Costos y Beneficios QMS

Costs a nd benefits related to quality
ma nagement systems i n small firms

- a case study
Liz-Marie Sander
Building Economics and Management Master thesis 2004: 1
Gothenburg, Sweden 2004
II
Costs a nd benefits related to quality
ma nagement systems i n small firms
- a case study
Liz-Marie Sander
Gothenburg, Sweden 2004
Chalmers University of Technology

Building Economics and Management
SE-412 96 Gothenburg Sweden
Sweden
www.bem.chalmers.se
Examiner:
Per-Erik Josephson, PhD
Supervisor:
Per-Erik Josephson, PhD
© Copyright Liz-Marie Sander, 2004
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ABSTRACT
Sander, Liz-Marie, Costs and benefits related to quality management systems in small firms: a
case study. Building Economics and Management, Chalmers University of Technology. M.Sc.
Thesis 2004:1. February 2004
To become certified a company must go through a special process that leads to both negative
and positive consequences. Advocates for certification believe that the process will bring
positive effects such as improved performance, clarified focus and increased market share.
Critics, on the other hand, believe that the process is too costly in regards to time and money
and may lead to a negative economical impact on the company.
This study is based on a case study of a small contractor and their process to certify their
quality management system according to the ISO 9001:2000 standard. The objective is to find
out if the result of the certification will benefit the company in the long run. Attention has
been paid to the action of the company before, during and after the implementation, their
client’s views, needed time, expenses and positive effects, with the aim to answer the
following three questions:
1. What are the positive and negative effects of implementing, certifying and maintaining
quality management systems for small companies?
2. How can the effects be defined in economical terms?
3. What is the economic value of the effects in a specific case?
First, the different effects elicited by a certification process were identified through a
quantitative literature study. Thereafter, interviews were made at certified companies for their
views on the effects stated by advocates and critics. Further, the effects were valued in regards
to their influence on the effectiveness of organizations and finally applied on a specific
company through interviews with employees and clients. The results of the study show that
the answers to the questions above depend highly upon the size of the company, the
motivation of the management and employees, the reason for certification and the company’s
actions during the certification process.
Earlier studies show that small organizations do not have to be very structured to be effective
and therefore often get certified due to external reasons. In other words, they are only
interested of doing as little as possible to become certified and thereafter only use the
certificate in the marketing process. However, when hiring a contractor, clients do not pay
much attention to the certificate. Focus is instead on the history, effectiveness, price and
quality of the contractor. Improvements within these areas can be achieved by a certification,
but none of the clients interviewed had noticed any difference between their certified and
uncertified contractors. Yet, every organization can improve their performance. Investigations
show the importance of fulfilling client demands to be competitive and that 10% of Swedish
companies turnover often consist of defect costs. If a quality management system is used
correctly, the company will gain knowledge about its client’s demands and their own faults. If
motivation exists, this information can be used to improve the company’s efficiency,
influence contractors and contribute to higher customer satisfaction. In this way a quality
management system could be of economic benefit for the company through increased
competitiveness and fewer defect costs.
SAMMANFATTNING
V
Ett företag måste genomgå en speciell process för att kvalitetscertifiera dess kvalitetslednings-
system, vilket medför såväl positiva som negativa effekter. Förespråkare för certifierade
kvalitetssystem menar att det medför positiva effekter för företaget så som högre effektivitet,
klarare mål och en starkare position på marknaden. Å andra sidan anser kritiker att systemet
kräver så stora resurser i form av tid och pengar att det istället kan vara till ekonomisk
nackdel för företaget.
Denna studie är baserad på en fallstudie av en mindre leverantör och dess certifieringsprocess

enligt standarden ISO 9001:2000, med syftet att ta reda på om certifieringen är ekonomiskt
positiv eller negativ för företaget. I studien har företagets agerande före, under och efter
implementeringen av systemet beaktas. Hänsyn har även tagits till dess kunder, förbrukad tid,
kostnader och positiva effekter. Frågorna att besvara är följande:
1. Vilka positiva och negativa effekter medförs, för ett mindre företag, vid implementering,
certifiering och underhåll av ett kvalitetsledningssystem?
2. Hur kan dessa effekter värderas ekonomiskt?
3. Vad är det ekonomiska värdet av dessa effekter i ett specifikt fall?
Först identifierades olika effekter som kan tänkas bli följden av en certifieringsprocess genom
en kvantitativ litteraturstudie. Vidare genomfördes intervjuer med redan certifierade företag
för att få deras syn på de effekter som angetts av förespråkare och kritiker. För att därefter
värdera de identifierade effekterna jämfördes de med resultat från studier inom
organisatoriskeffektivitet. Slutligen tillämpande effekterna på det specifika företaget genom
intervjuer med anställda och kunder.
Resultaten av studien visar att svaren på de ovan ställda frågorna till stor del beror på
företagets storlek, medarbetarnas motivation och skälen till certifieringen. En
certifieringsprocess är resurskrävande och vid val av leverantör är ett kvalitetscertifikat inte
av speciellt stor betydelse enligt företagets kunder. Istället är det viktigt att leverantören har
en bra historik, levererar i tid, och bra kvalitet och pris på sina produkter. En stor del av dessa
områden borde förbättras med ett certifierat kvalitetssystem, men ingen av de tillfrågade
kunderna hade lagt märke till någon skillnad mellan certifierade och ej certifierade
leverantörer i detta avseende.
Tidigare studier visar att små organisationer ofta inte behöver vara speciellt strukturerade för
att vara effektiva och certifierar sig därför ofta främst av externa orsaker. De är främst
intresserade av att använda certifikatet i marknadssyfte och minimerar ofta insatserna för att
behålla det. Trots detta kan alla organisationer bli bättre och tidigare forskning visar vikten av
att uppfylla kunders krav för konkurrenskraften och att 10 % av svenska företags omsättning
utgörs av felkostnader. Om ett kvalitetsledningssystem är använt på rätt sätt bidrar det till en
förhöjd kunskap om kunders krav och de egna misstagen. Finns motivationen kan denna
information användas till att öka den egna effektivitet, påverka leverantörer och bidra till
högre kundtillfredsställelse. Om detta görs kan systemet bidra ekonomiskt positivt i det långa
loppet genom höjd konkurrenskraft och lägre felkostnader.
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ACKNOWLEDGEMENT
I would like to thank:
Per-Erik Josephson, my supervisor and examiner at Chalmers University of Technology

for providing me with very helpful support and constructive feedback.
Per-Erik Larsson, my tutor at the primer company, for phrasing the main questions of this
study, letting me write it in co-operation with the company and for giving interesting
support and feedback.
I would also like to thank all the staff that worked in cooperation with me and took the
time for interviews and provided me with a very pleasant work environment during my
stay at the company.
Finally, I would like to thank all respondents at the different companies that took part in
the study for their time, interesting discussions and for providing information during the
interviews.
Liz-Marie Sander
Gothenburg, December 2003
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TABLE OF CONTENTS
1. INTRODUCTION 1
1.1 Background 1
1.2 Purpose and limitations 2
1.3 Methodological considerations 3
2. THEORETICAL FRAME OF REFERENCE 5

2.1 Quality Management Systems 5
The ISO Standard 5
2.2 The Certification Process______________________________________________ 7
Implementation________________________________________ 7
Certification__________________________________________________________ 8
Maintenance__________________________________________________________ 8
2.3 The organization 8

Environment 10
Technology 10
Social Structure 11
2.4 Effects conveyed of by a certification process 12
Positive effects 13
Negative effects 14
2.5 Identified effects connected to the organization 15
2.6 Measure the effects in monetary terms 17
3. METHOD AND RESEARCH DESIGN 19

3.1 Literature studies 20
3.2 Interviews with certified companies 20
3.3 The case study 22
The primer company 22
Interviews with clients to the primer company 23
Cost and benefit analysis 24
Secondary sources 24
4. ANALYSIS AND DISCUSSION 25

4.1 Economic effects conveyed by a small organization 26
Fees conveyed by the certification process 28
Expenses for required time 28
Eventual extra income through a strengthened market position 29
Eventual extra income through increased work effectiveness 31
4.2 The economic result of the certification process 35
5. CONCLUSIONS AND RECOMMENDATIONS 37
6. REFERENCES 39
IX
Chapter 1
IN TR OD UC TIO N
Money is an important factor for any project and company. It provides you with the
energy to lead, define, plan organization, control and close the project. You should
manage it with the care as all other types of energy, avoiding any waste. Even in times
when plenty of money exists, it pays to maximize the output for every dollar spent. (Kliem
et al, 1997, page 138)
1.1 BACKGROUND
Today it is common that companies not only use a quality management system, but are also
certified according to different quality standards. The purpose and expectation is to reach
certain goals set by the company and thereby gain positive effects that will contribute to an
increased profit (Josephson, 2000). The quality standards made by ISO, International
standards of organizations, are the most common standards that companies use to develop,
implement and certify their management systems. A total of a half million companies are
already certified according to these standards and many more organizations are striving
toward certification (Kanholm, 2003).
Organizations like “The Swedish Standards Institute” believes that a certified quality
management system will bring positive effects like, improved performance, clarified focus
on client expectations and increased market shares due to competitive advantages (SIS,
2002). On the other hand, it is well known that a certified management system requires
economical expenses due to comprehensive documentation, time consumed and dues (SIS,
2001).
If a certification is to benefit the company it is very important that the positive effects
gained by the certification generate money to cover the loss of expenses and retrieve a
surplus worth the efforts. To calculate a final result and analyze if an implementation and
certification should take place, the positive effects must be translated into pure money and
thereafter compared to the costs. This is not an easy task and executive managers have
raised two very important questions (Heinloth, 2003):
Are quality-related efforts worth their cost? What is quality’s return on investment?
According to Heinloth (2003), the answer is unique for every organization and is based on
two fundamental conditions:
Quality must be measurable, preferably in dollars.
A cause and effect relationship must exist between quality and financial results.
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1.2 PURPOSE AND LIMITATIONS
Most quality indicators are not expressed in financial terms and executive managers often
find it difficult to evaluate quality-related performance. A common question is:
“Are quality-related efforts worth the investment?”
Yet, more than 500,000 companies are certified according to different quality standards
(Kanholm, 2003). The purpose of this study is therefore to find out if a development,
implementation and certification of a quality management system will benefit the company
economically in the long run.
The main objective is to identify positive and negative economical consequences of a

