lot to management, the process improvement that comes with quality certification was also noted by respondents to the IAAR survey. The most frequently named external benefits were "improved perceived quality" (57%), "improved customer satisfaction" (55%), "competitive advantage" (38%), "reduced customer audits" (31%), "increased market share" (11%), and "quicker time to market" (4%). Internal improvements were also cited as benefits of certification, with 73 percent of respondents reporting greater quality awareness and better documentation, 37 percent reporting increased efficiency, 33 percent citing positive cultural change, 12 percent finding improved financial performance and 9 percent reporting improved employee morale.

A comprehensive 2002 study published by the International Organization for Standardization ("Does ISO 9000 Certification Pay?" ISO Management Systems , July-August 2002) found that improving profit was not the most cited result of certification. Instead, the survey of 7,598 organizations found that internal productivity almost always spikes--and remains improved--when the certification process starts. Firms that don't seek certification, according to the study, saw no such organic process improvement. In other words, the study seems to suggest that if organizations don't make process improvement a priority, business will almost certainly suffer in the long term.

According to the study, noncertified organizations experience a substantial loss of productivity and sales compared to certified firms, a gap that widens to 9.9 percentage points three years after certification. The study authors summarize that certified firms avoid the steady erosion of their quality and internal processes that noncertified organizations almost always suffer from.

"It seems as if ISO 9001 certification is more often a necessary condition to maintain current performance, rather than a sure-fire way to improve performance," write the study authors. "Our results suggest that failing to seek ISO 9001 certification contributes to gradually worsening performance.… This leads us to a seemingly contradictory conclusion: The decision to seek ISO 9001 certification did lead to substantial performance improvement, but it is difficult to justify in advance using a traditional cost-benefit analysis, implying that it has to be based, to some extent, on faith."

Making it work
For Custom Stamping Inc., a Carson City, Nevada-based supplier of precision stampings, the road to ISO 9001 certification was anything but easy. The company attempted certification three times before it was successful--a process that was both costly and demoralizing. The company decided to seek ISO 9001 certification after several of its clients asked it to do so, but the first two consultants Custom Stamping hired to get it ready for the process drowned the company in paperwork and complicated bureaucratic requirements. Twice, it failed to get past the internal audit stage before frustrated managers pulled the plug.

"We had consultants in here who wanted us to document every time someone blew their nose," recalls Tom Rettura, Custom Stamping's quality assurance manager. "It got to the point where we were saying, 'Is this even worth it?'"

The third time, however, turned out to be the proverbial charm. An early pre-audit and abbreviated quality manual helped streamline the process, and DNV Certification issued Custom Stamping's certification in January 2005.

"We knew we met the requirements. It was just figuring out a way to document everything correctly, while not burdening us with more requirements," says
Rettura.

Post-registration, business at Custom Stamping is very much as it was prior to registration. This mirrors the results of ISO's survey, which found that certified organizations generally maintain the status quo, avoiding the probable gradual erosion of quality at their noncertified peers' organizations. Rettura reports that the company is not disappointed, though.

"It was always about maintenance for us, anyway," he says. "We didn't expect dramatic changes or major new customers because we're registered now. Just to maintain what we have is good enough for now…. The way things are in manufacturing in this country right now, we're happy to be in business."

Conclusion
In the end, registration to quality, environmental or any other standard is what an organization--and its managers--make it. Research proves that certification will help a company maintain and improve its processes and product quality, but the decision to undertake the registration process is a major one that should be carefully considered. Chief among the decisions to be made is how to prepare for the required audits and how to hire a certification body or auditor to guide the company through the process. Choosing based solely on price is a very bad idea. Choosing an inexpensive, commercially driven auditor with little experience in your industry may result in certification, but it almost certainly won't drive the quality and process improvements that the registration is supposed to show. That will cost dearly in the long term.

"What it comes down to is, if you pay peanuts you'll get monkeys," says Croft. "To maintain credibility in the process, certification has to be what it's designed to be: evidence that the organization has quality products and services. Anything else damages the entire economy."

About the author
Laura Smith is Quality Digest's assistant editor.