certification and analyze how quality can be measured in monetary terms. Consideration has
been taken to the relationship between quality, income and expenses. Another aspect of the
study is to discuss how the company should act before, during and after the certification
process in order to determine if the investments has any effects on the end result. The
questions to answer are:
This study is based on a case study of a small wholesale business firm and their certification
process according to the ISO 9000:2000 standard. Attention has been paid to the actions of
the company before, during and after the implementation, their client’s view of quality
certification, the time needed, the expenses and positive effects. Interviews have been done
with respondents at companies with certified quality management systems according to the
new ISO 9001:2000 standard.
A company is here considered small if it has less than 30 employees. All companies that
took part in the study have 30 or less employees and have no production of their own. It is
important to point out that the study includes the whole process from a non-existing quality
management system to maintenance of the system. This process from implementation to
maintenance of the system will be further on referred to as the “certification process”.
The study only considers the ISO 9001:2000 standard. The findings may therefore be
generalized to small companies within the service industry using the ISO 9001:2000
standard, but will hopefully be of interest to companies using other standards. Another
limitation is the fact that not all parts of the organization are included in the study, due to
practical reasons and certain interests of the case company. Further, the study is limited to
aspects of the environmental, technological and social environments. Hence, ethical aspects
and the physical environment have not been considered.
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1.3 METHODOLOGICAL CONSIDERATIONS
Critics have stated that single case studies offer a poor base for generalizing (Yin, 1994).
Yet, I have chosen to base this study primarily on a case study of a single company. The
reasons are time constraints and my desire to cover all the necessary factors and
observations in depth.
To strengthen the validity of the study, important principals have been taken in
consideration. It is important that information is collected from multiple sources (Yin,
1994). This means that evidence should be collected from at least two sources. To fulfill this
demand information from both previous studies combined with verbal information from
interviews were used. It is also important to have a chain of evidence (Yin, 1994), which is
achieved through a developed model. The model consists of the discovered effects and was
used during all interviews. The work was thereby structured in such way that comparisons
between the different information sources easily could be made.
To receive a preferable result quantitative and qualitative research methods were combined.
A quantitative research was conducted to deduce all of the possible effects due to a
certification process. Articles and other literature sources that either contributed with
negative or positive effects regarding the certification process were used. These effects were
in other words collected from all kind of sources and needed to be confirmed and sorted in
some way. Personal interviews are rapidly becoming the most frequently used method to
collect evidence in business and management research. It allows the researcher to meet the
respondent in person and many times visit the organization. This type of visual contact is
important for the triangulation that increases the validity of the research (Remenyi et al,
2003). I therefore chose to go through with a qualitative research, where eight persons at
four already certified companies were interviewed, during which they expressed their
opinion about the identified effects.
The fact that I have performed this study by my self reduces the correctness of the
information gathered during the interviews. It is difficult to take notes, ask questions and
pay attention at the same time; some information might therefore have been lost. The ISO
standard was selected, partly because it was the one chosen by the studied companies and
partly because it is the most common standard companies get certificate according to
Kanholm (2003).
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Chapter 2
THE ORE TIC AL F RA ME OF REF ERE NCE

2.1 QUALITY MANAGEMENT SYSTEMS
A management system is the policy, the goals and the working strategy of an organization.
It is important to elucidate that it is the actual work of the organization that is the system
to reach its goals and not the documentation, which is often prioritized (SIS, 2002). The
system has to include the whole business and all tasks in the process from identifying the
needs of the client until the final product is delivered. The purpose is to make sure that the
same methods, knowledge and controls are used every time a process is done. A process is
defined as a series of repeated tasks and the purpose of the system is to make sure that the
processes are performed as they are described (Bladfält and Henriksson, 2003).
The documentation of the management system consists of different rules, which often are
divided into three different levels and the amount of rules depends on the company and
the business. The first level of rules is a comprehensive description of the business. This
description should follow the main process of the organization and give references to
lower levels. The second level consists of the routine descriptions that are needed to point
out the responsibilities and authorities for the activities in the business description. This
section describes “who and what that is going to be performed regarding a specific task”.
Finally, the third level remains the instructions required to reach specifications on
products and services promised to the customer. These instructions describe how the work
is going to be performed (www.sis.se).
The ISO s tandard
A standard is an example to a solution to a constant returning problem. It is a

recommendation on how things should be performed such as, the development of a new
product. A standard within the area of quality provides recommendations, explanations
and demands that have to be fulfilled if a certification is going to take place (Bladfält and
Henriksson, 2003).
ISO is a non-governmental organization and is the world's largest developer of standards.

The ISO standards are developed by technical committees comprising experts on loan
from the industrial, technical and business sectors which have requested the standards,
and which subsequently put them to use (www.sis.se). The ISO 9001 has mainly been
used for certification which has led to a half million certifications all over the world and
many organizations today are working with an introduction of an ISO certified
management system. Today the manufacturing business is way ahead of the service
companies regarding certification. Large manufacturing businesses hold the majority of
the certifications (www.dsv.su.se), which is of interest since this study only considers
small organizations.
Every fifth year the standards are checked and reviewed. An investigation takes place to
decide if a standard is going to remain, be changed or removed. The ISO standards of
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1994 were removed by the end of year 2003 and all certificates that have been issued
according to this standard were thereby expired. The ISO 9000:2000 standards are a
collection of international standards and guidelines for quality management systems that
will replace the old standard from 1994. The new standards in the ISO 9000:2000 series
were revised and published in the fall of 2000 and consist of the following four
standards:
1. ISO 9000 Quality Management System – Principals and terminology

2. ISO 9001 Quality Management System – Demands
3. ISO 9004 Quality Management System – Guidelines for improved management
4. ISO 19011 Quid lines for audits of quality or environment management systems
To be able to understand the effects of the standards it is important to have knowledge

about them and their purpose. The new standards have compared to the old standards
another focus and more attention is paid to the managing processes within the business.
Processes that in any way include communication with clients are very important parts in
this new way of working (SIS, 2001). Unlike the old standard that was developed mainly
to fit large manufacturing business, the new standards have been made to fit all sizes and
kinds of organizations including small companies within the service industry like the ones
included in this study (www.smelink.se). The new standards are created around eight
principals and each involves advice not rules for a successful organization
(www.ida.liu.se).
Client attention: The organization should fulfill the expectations of the clients. To
achieve this it is important that the organization understands, communicates and puts up
goals that are compatible with the needs of the client.
Management: The management of the organization should inform the whole

organization about its purpose, goals and internal environment to inspire and motivate
the other co-workers to strive to fulfill the goals of the organization.
Committed co-workers: All co-workers should attend and be willing to contribute to

continued improvements. They should also be aware of the importance of their
contribution to the organization and should strive to seek the possibilities to increase their
own competence, knowledge and experience and then share it with others.
Process oriented: The organization should have structured methods to define the key
activities that are important to achieve results. It should also have specific rules and
instructions for authorities and responsibilities.
Systematic action plan for the management: All employees of the organization should
have an understanding and knowledge about the relationship between the core processes
of the organization. Continuous analyses and investigations should be done to create
systems for improvements.
Continuous improvements: Investigations, calculations, analyses and feedback makes

continuous improvements easier to be achieved and contributes to a quick response on
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changes, which leads to increased competitiveness. Important factors within the field of
continuous improvements are attention, ability to listen and openness.
Decisions based on the fact : Decisions should be well based on logical and/or intuitive
analysis of date or other information. The information should be sufficient and accurate.
The organization should also be able to show and analyze the effectiveness in historical
decision through references according to the fact.
Partnering with the contractor: The organization should identify and sort out the key
contractor and should with them exchange knowledge as well as resources. A close
relationship can increase flexibility and effectiveness when it comes to quickly meeting a
fast changing market that optimizes expenses and resources.
2.2 THE CERTIFICATION PROCESS

To certify a quality management system, a company has to go through a specific process
which differs due to many different factors such as the size of the company, the time
available, the accredited company, external help etc. In this study the whole course of
event is included from a non-existing system to the maintenance of a certified system.
This process can be divided into three major parts:
1. Implementation
2. Certification
3. Maintenance
An investigation of 403 Swedish companies with less then 50 employees made by, IVF
Industrial Research and Development Corporation showed that around ten percent of the
companies paid less than 100,000 SEK, for the whole certification process. The expenses
included the development of the system, the certification and external expenses for hired
consultants etc. 50% the companies had expenses between 100,000 SEK and 300,000
SEK and for the last 40% extended the expenses a cost of 300,000 SEK. 40% of the
involved companies paid between 25,000 – 50,000 SEK in dues for the actual certificate.
Expenses regarding documentation and maintenance of the system were calculated
through the time required for these activities (Berggren, 1999).
Implementation
During the planning stage the company writes an agreement with the accredited
company that is going to issue the certificate. The standard to use is defined and
explained; expenses and arrangements for the process are discussed. Some accredited
companies also have a pre discussion including a comprehensive assessment of the
existing quality management system and obvious shortcomings are pointed out. This pre
discussion is often a voluntary step. During the pre audit a more detailed appraisal of the
company’s quality management system is made. The results are often documented. The
pre audit is also a voluntary step (www.sis.se).
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The success and the satisfaction of a system highly depend on how it is implemented. An
implementation has to include a committed management, dividing of resources and
increased knowledge. It is not enough with one of them to reach a stage of satisfactio n
(www.ida.liu.se). There are two main ways for a company to go through with an
implementation. One way is to develop the main part of the system without any external
help and the other alternative is to do the opposite. It is very important to carefully
decide how much or how little external help the organization requires since it has effect
on the final result. If no help is taken it is a risk that the employees will not receive
enough knowledge and competence within the area and if too much help is taken it could
contribute to a feeling of exclusion from the process (www.ida.liu.se). Another important
factor to consider for the success of the system is the commitment and involvement of
the management. This is one of the most important factors to reduce the expenses and
time consumption as much as possible. A motivated and committed management is also
a very important contributor to a well functioning information system between the
management and co-workers, which is a necessary for a successful implementation
(www.sis.se).
Certification
During the certification audit a careful review of the documentation, routines and
activities are made. The accredited company checks that:
• The demands in the ISO 9000 standard are fulfilled.

• That the demands in the company’s own quality management system are
followed and implemented.
Deviations are documented in special “Deviation reports” that are presented to the
company both verbally and in print. If deviations are found during the audit the company
has the possibility to correct these deviations and present the corrections to the accredited
company, within a certain period of time. When the company has made the required
corrections the accredited company issue a certificate (www.sis.se).
Maintenance
The certificate has a validity period of three years, but the accredited company makes
audits every year. The purpose of these audits is to make sure that the quality management
system is maintained and constantly improved. After three years a new certificate is issued
if the demands are fulfilled (www.sis.se).
2.3 THE ORGANIZATION
It is important to have knowledge about organizational effectiveness and productivity

when analyzing the effects of a certification process and to determine if the company will
benefit economically in the long term. There are actually many studies and investigations
carried out in order to analyze this question, which were found during the literature study.
The results from these investigations are of use when analyzing the question if any
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connections exist between “the certification processes” and “the final effectiveness of the
organization”. This is due to the fact that if the effects of a certification process are
similar with the effects that make an organization effective. The conclusion naturally
becomes that a certification process increases the organizational effectiveness and is an
economic benefit. One problem is that some important areas of effects might be lost or
never found during the research. To minimize this risk the effects and results from
previous investigations must be structured.
Further, a quality management system created according to the ISO 9001:2000 standards
is supposed to be an aid for the organization to reach its goals and the standard is created
to cover the whole organization (SIS, 2002). If this is true, the whole organization should
be effected by the certification process. An organization can be described according to the
following five basic conceptions (Hatch, 2002):
• Environment (influence the competitiveness, deliveries and information flow etc)

• Technology (influence the business process of the organization)
• Social structure (influence the internal environment of the organization)
• Physical structure (influence the equipment and buildings of the organization)
• Culture of the organization (ethics etc of the organization)
The earlier mentioned investigations regarding effectiveness of an organization,

considered information related to one or some of the concepts mentioned above. The
concepts are therefore very general and could be used to structure information from these
investigations. To simplify a comparison between the “results from these investigations”
and “the identified effects” the findings should be structured in the same way.
It is also important to understand which actors

that are involved in an organization, to be able External Network
to structure the research and find the relevant
information. This is due to the fact that a Internal
model called “The model of interacting actors” Organisation
is based on the belief that an organization is
influenced by several actors within. To cover
all possible contributions all actors have to be
identified and considered. In the model the
actors are divided into two parts one internal
group and one external group (Bakka et al, 1994). Figure 1. Model of interacting actors
(Hatch, 2002)
There are similarities between the five basic concepts and the model of interacting actors.
For example, the environment and the external network is the same thing and exist of the
external group of actors. The only difference is that the external network is seen from the
inside of the organization while the organization could be analyzed from the outside
called the environment. To be able to receive supply, personnel, economic capital etc
every organization interacts with other parts of its environment. Organizations interact
with its customers due to the fact that services and products produced by the organization
are to be consumed by its customers in competition with other organizations. Other actors
in the environment that sets rules and regulates these interactions, like authorities, are also
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included in the external network of an organization (Hatch, 2002). Thus the external
organization exists of following actors: banks, contractors, authorities, customers, unions,
competitors, and partners. The internal group constitutes of the actors working within or
very close to the organization like the management, employees, owners and investors.
To summarize the previous chapters, it is easier to select sources of information when all
important actors are detected, which also makes sure that no parts of the organization are
left out. The five concepts are helpful to structure the results from previous made
investigations and therefore are both ways of describing the organization useful during
future research. Below, three of the five different concepts are described together with
results from previous investigations. Two of the five concepts have been excluded from
the study because of limitation in time and a certain interest of the case company.
Environment
The company’s environment is able to set two different categories of demands on the
organization. The first category is the technical and economical demands, while the
second category is social and cultural demands. These demands also indicate the
previously mentioned connections between the two ways of describing an organization.
The economic demands are fulfilled if the organization delivers supply and services in an
effective way (Hatch, 2002).
The client belongs to the environment and is the most important actor regarding the
competitiveness and survival of the organization. The client is the one that normally pays
for his or her satisfaction received through services and products. If the client is satisfied
then new purchases will be made; however if the client is dissatisfied then this increases
the risk that the client will choose a new contractor. It is therefore of great importance for
the organization to identify and fulfill the needs of the clients in order to survive (SIS,
2002).
Technology
Economists often studies technology from the outside. An external view of technology
often include aspects of society that have to do with material needs of it’s members such
as, food, houses, computers etc. An electronic company is, in this view, an organization
that provides society with necessary electronic devices (Hatch, 2002). On the other hand,
if technology is looked at from the inside, attention is paid to the ability to take the steps
needed to provide the wanted result. Technology is therefore included in the different
hierarchic levels of an organization from marketing, economics, human resource
management to sales and technique. Knowledge and education are for example important
factors for a well functioning technology of an organization. An organization is therefore
a compound of many interdependent activities. The technology of an organization looked
at from the inside could with other words be called the methods or processes with which
the company produces its products or services (Hatch, 2002).
The technology goes hand in hand with the social structure of the service companies, due
to the fact that employees are responsible for production. Swedish companies have
expenses for lack of quality in their processes for approximately ten percent of their
10
turnover, while managers of companies often estimate the cost to a couple percent. These
expenses could be divided into external and internal expenses, and the different areas
include the following expenses (www248.indek.kth.se):
Internal expenses
Rework, repair, scrap and reduced price
External expenses
Less productivity, damages lost purchasing, retrieve of products.
Social s tructure
To day it is known that the survival of organizations and companies depends on the
satisfaction of its employees and that a correlation exists between staff satisfaction and
organizational effectiveness (Lennéer-Axelsson and Thylefors, 2000). In the short term it
is difficult to determine any real benefits of a good working environment due to variations
in work tasks, individuals and variations in the environment. On the other hand, a good
work environment is always seen as an economic benefit in the long run because of
reduced expenses for heath care etc. In general it could be said that the spirit among the
employees and the effectiveness of the organization have a close relationship when the
productivity is influenced by team work, wealth of ideas and endurance in difficult
situations (Lennéer-Axelsson and Thylefors, 2000).
According to a study made by Peter Bollinder and Lars Hessner, the work environment
can influence the profit and production both positive and negative by up to 20 percent.
Their argument is based on interviews and attitude analyses with more then 1 million
people made during a time period of 20 years within and outside Sweden. Analyses of
economical results from both production and service companies indicate a clear
connection between the work environment and the profit (Larsson, 2003).
Hessner has described a negative spiral related to the work environment (Larsson, 2003).
The spiral indicates that a bad work environment creates a negative attitude among the
employees. A negative attitude reduces the employee’s ability to receive information and
to meet the expectations of the management. The most important factor is that conflicts
need to be resolved, which requires a well functioning internal communication
(www.svd.se). Hessner has provided the list below with ten criterions for a good work
environment (www.ledarna.se):
• Management must show respect towards their employees.

• Management must cooperate within the field.
• Employees must feel that they can influence their workplace.
• Everyone must receive acknowledgement for their contributions.
• Employees must feel that they receive adequate compensation for their contribution.
• Have a well functioning internal communication.
• Employees must be able to see the full picture and understand their part in it.
• Employees must know what the goals are, work towards and follow-up these goals.
• Employees need individual development.
• It should be easy for employees to perform specific tasks.
11
The social structure is also highly dependent on the size of the organization or a group,
which is of importance since this study is done on small companies. There are several
differences between a small and a large group and a small group often is more effective
then a large one (Svedberg, 1997). It is easier to feel belonged and valued in a small
organization than in a large one. In a large organization there is often a feeling of
anonymity and the areas of responsibility for the individual are less clear, which in some
cases could lead to reduced productivity (Svedberg, 1997).
In general, a small organization allows time for discussing questions and giving feedback.
Everybody has a place and is free to express his or her point of view. The psychological
distance is smaller amongst the employees and it is easier to create a well functioning
network for communication. The larger an organization is, the heavier structure is needed.
The communication becomes more Efficiency

mechanical, routines and decisions
have to be formalized, while small
groups are free to be less formal and
more flexible in structure. Figure 2
describes the relationship between Group
group size and efficiency according Group
size
to Svedberg (1997). 3 5 7 9 11
Figure 2. Connection between group size and its
efficiency (Svedberg,1997) .
Generally a company that implements ISO 9000 due to internal reasons is more
successful than those that carry out a certification due to external reasons (While and
Van der Brown, 2002). Then again, small companies could manage the structure without
a standardized system and their certification process is often due to external reasons.
Additional, an organization that implements a certified quality management system with
a positive attitude and has a variety of internal goals attain increased satisfaction and
internal reasons for a certification stimulate activities such as follow-ups and generate
higher quality awareness among the employees (While and Van der Brown, 2002).
12
2.4 EFFECTS CONVEYED BY A CERTIFICATION PROCESS
A certified quality management system conveys certain positive and negative effects.
Positive effects due to increased quality, but also negative effects due to time
consumption, fees etc.
To identify the positive effects I did a literature research of homepages made by

accredited companies, already certified companies and other different sources that in one
way or another advocated a certified quality management system. Scientific papers and
master thesis’s were included in this study to make sure that all positive effects of
certification would be covered. This literature study was finished when no further effects
were found. To identify negative effects a similar research was done. The main difference
was that I had to use alternative sources of information, since the negative effects often
are excluded from homepages made by accredited and already certified companies.
Instead I used scientific papers and master theses. The positive and negative effects found
during the literature study are described below.
Pos itive effects
Effects related to the environment:

Today it is very important for the survival of a company to be competitive and a
certificate according to ISO 9001:2000 might be one way. One advantage with a
certification is that it will increase the ability to receive a greater trustworthiness
(www.bin.co.uk). A certification is a proof that the Quality Management System works
effectively and could therefore easily be used as an argument in a marketing process
(www.smelink.se).
In most industries, good references from satisfied customers are important factors for
business growth (Heinloth, 2003). A process of improvement begins with certification
when increased attention is paid to the actions of management and personnel. A reduced
amount of mistakes and errors will lead to a faster flow in the business. This will for
example make it easier to keep the promised time of delivery and increase the quality of
the products, which creates satisfied clients.
Small and medium sized companies often choose to implement ISO 9000 primer due to
external reasons i.e. pure marketing (While and Van der Brown, 2002). In many cases
clients stop doing business with contractors that are not certified; thereby small companies
are forced to become certified (www.ida.liu.se). This could be seen as a negative effect
but it is also a way for small companies to retain customers.
Effects related to social benefits:

A certified quality management system contributes to client satisfaction which in turn
increases goodwill, which in the long run could increase sales, profits and productivity
despite expenses for the quality of work. A safer future could thereby be offered to the
employees, which will increase the security for everyone working in the company
(www.smelink.se).
13
A quality management system makes it easier for the management of the company to set
goals and clarifies the strategy for the employees. A certification develops and engages
the personnel through an increased ground for delegation of responsibility. It also
stimulates the personnel to develop and take more responsibility themselves (Lindskog,
2003). The standard demands a well functioning internal communication. Meetings, audits
and improved communication leads to better information, which reduces the insecurity
and increases the sense of belongingness.
Effects related to the technology

One demand in the ISO standard is that certified companies should constantly improve
their strategy and quality management system. This is checked through special audits, by
certain accredited companies, where the system is carefully reviewed and the
documentation is controlled (www.smelink.se). Improved documentation and controls
makes it easy to define the way something has gone wrong, which minimizes mistakes
and reduces expenses in the long run (Lindskog, 2003).
Negative effects
Effects related to the environment
Different laws and regulations exist in different countries. This makes the ISO standard
naturally non-competitive within the EU and a compromise on behalf of the different
countries and investors (Gustavsson, 1999). Different systems also have different
headmasters and are introduced at different times, which are negative in a competitive
point of view (Wennersten, 2003). It is hard to put a fixed price on a certification since the
final cost depends on certain factors depending on what your company looks like. The
accredited companies also have different dues on their services. There is a fear among
critics that the certification expenses etc that follows with a certified quality system could
result in a higher price for the customers (Seddon, 2003).
According to Gustavsson (1999), it is not enough with marginal improvements, according

to an international standard, to increase the competitiveness and effectiveness of an
organization. To be competitive there is a demand for an improvement rate that is higher
than the competitors which is hard to achieve. It is therefore not an option to have a
standard as strategy for business development. Gustavsson (1999) advocates that there
always exists an individual way of action that is more suitable for the specific company
and that this way has to be used if the company should remain competitive.
Effects related to the social environment

A negative effect that was found regarding the social environment is a fear that the
organization will be controlled by the standard instead of the needs of the organization. In
other words, this could be described as a work environment which stifles initiative
(Seddon, 2003).
Effects related to the technology

Building a quality system and obtaining an ISO 9000 certificate ties resources and is time
consuming. There is a need for extensive documentation and in many cases training,
which demands time and money (Wennersten, 2003; Heinloth, 2002). According to
different sources it is a risk that the demands of the standard will control the organization
14
and not meet the actual needs of the organization. It is also a fear that the standard could
encourage the old conservative way of controlling instead of inspiring creative work and
improvements (Seddon, 2003).
2.5 IDENTIFIED EFFECTS CONNECTED TO THE ORGANIZATION
The matrix below (Table 1) is created through a combination of the Mary Jo Hatch
organization model presented in chapter 2.3 and the identified effects. The matrix was
created to make sure that no effects were left out and that the whole organization was
included in the investigation and to structure the interviews and further analysis.
In the first column on the left side the different parts of the organization are presented in
the following order: First internal organization as management, employees and owners
followed by the external network including contractors, banks and clients. The second and
fourth column presents the identified effects sorted into the areas of the organization that
they influence the most. These columns allocate which parts of the organization that is
most effected by a certification.
The third and fifth columns embrace the three different concepts presented in chapter 2.3
environment, social environment and technology together with the expressions income
and expense. The words income or expense has been used in those cases when an
identified effect directly could be translated into pure money. In other words, in the cases
when no further analysis had to be made to assign the identified effect an economic value.
These columns show how the identified effect influences the organization, which is useful
for future analysis.
The matrix show that the majority of the identified effects influence the internal parts of
the organization and that the actor that is most influenced is the management. The effects
related to the internal organization mostly influence the social environment and the
technology and the effects are equally divided between the two concepts. On the other
hand, does the effects related to the external network exclusive influence the environment.
15
Table 1: Identified effects and their influence on the organization
INFLUENC E INFLUENC E
POSITIVE EFFECTS ON THE ORG NEGATIVE EFFECTS ON THE
ORG
INTERNAL ORGANIZATION
Better documentation Technology a)Resource demanding especially during Technology

Increased quality awareness Technology the certification process
among the employees b) A long-term investment / commitment Technology
An increased sustained Technology c) Extensive documentation Technology
Management
knowledge within the d) Demanded education Technology

organization e) The demands of the standard is Social env
Better internal Social env. controlling and not the need of the
communication organization
Reduced costs for wrong Technology f) Increased calibrating costs Expense
Increased market shares Environment g) Not competitive neutral within EU since Environment
Better information for Technology different laws and regulations exist in
decision making different countries
Increased work effectiveness Tech/Social
Increased structure and order Technology
Increased competitiveness Environment
Better conditions Social env. h) Time demanding Technology
Employe
Better spirit Social env. i) Education demanding Technology

Increased work safety Social env. j) Could encourage the old conservative Soc/Tech
es
Better work environment Social env. way of controlling

Increased work satisfaction Social env.
Increased return on invested Income k) A long-term investment / commitment Soc/Tech

Owner
capital l) Dues Expense

Stronger position on the Environment m) Not enough to cause increased Environment
s
market competitiveness or effectiveness
EXTERNAL ORGANIZATION
Stability Environment
Cont.
Partnering Environment
Growth Environment
Increased security Environment

Banks
Information
Products according to the Environment n) A higher price due to certification Expense

specification expenses
Clients
Products that are trustworthy Environment

and functional
Products easy to maintain Environment
Products at hand when Environment
needed
16
2.6 MEASURE THE EFFECTIVENESS IN MONETARY TERMS
Heinloth (2003), who has specialized in integrated management systems and effectiveness
assessments, claims that the dilemma of evaluating quality-related performance can be
overcome by applying fundamental business management concepts, including financial
principles, to the measurement of quality.
He has created a matrix of measurable quality parameters that enables an organization to

measure quality (Heinloth, 2003). The vertical axis contains three quality aspects:
value/cost, time and quality of work results. The horizontal axis represents four major
factors: People, machines, materials and methods. Most of these measures are available in
monetary terms or can easily be assigned such a value.
This matrix is of use when trying to economically evaluate the effects identified during the
research, which has to be done if research question number two and three presented in
chapter 1.2 are to be answered. The plan is to find some kind of connection between the
found effects and the parameters included in the matrix and thereby be able to use it as a
base for the economic analysis.
Table 2: A model that present quality factors momentary valuable (Heinloth, 2003).
PEOPLE MATERIALS METHODS

MACHINES (PSY)
(SOCIAL) (PSY) (TECH)
Sales per employee Added value per hour Material cost Job set-up cost
Value/Cost
Revenue per Equipment cost Rework cost Activity-based

employee Repair cost Scrap cost cost
Training cost Operating cost Inventory cost Engineering cost
Overtime cost Waste disposal cost Inspection cost
Recruiting Cost
Time to close Process cycle time On-time shipments Contract review

action items Machine lifetime Back orders time
Time to resolve Maintenance time Material shortages Time to close
Time
complaints Repair time Rework time complaints

Time to process Set-up time Processing time per Response time to
requests Time to enter part request
Time spent on customer in system Cost of urgent Value- adding
Value-adding shipments employee hours
task
Employee turnover Machine Capability Reject/Scrap rate Engineering
work Results
Employee Pieces per hour Number of changes

Quality of
output/productivi Set-up time nonconformity’s Number of closed

ty Unscheduled Customer returns action items
Training hours per downtime Supplier quality Undesirable side
employee Number of rejected products
Number of errors parts per hour
Number of requests Computer uptime
handled
17
18
Chapter 3
ME TH OD AN D RESEA RC H D ES IGN
There are many factors to be considered when choosing an appropriate research
methodology. Yet, the topic to be researched and the specific research question is one of
the primary motivators in the choice of methodology (Remenyi et al, 1998). The main
question this study is to answer if a certification of a quality management system
according to the ISO 9001:2000 will benefit a small company.
Galliers (1992) provides a list of approaches of tactics for this kind of study and one of
them is the case study. A case study provides a multi – dimensional picture of the
situation. It can illustrate relationship, as well as, corporate political issues and patterns of
influence in particular contexts (Remenyi et al, 1998), which seems to fit the purpose of
this study. This study is therefore primarily based on a qualitative method including a case
study of a small contractor together with three minor case studies. The study also includes
a literature study to collect and cover as many effects conveyed by a certification as
possible. The research approach used for this study is illustrated in figure 3.
Form a purpose of
Analysis the study Discussions
Discussio
Make conclusions
ns
Find positive and
and negative effects
recommendations
Case study Literature

study
Evaluate the found

effects in a Confirm Effects
specific case
Interview
Literature certified
study Evaluate found
effects companies
Figure 3. Model describing the research approach
3.1 LITERATURE STUDIES

To answer the first research question, the different effects conveyed by a certification
process had to be identified. To find these effects a literature study was carried out.
Positive effects were found through homepages made by accredited companies
(companies that issue certificates and performs external audits) and companies with a
19
certified managements system and other sources that in one way or another recommended
this kind of system. Scientific papers and master thesis’s reports were also included in the
research. The Research was finished when I found no further effects in the papers and the
homepages. To find the negative effects a similar research was carried out. The main
difference was the source of information, due to the fact that homepages of accredited-
and certified companies often exclude negative effects. Instead papers, reports and master
theses were used.
To systematically arrange the effects and to make sure that as many influences as possible
had been included; a model of interacting actors of an organization was used. This model
has been shown useful in science. It is not a theory, but it makes it possible to ask further
questions regarding goal fulfillment, strategy and power of an organization (Bakka et al,
1994). The model was used in such way that the different effects were arranged and sorted
in internal and external effects and connected to the area of the organization that they
influence the most. It was necessary to analyze if the effects were positive or negative in
an economic perspective. To do this evaluation a second literature study was carried out to
find factors that contribute to an effective and productive organization. Thereafter the
previous effects could be compared to the new ones and their influence on the
effectiveness of the organization could be analyzed. To simplify the analysis the effects
and the factors contributing to an effective organization were structured in the same way.
The structure was developed according to three basic elements of an organization:
surroundings, technology and social environment (Hatch, 2002). This structure was
chosen, due to the fact that both factors and effects could be connected to these concepts,
as well as covering the whole organization.
3.2 INTERVIEWS WITH CERTIFIED COMPANIES

After the effects had been sorted in to the table according to the model of interacting
actors the desire was to confirm their validity for small organization. Evidence can be
obtained from documents, archival records and interviews as well as from any person who
has knowledge of the subject (Remenyi et al, 1998). For this study I chose to use
interviews as the main information source. This was achieved by four minor case studies
at four companies with certified quality management systems. Once a case study is carried
out more than one informant should be used for data validation and at least one informant
per firm should be a senior manager (Remenyi et al, 1998): therefore two interviews were
done at each company.
The eight interviews were all made in person and lasted at least for one hour. One of the
respondents was a person that both uses and actively participates in the development of
the quality system, while the others only use the system. This was done to collect both the
developers and the user’s point of view, which in many cases differ (Remenyi et al, 1998).
During these interviews attention was also paid to the action before, during and after the
certification to investigate if the action of the company affects the final result. The
selected companies are all small, the size varied between two and 30 employees. All
companies are located in Gothenburg and three of them have never been certified
according to any other standard than the new ISO 9000:2000 standard.
20
Table 3: Presents important information about the interviewed companies already certified.
Amount of
Companies Business employees Certificates
Sale and service of Caterpillars 30 ISO 9001
Geveke industry- and marine engines
Raydar General agents for 8 ISO 9001,

manufacturers of pumps. 14001
Whole sale business of 2 ISO 9001,

Scansigma products regarding green 14001
Heating, Ventilation and
Sanitation and bearings
Whole sale business of 5 ISO 9001,

Slangflex equipment for transport of 14001
dangerous material.
Geveke with 30 employees was certified according to the ISO 9002 standard before they
upgraded their system according to the new standard. This company was also the first of
the companies involved in the study to upgrade their system according to this standard.
They started their upgrading process as soon as the guidelines for the new standard was
available, before the standard was even completed and finished and the system was
certified as early as January 2000.
It was hard to find small firms with quality management systems certified to the ISO
9001:2000 standard. Finally, I found three companies that certified their quality
management systems together trough a group certification. It was a total of seventeen
companies that together with a consultant firm decided to go through with a group
certification, to minimize the expenses which in many cases are difficult to carry for small
organizations. The group of companies met once a month during a period of two years.
During these meetings a consultant informed them about the standards and the
certification process. This formed an opportunity for the companies to ask questions to the
consultant as well as to each other. All external expenses were divided between the
companies involved in the group, which drastically reduced expenses such as dues for
external audits. It is also important to point out that all companies have their own system
and their own routines.
3.3 THE CASE STUDY
This study is primarily based on a case study made on a small whole sale business, which
here is referred to as the primer company. The case study provided information regarding
the certification process and the company was used in the process to actually evaluate the
21
monetary effects in a specific case. Interviews were made with the management,
employees and clients to collect the needed information.
The primer company

The primer company is a subsidiary established on the Swedish market 1962 and is
operating within maritime technology. The number of employees is approximately ten
people working with service, sales, marketing and planning. The company has
approximately a turnover of SEK 24 million. Due to a demand from a large client the
company was introduced to quality management. The demand was that the company had
to develop a quality management system that fulfilled the demands from the client. In
other words, it was not a demand that the system should be developed according to an ISO
standard, but instead according to a standard created by the client. At this time the
management and the personnel at the company had no knowledge or experience from
quality management and therefore external help was needed. This was received from a
consultant that helped them create a simple system, for SEK 100,000.
The consultant worked to a great extent alone with help from the management of the
company, but all employees were included in that they had to explain their work tasks.
This was done through interviews with each one of them during which the information
needed to create the necessary routines was collected. Later on the external demands from
clients became more and more focused on quality management systems that fulfilled the
demands of the ISO 1994 standard. Consequently the company started to strive to certify
their system according to this standard. The system already created to fulfill the demands
of the specific client, had similarities to the ISO standard but some rearrangements still
had to be done. One of the employees was therefore assigned the commission to do these
arrangements. Once again interviews took place and the system was checked and revised
several times during meetings so that all employees attended. The system was certified
according to the ISO 9002 standard in the year of 2001 and is still today.
Later a problem occurred. The ISO 9002 standard that the company certified their system
according to expired at the end of 2003 and was replaced by the new ISO-EN 9000:2000
standards. The parent company therefore demanded that the system be upgraded and
certified according to this new standard. The upgrading process started in April 2003 and
this time I was responsible for a large part of the process. There is large similarity
between the two standards, but some old routines had to be removed and some new ones
added. For the third time, interviews were made with the employees and the management
to collect necessary information. Time was spent reading and trying to understand the
standard and to discuss possible solutions. It became clear that more attention should be
paid to the needs and demands of clients and that a system to analyze these factors had to
be developed.
The system was finished and the documentation was sent to the accredited company the
11th of September and an external audit took place the 29th of September, during which
some discrepancies between the system and the standard was found. These discrepancies
had to be corrected before a certificate could be issued and before the end of 2003 when
the old certificate expired. The discrepancies were corrected and the quality management
system was certified according to the ISO 9001 standard.
22
Interviews with clients to the primer company
To find out if an ISO certificate is preferable in a competitiveness point of view, seven

telephone interviews were made with clients to the primer company. The interviews lasted
about 20-25 minutes each and all respondents were personal responsible for purchasing of
technical supply. The interviews were formed around an amount of six questions
regarding their thoughts and values about the certification and if they pay attention to a
certificate when hiring a contractor. Clients of different size and importance to the
company were included and information regarding their business, turnover, amount of
employees is presented in Table 4.
Table 4: Information about the clients in the study

Turnover Number of
Client Business (million) Employees Certificates
1 Marine electrical and SEK 235 150 ISO 9001:2000

electronic service Ownershi
company. p
2 International transport SEK 13,100 6000 ISO 9001:2000
and travel service
company.
3 International Shipping SEK 150 100 ISM certificate
4 International Shipping SEK 220 150 ISM certificate
5 Shipyard SEK 60 50 ISO 9001:2000

6 International Shipping SEK 610 550 ISO 9001:2000
7 Coastal shipping SEK 120 70 ISO 9001:2000
Interviews are one of the most common sources for data collection used among business
and management researchers and are an essential part of case study research (Remenyi et
al, 2003). However, they are verbal reports and as such are subject to the problems of
bias, as well as, poor and inaccurate articulation and listening. It allows the researcher to
meet the respondent in person and many times visit the organization. This type of visual
contact is important for the triangulation that increases the validity of the research
(Remenyi et al, 2003).
Cos t and benefit analys is

A cost and benefit analysis was carried out to calculate the final result of the certification.
The economic influence by the effects was analyzed through a comparison between “the
effects conveyed by a certification process” and “the effects significant for an effective
organization”. The profit analysis was made with help from a model created by Heinloth
(2003). The model consists of a number of measurable quality parameters that enables an
organization to measure quality. The model was used in combination with information
collected from theory, the Primer Company and interviews with clients and respondent at
already certified companies. In the cost analysis, attention was mainly paid to the time and
23
dues conveyed by the certification process. To receive the necessary information, help
was taken from the economic division of the primer company.
Secondary sources
Secondary data for the case study is the aforementioned literature which had been
collected during the summer while I took part in the certification process of the primer
company. The company already had a certified quality management system according to
the ISO 1994 standard, but had decided to upgrade the system to fulfill the demands of the
new ISO 9001:2000 standard to receive a new certificate.
My assignment was to develop the documentation needed for the new system. During the
process, which started at the end of May 2003, I got to know the employees, their way of
working and their attitude towards the ISO standard. I also received an insight into the
business and the certification process in a very close way. I was a part of the external audit
and learned all the different steps. The knowledge I received during this period of time has
been very helpful to me during this study. I was able to be a part of a certification process
in reality and could exclude some otherwise necessary assumptions, like estimation of the
time required for the certification.
24
Chapter 4
ANAL YS IS AN D D IS CUSS ION

4.1 ECONOM IC EFFECTS CONVEYED B Y A SM ALL ORG ANI ZATION
The first two research questions are:
To be able to answer these questions interviews were made with respondents at certified
companies. At the end of these interviews all respondents were asked if they thought each
of the found effects were correct or not. I used Table 1 as a quid line for these questions
and graded the different answers after the following scale.
Answer Evaluation
Yes 100
Probably 75
Maybe or I do not know 50
Probably not 25
No 0
Afterwards the different answers from the respondents were put together and a mean value
was calculated. This was done as an attempt to analyze the grade of correctness of the
effects found according to the respondent’s opinions at the already certified companies.
One difficulty of doing an economical evaluation of the effects found is that the same
economic factor could by mistake be calculated several times. This is due to the fact that
the different effects influence each other and can often contribute to the same economic
value through a chain of reactions. To make sure that the same economic value not got
calculated more than once the map illustrated in Figure 4 over the reactions was created.
All effects included in the model that received a value greater than zero was written on a
piece of paper and then analyzed. The analysis was done with help from knowledge from
the interviews and theory. The map indicates the end results in terms of income and
expenses. Income can be defined as a stronger position on the market and increased
effectiveness and expenses in terms of time and fees. In other words the factors that have
to be calculated financially are:
1. Fees conveyed by the certification process
2. Expenses for time required
3. Eventual extra income conveyed through a strengthened market position
4. Eventual extra income through increased work effectiveness
25
Table 5: Presents the correctness of the effects according to companies already certified
POSITIVE EFFECTS NEGATIVE EFFECTS
INTERNAL ORGANIZATION
1. Better documentation 100 a) Resource demanding especially during the 100

2. Increased quality awareness 97 certification process
among the employees b) A long-term investment / commitment 100
3. An increased sustained 75 c) Extensive documentation 100
Management
knowledge within the d) Demanded education 100

organization e) Increased calibrating costs 100
4. Better internal communication 53 f) The demands of the standard is controlling and not 47
5. Better information for decision 53 the need of the organization
making g) Not competitive neutral within EU since different 0
6. Increased market shares 50 laws and regulations exist in different countries
7. Reduced costs for wrong 47
8. Increased competitiveness 31
9. Increased structure and order 28
10. Increased work effectiveness 22
11. Better conditions 97 h) Time demanding 100

Employe
12. Better spirit 78 i) Education demanding 100

13. Increased work satisfaction 78 j) Could encourage the old conservative way of 47
es
14. Better work environment 75 controlling

15. Increased work safety 66
16. Stronger position on the 50 k) A long-term investment / commitment 100

Owner
market l) Dues 100

17. Increased return on invested 47 m) Not enough to cause increased competitiveness or
s
capital effectiveness
62,5
EXTERNAL ORGANIZATION
18. Stability 100
Cont.
19. Partnering 97
20. Growth 53
21. Increased security 0

Banks
22. Information 0
23. Products according to the 50 n) A higher price due to certification expenses 50

specification
Clients
24. Products that are trustworthy 47

and functional
25. Products easy to maintain 25
26. Products at hand when needed 22
26
Increased calibrating costs
Resource demanding to
implement and maintain Dues
Expenses
Demand education Time consuming
A long term investment
Partnering with contractors
A higher price due to

Supply products that are certification expenses
trustworthy and functional
Increased
Supply products easy to maintain
competitiveness
Give products according to the Increased market

specification shares
Strong position on the

market
Could encourage the

old conservative way
An increased
of controlling Income
sustained
knowledge
within the Increased work
organization effectiveness
Better work
Increased work environment
safety
Better
Documentation Better internal
Increased communication
structure and Increased
order quality
awareness
Better among
information for employees Reduced wrong
decision expenses
making
Figure 4. Relations between identified effects Positive influence

Negative influence
Could be a positive
influence in the long run
27
Fees conveyed by the certification process
Information about the activities conveyed by the certification process liable to a fee was
collected through interviews with the financial manager at the primer company.
The company did not calibrate any of their instruments before the implementation of the
system according to the ISO standard. After the implementation all instruments are
calibrated one time every other year, with a cost of approximately SEK 4,000. Four
persons within the company have been trained for a fee of SEK 34,000 within quality, by
the accredited company, to be able to perform internal audits. Another fee of SEK 40,000
has been paid to the accredited company 2003, which covers the external audit and issuing
the certificate. For external help during the whole certification process the company paid
SEK 170,000. The dues for the implementation and maintenance of the system for one
year consist of the following:
Table 6: Expenses by fees required during the certification process

Activity Payment to Expense
(SEK)
Calibration Calibration company (annual) 2,000
Training Accredited company (one time) 34,000
Upgrading Accredited company (one time) 20,000
External audits Accredited company (annual) 20,000
External help Consultant (one time) 170,000
TOTAL 1 ST YEAR 246,000

TOTAL ANNUAL EXP. 22,000
Expenses for time required
For one work hour the company pays approximately SEK 450. It is therefore of
importance to find out how much time that is spent during the whole certification process.
Through interviews with employees at the primer company and through my experience
from developing the system I found eight different factors that each demand time.
1. Time spent on education

2. Time spent on internal and external audits
3. Internal time spent on documentation and paper work
4. Customer research,
5. Management meeting
6. Investigation of contractors
7. Statistical analysis
8. Deviation
Four employees have together spent eight days on education to be able to hold internal
audits, which means a total of 64 hours. For external audits two persons from the
accredited company are stationed at the company for one day. One person at the primer
company is that day fully occupied with the certification, which adds another eight hours.
28
There are five persons responsible for different routines and all of them are cross-
examined for approximately half an hour, during the day, which adds another 2.5 hours.
The vice president of the company is occupied for at least four hours and the entire staff
attends a meeting the last hour of the day. There are ten people working at the company
for the moment, which means that the last meeting during the day adds another nine
hours. Together this sums up to 23.5 work hours for external audits.
For internal audits two persons from the parent company are stationed at the company for
two days. One person at the company is fully occupied for one and a half day out of these
two days, which add 12 hours. All staff responsible for routings is cross-examined for half
an hour, which adds another 2.5 hours. Total time for internal audits is thereby 14.5 hours.
Together internal and external audits consumes 38 working hours. To document and
upgrade the system one person at the company spends approximately one hour a week,
which adds 52 hours. The demanded investigation of the contractors takes about one work
day a year and the customer research two days a year. To correct deviations and
improvements one person may spend approximately one hour every other week, which
adds 26 hours a year. To make statistical analyses over late deliveries one person spends
one half hour a month, which adds another six hours.
Table 6: Expenses for required time during the certification process

Activity Time Expense
(h) (SEK)
Education (one time expense) 64 28,800
Audits (annual exp.) 38 17,100
Documentation (annual exp.) 52 23,400
Customer research (annual exp.) 16 7,200
Management meetings (annual exp.) 2 900
Investigating contractors (annual exp.) 8 3,600
Deviations and improvements (annual exp.) 26 11,700
Statistic Analysis (annual exp.) 6 2,700
TOTAL 1 ST YEAR 95,400
TOTAL ANNUAL EXPENSE 66,600
Eventual extra income conveyed through a s trengthened market pos ition
The majority of the respondents at the certified companies experience that the system has
a psychological effect on the customers, which influences them to believe that the
products are of better quality due to the certification. They argue that this effect has a
good influence on the competitiveness of the company and the received certificate is
therefore often used in the marketing processes. Yet, any of the companies that took part
in the study have experienced an increased amount of customers after the certification.
They believe that one explanation could be the period of economic decline experienced
the last years. The clients of the primer company added another explanation to the lack of
new customers. None of the clients expressed that a certification according to the ISO
9001:2000 standard is especially important when choosing a contractor and all of them
have never excluded a contractor because a lack of certificate. Instead they mentioned
29
deliveries on time at the right place, price and quality of the products as the most
important factors when hiring a contractor. Improvements within these areas should be
conveyed by the system, but none of the clients had noticed any difference between
contractors with a certificate compared to those without.
A majority of the clients believe that large companies are expected to have quality
systems and that small companies often already are very skilled since they are so close to
their business. Another opinion among the clients is that the history of the contractor is far
more important then a certificate. If a client has done a good work for 30 years then more
weight in making a selection than a certificate does. Another argument stated by the client
is that a quality certificate is not special enough since the majority of their contractors
already are certified. Instead they mentioned that an environment certificate according to
the ISO 14001 sometimes could be an advantage. Two out of seven clients mentioned that
they would choose a contractor with an environmental certificate before one without if
they are equivalent in all other aspects.
The respondents, at the certified companies, argued that it is very important to keep the
right prices on the offered products and services in order to be competitive. Further, the
majority of them said that it takes a lot of time and effort to implement a quality
management system created to fulfill the demands in the ISO 9001:2000 standard. To be
updated in the system demands continuous work, which takes a lot of time and time is
money. If it comes to the extent that it takes raised prices to cover the extra expenses then
it is a threat of a drastically reduced competitiveness.
There are however arguments that support an increased amount of clients. One argument
is the fact that all companies included in the study mentioned that they were certified due
to a demand from a larger client. This proves that some large clients demand an ISO
certificate and they could also be clients to the primer company. Another argument is the
fact that the majority of the clients believe that companies should get certified, which
proves a positive attitude to the certification. The respondents at the already certified
companies claimed that the certificate caused the clients to believe that the products were
of better quality. Some of the clients interviewed also mentioned that the history of the
contractor is one of the most important factors when hiring a contractor, but when a
contractor is new to them there is no history to consider and in those cases a certificate
might be viewed as an advantage. One of the respondent companies had made an
investigation, in which a questionnaire was sent to 35 of their clients. In the questionnaire
the clients were asked if they ever had excluded a contractor due to lack of an ISO
9001:2000 certificates. Twenty-three of the clients answered and only six of them
answered yes.
The strongest arguments in this section are however that the certified companies not have
received any more clients and that the clients do not pay much attention to the certificate
when hiring a contractor. Therefore I have chosen to conclude that this is the case for the
primer company as well. This means that no incomes could be expected from a stronger
position on the market the first years. It is important to point out that this conclusion is
considered only in a short term perspective, when no large improvements have had time to
be made, and the system only is used as a marketing tool otherwise it would not be totally
fair. If increased work effectiveness is achieved and fewer mistakes made through the
30
system it might contribute to an increased amount of customers in the long run. This is
due to the fact that an effective company with very few mistakes is going to be
competitive.
Eventual extra income through increased work effectiveness
The work effectiveness can be divided into two categories concerning the social
environment and the technology. First the effectiveness of the people working within the
organization and second the effectiveness of the methods and processes used in the
organization. Heinloths (2003) model describes a way to put monetary values on quality
related performances. This model considers among other things the actions caused by
people and the methods used in the different processes and their time consumption.
In this section an attempt has been made to cover all the factors in Heinloths model
regarding work effectiveness, people and methods, which are the marked factors in Table
7. The structure of the analysis will follow the map in Figure 4, and the headlines are the
same as the four factors that directly influence the work effectiveness:
1. Better work environment

2. Better Documentation
3. Increased sustained knowledge within the organization
4. Reduced faulty expenses
Further, the following two extra headlines have been added to analyze the influence on the
primer company:
5. Relationship between group size and effectiveness

6. Relationship between the quality level and final effectiveness
Table 7: The marked areas of the model are the ones taken in consideration in the financial calculation
PEOPLE (SOC) MACHINES (PSY) MATERIALS (PSY) METHODS (TECH)
Employee turnover Machine Capability Reject /Scrap rate Engineering changes
work Results
Employee Pieces per hour Number of Number of closed action

Quality of
productivity Set-up time nonconformity’s items

Number of requests Unscheduled Customer returns Undesirable side
handled downtime Supplier quality products
Training hours per Number of rejected
employee parts per hour
Number of errors Computer uptime
Better work environment

According to experts within “the work environment field” a good work environment
increases the productivity of the organization with up to 20 %. Some of the respondents at
the certified companies responsible for quality and personnel confirm that they feel an
increased work satisfaction due to the certification. They experience a pride because they
have accomplished something that everybody else has not yet done. However, many of
them pointed out that there is large dissatisfaction related to the certification. When
questions were asked about the employees and their satisfaction with the system many of
31
them asked if they could choose not to answer. They desired to say something else but the
truth is that the majority of the employees are reluctant to the system. They call the system
a “paper tiger” that takes lots of time and brings nervousness through all the auditing and
checks. During my stay at the primer company I sensed more unhappiness then happiness
with the system due to the time and recourses it demanded. The company fulfilled the ten
criterions for a good work environment, as described by Larsson (2003), prior to the
certification. Therefore, the conclusion is that the system will not increase the productivity
due to better work environment.
Another argument that strengthens this conclusion is that the system has to be used
correctly otherwise it could result in over whelming stress. This was expressed by the
respondents at the certified companies. They argued that the system sometimes was used
in the manner that the normal work routines were used during the year and the actual
quality work such as internal audits etc were neglected. Consequently, the system
becomes a burden since it brings large stress before an external audit when all papers
including routines and instructions are to be checked and placed in order within a short
matter of time. One explanation for this way of action is the lack of time many companies
experience today and the period of economic decline that makes it hard to increase the
number of employees. The primer company was certified according to the old quality
standard before upgrading the system and many times they were trapped in the situation
mentioned above, which caused stress.
Better documentation
According to some of the respondents, at the certified companies, the routines make it
easier to employ new staff, due to a more effective introduction period. If the new
employees experience some uncertainties regarding a work task it is sometimes easier for
them to read instructions in a handbook instead of asking all the time. The primer
company has during the last two years employed three new staff members and two of
them have used the system during their introduction period. They used the system for
instructions for different work tasks, which might have saved their colleagues
approximately three hours per employee. If the company hires new staff at the same rate
as earlier it means one and a half person a year. If one work hour costs SEK 450 and three
hours per employee will be saved, a total amount of SEK 2,025 will be saved every year
by implementing the system.
According to the respondents in a leading position at the certified companies it is easier to

delegate responsibilities after the implementation of a quality management system,
because of the routines developed. The employees have routines to follow and if
something is done in a wrong way it is easier to get a person to correct his or her mistake
when using references for a specific routine. People get along better if they have routines
to follow since unnecessary discussions regarding the performance of specific task can be
avoided. However, many of the respondents argued that the system made them less
effective because of the time it demands. Before the system was implemented many of
them already worked after certain written or unwritten routines, but they did not have to
fill in deviation reports etc. This is the case for the primer company which worked after
written routines before the certification and had a well functioning organization and a
good work environment. In conclusion, no time will be saved through more delegation of
responsibilities and less discussions.
32
Increased sustained knowledge with the organization
The clients pointed out the importance of deliveries being on time, at the right place and
the quality of the products when hiring contractors. The primer company has today
approximately five late deliveries a month and if these were reduced it could therefore be
of benefit from a competitive standpoint. The question remains, will the system help them
reduce these late deliveries and increase the quality of their products? The company has
no production of its own and is therefore dependent on its contractors in this matter. A
benefit with the system is that it increases the ability to influence contractors by providing
statistics of late deliveries and feedback from clients. In other words, if the system is used
correctly it will increase the knowledge within the organization which later on can be used
to influence the contractor. A negative effect regarding the standard in combination with
small companies is that they don’t have the power to force their contractors to get
certified. The consequence is that the chain of improvements could come to an end
regarding the quality and time deliveries of the incoming products. The contractors of the
primer company are already certified, which removes this threat.
Some of the respondent’s experiences are that the system contributes to a more structured
organization, which makes it easier to have better control over the different work tasks
and increases the possibility to track products in different stages. An increased control of
incoming deliveries has for example resulted in a better quality of the products. However,
the certification at the primer company was carried out, as for almost all smaller
companies, due to external reasons. This is based on interviews with the employees and
the management of the company and on the fact that they went through with the
certification by demand from the parent company. According to a study conducted by a
primer company, the end results being lack of motivation, reduced quality awareness and
follow-ups.
My conclusion for this section becomes that if the motivation for the certification does not
increase and more effort is not put on collecting information and using the increased
knowledge to influence contractors etc, then no increased income will be conveyed
through knowledge sustained within the organization. More time is needed for the system
to function, this in turn requires that time is available.
Reduced faulty expenses

Some of the respondents at the certified companies pointed out that the system increases
the quality awareness within the whole organization. Dialogues about the different
adjustments and errors have started, which could contribute to reduced expenses.
However, none of the certified companies have received a better result after the
implementation. Further, none of the clients included in the study had noticed any
difference between certified and uncertified contractors regarding defects, deliveries on
time or in a quality perspective.
As mentioned in chapter 2 most companies in Sweden have faulty expenses that take up to
10% of their turnover. The defect expenses could be divided into external and internal
expenses. When questions were asked to the employees at the primer company regarding
this matter they argued that they had experienced situations like this very seldom. The
answers to the questions are presented in Table 8:
33
Table 8: Answers from the employees at the primer company regarding defect expenses
Internal expenses Answer External expenses Answer
Rework Seldom Reduced productivity No production of our

own
Reparations No Damages One time
Scrap No Lost purchasing Seldom
Reduced price Ones a month very Retrieval of products One time due to our
small amounts contractor
Due to the answers and the small organization I found the number of 10% a little high, but
since the primer company didn’t have any statistics or number regarding this aspect then
10% is the number I used for my calculations. The primer company has a turnover of
approximately SEK 24 million and if the company is able to reduce all their defects,
which is impossible, then they will reduce their expenses with 2, 4 million every year. The
length of time it will take them to reduce these expenses and if they will reduce these
expenses at all is very hard to say. My conclusion regarding the reduction of faulty
expenses will once again refer to the motivation and the time spent on the system. If the
focus of the primer company isn’t changed and more time is spent, then no income will be
conveyed for the primer company through reduction of defect expenses.
Relationship between group size and effectiveness

Another argument related to the system and the eventual increased effectiveness of the
company is the number of staff. The whole organization consists of approximately ten
people, which is a rather small organization. As mentioned in chapter 2, the internal
communication, the environment, the structure and the effectiveness are often already well
functioning in small organizations and therefore a strict structure and routines are not
needed. However, if attention is paid to Figure 2, in which the relationship between group
size and effectiveness is described, it could be seen that a group of ten people is almost
too large to be considered as a small group in from an effectiveness perspective. Therefore
it is very hard to say if the routines created in combination with the ISO standard will
increase the effectiveness of the organization or not based on the group size.
Relationship between the quality level and final effectiveness

A common opinion among the respondents is that the level of benefits conveyed by a
certification process depends on the “quality level” of the company before the process
started. The quality level stands for the effectiveness, structure, safety of the personnel
and customer satisfaction. They believe that an organization with a low quality level gains
a lot more benefits by the process than an organization with a higher level. This is due to
the fact that both organizations even if they have a low or high level have to go through
the same process, create routines, pay the same dues and take the time the system
demands. A company with a low quality level is the one with the greatest improvements.
According to some respondents, it is the low quality company that has the best use of the
increased competitiveness involved in a certified quality management system. This
argument is applicable to the primer company in that sense that the organization already
today keeps a high quality standard and therefore might not gain so many benefits.
34
4.2 THE ECONOMIC RESULT OF THE CERTIFICATION PROCESS
Three tables have been created to present the monetary values of the certification process.
Table 9 presents the expenses and incomes that only occur one time in the process. These
values are here assumed to occur during the first year when the system is implemented and
the certificate is issued.
Table 10 presents the annual result of the certification process and includes the expenses
and incomes required for the maintenance of the system and the certificate. This result is
similar to the final result for the 2nd year and forward as all one time expenses and incomes
are assumed to arise during the first year.
Finally Table 11 presents the economic result for the first year, when both one time and
annual values are applicable. It is very important to keep in mind that all presented values
are specific for the primer company and can not be applied on any other organization. This
due to the fact that every organization is a unique regarding size, focus, earlier quality level
etc.
Table 9: Expenses paid one time during the certification process
One time expenses
Description SEK
Education fee 34,000
Education time 28,800
Accredited company upgrading fee 20,000
Consultant fees 170,000
Total one time expense: 252,800
Table 10: Annual expenses and incomes

Result for the 2nd year and forward
Description expenses SEK Description Incomes SEK
Deviations 11,700 Increased market shares 0
Calibrations 4,000 Increased sustained knowledge 0
Accredited company annual exp. 20,000 Better documentation 2,025
Audits time 17,100 Reduced wrong expenses 0
Documents 23,400 Better work environment 0
Customer research 7,200
Meetings 900
Investigate contractors 3,600
Statistical analyses 2,700
Total annual expenses: 90,600 Total annual incomes: 2,025
Total annual result: (2025-90 600) = -88,575
35
Table 11 : Result of the certification process the first year
Result for the 1st year
Total one time expense 252,800 Total one time income
Total annual expense 90,600 Total annual income 2,025

Total expenses the first year 343,400 Total incomes the first year 2,025
Result : (2,025-343,400) = - 341,375
Table 9, 10 and 11 shows that the result of the certification process is negative both the
first and the following years. The first year the company has a total loss of SEK 341,375
and the following years a loss of SEK 88,575. This means that the total loss of the
increases every year, but it is important to notice that the loss is rather small compared to
the total turnover of the company. The first year is the loss approximately 1,4% of the
turnover and the following years only 0,37%. These values could be compared to the 10%
of Swedish companies’ turnover that often consist of defect costs. Further, this means that
a small mistake in appraise of the defect costs could turn the result of the certification
process from negative into positive. Hence, a minor error in my assumption regarding the
defect costs could be an explanation to the negative result.
It is also important to keep in mind that the result depend on the actions taken by the
specific company. A quality management system that is used correct increases the
knowledge within the organization about client expectations and own faults. This
information could be used, if the management and the staff of the organization are
motivated, to improve the efficiency of the organization, influence contractors and
contribute to higher customer satisfaction. This could generate the money to cover the
expenses for the certification process due to the high amount of defect costs that exist
today. Hence, it is important to involve as many employees as possible from the beginning
of the process since it only will get harder as the process proceeds. An early involvement
will increase the quality of the system in the end due to the many different points of
views. High quality is desirable since it could generate incomes and reduced expenses
according to Heinloth (2003).
Table 9 show that 50% of the expenses paid during the first year consist of consultant
fees. To use an inexperienced consultant with lack of knowledge was a mistake done by
one of the certified companies, which contributed to an extended certification process and
even higher consultant fees. It is therefore important to make sure that consultants with
experience and knowledge are used to minimize rework and reduce the cost for external
help. Another way to minimize this cost is to let the employees write the routines they are
responsible for them selves. Further Table 10 shows that the largest item of the annual
expenses is the one required for the maintenance of the documentation. Thus, it is
important to keep the routines simple and short to reduce this expense. It is also important
to read analyze what the standard requires before the development of the system. This due
to the fact that without knowing most companies already have routines that fulfill the
demands of the standard and these should be used to minimize extra work. Another large
expense is the fees paid to the accredited companies that makes external audits and issues
the certificate. These expenses are hard to reduce but a recommendation is to go trough
with a group certification, in which the expenses are divided by all companies involved.
36
Chapter 5
CON CLUS IO NS A ND RE CO MMEND A TIONS

The purpose of the study was to highlight the positive and negative economic effects
conveyed by a certification process of a small wholesale business. The questions were the
following:
To answer these questions information was obtained from clients, certified companies,
employees and investigations. This was done through interviews and literature studies.
The analysis showed that the answers highly depend on company size, employee
motivation, reason for the certification and actions taken by the specific company. The
effects were defined by support from earlier studies. To be able to calculate economic
values for a specific case the identified effects were applied on a specific company trough
a case study in which information was gathered from all employees including managers
and the clients of the organization. Finally, the economic effects were calculated and the
result turned out negative!
The explanation for the negative result is that it is impossible to reduce the negative
effects completely, while improvements are required if any positive effects should be
achieved. Two major negative effects were detected and confirmed by almost all
information sources. Firstly, the system demands resources. Secondly, the system requires
an extensive documentation, education and added costs to accredited companies etc.
Furthermore, all organizations have to go through the same process, create routines and
pay dues to receive a certificate. There is no difference between small and large or high
and low quality organizations in this matter. It is therefore impossible to reduce these
effects completely, but there are some things that can be done to minimize the negative
effects. Some advises are: To use good external support, study the standard before the
implementation, make simple routines and let the employees write the routines they are
responsible for them selves.
If the expenses for the certification are two high one suggestion is to find other companies
in the same situation and carry out a group certification. In this way, certification allows
sharing of information and knowledge through new contacts. There is however a very
important aspect to consider. A shared certificate between the different companies could
bring problems regarding the maintenance of it. It is therefore preferable with a divided
certificate, which makes it possible for a single company to maintain its certificate even if
one of the other companies does not qualify. The main positive effects that could be
conveyed by the certification are:
1. Reduced faulty expenses

2. Increased sustained knowledge within the organization
3. Increased quality awareness among the employees
37
4. A better work environment
5. A stronger position on the market
6. Better documentation
To receive these effects and get economic benefit from them the system has to be fully
used, the organization has to focus on the internal effects that could be received and time
has to be spent on the system. This study was mainly done to investigate the effects
regarding small organizations. According to earlier investigations, these organizations
often decide to get a certificate due to external reasons. This is due to the fact, that small
organizations already prior to certification often have a well functioning internal
communication and do not need to have a strong structure to work effectively. In other
words, the reason for their certification is to use the certificate in the marketing process.
On the other hand, none of the already certified companies had received any more clients
during the first years! The clients confirmed that they do not pay much attention to the
certificate when hiring a contractor. The conclusion is therefore that the certificate itself
doesn’t work especially well in the matter of strengthening the companies’ position on the
market. The system should instead be used as a tool to gain internal effects that contribute
to more productive organizations that fulfils the demands of the clients to a greater extent.
Earlier studies show that 10% of the turnovers of Swedish companies often are defect
costs. The case study and the financial calculation show that if the system could reduce
these costs with only one percent it would cover the expenses for the system several times.
An argument among the majority of the companies in the study is that even if they
improve their way of working the final result is in the hands of their contractors. This due
to the fact that none of the companies partaken in the study have any production of their
own and has to relay on the quality of their contractors. On the other hand the ISO
9001:2000 standard demands that the organization in some way reveals the demands of
their clients and works to fulfill them. If this is done and the acquired knowledge is used
to influence the contractors, increase effectiveness and reduce the number of mistakes, it
will increase the competitiveness of the organization.
This study is soon on one small company and includes the certification process. It would
be interesting to study the identified effects over a longer time perspective than this study
has been able to do. It would also be interesting to include a larger amount of companies
and sources of information to strengthen the validity of the results. Another aspect would
be to analyze the best way to use the positive effects as increased knowledge within the
organization, to receive as much benefits as possible.
38
Chapter 6
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Costos y Beneficios QMS

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Costos y Beneficios QMS

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Costs a nd benefits related to quality

ma nagement systems i n small firms

Chalmers University of Technology

© Copyright Liz-Marie Sander, 2004

Denna studie är baserad på en fallstudie av en mindre leverantör och dess certifieringsprocess

I would like to thank:

Per-Erik Josephson, my supervisor and examiner at Chalmers University of Technology

2. THEORETICAL FRAME OF REFERENCE 5

2.3 The organization 8

3. METHOD AND RESEARCH DESIGN 19

4. ANALYSIS AND DISCUSSION 25

5. CONCLUSIONS AND RECOMMENDATIONS 37

Quality must be measurable, preferably in dollars.

“Are quality-related efforts worth the investment?”

The main objective is to identify positive and negative economical consequences of a

THE ORE TIC AL F RA ME OF REF ERE NCE

The ISO s tandard

A standard is an example to a solution to a constant returning problem. It is a

ISO is a non-governmental organization and is the world's largest developer of standards.

1. ISO 9000 Quality Management System – Principals and terminology

To be able to understand the effects of the standards it is important to have knowledge

Management: The management of the organization should inform the whole

Committed co-workers: All co-workers should attend and be willing to contribute to

Continuous improvements: Investigations, calculations, analyses and feedback makes

2.2 THE CERTIFICATION PROCESS

• The demands in the ISO 9000 standard are fulfilled.

2.3 THE ORGANIZATION

It is important to have knowledge about organizational effectiveness and productivity

• Environment (influence the competitiveness, deliveries and information flow etc)

The earlier mentioned investigations regarding effectiveness of an organization,

It is also important to understand which actors

• Management must show respect towards their employees.

The communication becomes more Efficiency

To identify the positive effects I did a literature research of homepages made by

Pos itive effects

Effects related to the environment:

Effects related to social benefits:

Effects related to the technology

According to Gustavsson (1999), it is not enough with marginal improvements, according

Effects related to the social environment

Effects related to the technology

2.5 IDENTIFIED EFFECTS CONNECTED TO THE ORGANIZATION

Better documentation Technology a)Resource demanding especially during Technology

knowledge within the d) Demanded education Technology

Better spirit Social env. i) Education demanding Technology

Better work environment Social env. way of controlling

Increased return on invested Income k) A long-term investment / commitment Soc/Tech

capital l) Dues Expense

market competitiveness or effectiveness

Increased security Environment

Products according to the Environment n) A higher price due to certification Expense

Products that are trustworthy Environment

He has created a matrix of measurable quality parameters that enables an organization to

PEOPLE MATERIALS METHODS

Revenue per Equipment cost Rework cost Activity-based

Time to close Process cycle time On-time shipments Contract review

complaints Repair time Rework time complaints

Employee Pieces per hour Number of changes

output/productivi Set-up time nonconformity’s Number of closed

Case study Literature

Evaluate the found

Figure 3. Model describing the research approach

3.1 LITERATURE STUDIES

3.2 INTERVIEWS WITH CERTIFIED COMPANIES