The impact of certification on the elements of TQM exploring the influence of company size and industry

Certification

Certification means conformity assessment. Often, requirements are set out in the standards that guide companies toward achieving certification. The focus of certification might be, for example, rebuilding the entire management system in accordance with the ISO 9001 quality standard. The purpose of SFS-EN ISO 9001 certification is to increase trust in the organization's products and services and to increase trust throughout the supply chain. In a certification audit, the certification body assesses whether the object to be certified meets the certification requirements. After the requirements have been satisfied, the certification organization admits confers a certificate on the company, which shows that the organization meets the criteria used in the assessment. The validity of certification requires reassessments and periodic re-certification. (FINAS, 2016; SFS -EN ISO 19001, 2018).

TQM

TQM means total quality management; it consists of several parts and is generally thought to be a “management philosophy and mindset”. It is perceived to develop organizations into world-class companies. TQM is said to help organizations that want to improve customer satisfaction, reliability, productivity and market share (Sharma and Gadenne, 2008). In the 1950s, Deming introduced the TQM quality philosophy adopted by the Japanese, which enabled Japanese manufacturers to make better progress in quality-related matters than American manufacturers (Fotopoulos and Psomas, 2008). With the success of the Japanese, American companies lost market share and investment in TQM expanded in the United States. The use of TQM received widespread attention, and by the late 1980s it had been implemented by numerous large American corporations (Powell, 1995 and Ahire et al., 1996).

In contrast to certification, no common principles have been agreed upon for the implementation of TQM, and available guidance is quite vague (Gotzamani and Tsiotras, 2002). In order to outline TQM in this study, researchers' views on relevant issues related to TQM were sought from previous studies. The studies utilized were Tari (2005), Sila (2007), Zakuna et al. (2010) and Sadikoglu and Olcay (2014). Most views could be grouped under the following issues: management/leadership, data and reporting, customers, personnel, processes, product/service, material/suppliers and continuous improvement. The results are shown in Table 1. It can be seen from Table 1 that there was no consensus among the researchers on the content of TQM, as only the “Management/Leadership” column is represented in the views of each researcher.

In the twenty-first century, the division into soft and hard aspects has become more common in TQM. Vouzas and Psychogios (2007) stated that the above aspects are observable in several TQM definitions. Hard TQM can be understood as technical and refers to tools and techniques, while soft TQM can be understood as a more philosophical implementation of management models. Georgiev and Ohtaki (2019) state that soft TQM aspects are intangible and difficult to measure, while hard aspects are more like production techniques. Although in theory, the division seems simple, Vouzas and Psychogios (2007) stated that no consensus exists on how different things should be divided into soft and hard aspects.

Fotopoulos and Psomas (2008) present one solution by stating that aspects of soft TQM are long-term issues that need to be included in companies' deployment plans for TQM projects. TQM's hard aspects must support the exploitation of soft aspects. Fotopoulos and Psomas (2008) divided hard and soft aspects as follows:

1. Hard TQM: These include cause-and-effect diagrams, scatter diagrams, affinity diagrams, relationship diagrams, force-field analyses, run charts, control charts, quality function deployment, failure mode and effect analyses. According to the researchers, TQM's hard aspects, which comprise different tools, cannot lead to desired results alone.

2. Soft TQM: These include commitment from top management, strategic quality planning, employee involvement, supplier management, customer focus, process orientation, continuous improvement, fact-based decision making and human resource development.

Fotopoulos and Psomas (2008) noted that for a company, soft TQM carries more weight than hard TQM and success in implementing continuous improvement, fact-based management and organizational involvement becomes particularly important.

The European Foundation for Quality Management (EFQM) model

Despite the fact that there is no consensus on the specific content of TQM, the European Foundation for Quality Management (EFQM) has developed a European multidimensional quality management model, the principles of which are derived from the TQM philosophy (Nabitz et al., 2000), and it is the most widely used model in Europe for evaluating corporate TQM systems (Heras-Saizarbitoria et al., 2011). The EFQM model is a set of systematically presented criteria that represent different organizational areas within firms (Ruiz-Carrillo et al., 2005), and for this reason the EFQM model is better structured than traditional TQM. The EFQM model was updated in 2019 and is divided into three areas: direction, operation and results.

The EFQM model (2019) provides guidance for establishing a core mission, vision and strategy, as well as organizational culture, pioneering and leadership. Mission, vision and strategy are concretized into five tasks: (1) define the mission and vision, (2) identify and understand the needs of stakeholders, (3) perceive and understand the operating environment, the company's capabilities and major challenges, (4) develop a strategy and (5) build a management system to guide the organization's governance and performance. Organizational culture, pioneering and leadership are concretized into four tasks: (1) guide organizational culture and uphold values, (2) make all changes possible, (3) encourage creativity and innovation and (4) involve and engage stakeholders in the mission, vision and strategy implementation.

The operations of the EFQM (2019) model include stakeholder engagement, sustainable value creation, performance management and renewal. Stakeholder commitment is concretized into five target groups and tasks: (1) Customers—i.e. build sustainable customer relationships; (2) Personnel—i.e. attract and commit to develop and retain personnel; (3) Stakeholders who guide and regulate the economy– i.e. ensure and maintain ongoing support from these stakeholders; (4) Society—i.e. contribute to the development and mental and material well-being of society; and (5) Partner suppliers and subcontractors—i.e. build relationships and secure support for sustainable value creation. Creating sustainable value is concretized into four tasks: (1) assess design value and create value, (2) communicate and sell value, (3) produce value and (4) define and produce the overall experience. Performance management and renewal are concretized into five tasks: (1) direct performance and manage risks, (2) continuously assess the organization's readiness to meet future needs, (3) drive innovation and leverage technologies, (4) harness access to data and knowledge and (5) manage assets and resources.

The EFQM (2019) model includes the views of stakeholders as well as strategic and operational performance in its assessment of results. Thus, this study is a combination of a study of TQM, the factors of the EFQM (2019) model, and the studies presented in Table 2 related to risk management, stakeholder management, digitalization and systems deployment. A theoretical framework has been developed based on these components to study the effects of certification on the dimensions of TQM. The rationale for the theoretical framework is presented in the next section.

TQM dimensions

This section explains the TQM dimensions selected for this study. Prior studies of TQM classify the dimensions in a variety of ways. Thus, prior TQM studies were reviewed to determine the dimensions of TQM. A comprehensive framework was developed based on this review and describes the dimensions that TQM emphasizes in order to achieve higher performance. The TQM dimensions selected for the study and their identification are presented in Table 2.

Impact of certification on the TQM dimensions

As previously discussed in the background of the study, it has become clear that many studies have been carried out on certified quality systems. A wide range of benefits have been reported, and since this study compares the status of factors affecting the performance of certified and uncertified firms, findings from prior studies regarding the effects of certification on performance factors have been explored.

Douglas et al. (2003) examined more than 100 certified service and industrial companies in the UK and found that certification improved organizational consistency and management oversight. Padma et al. (2008) extensively studied the impact of ISO certification on organizational performance in the Indian industry, using management views as their source material. They considered the impact of certification on management engagement, customer focus development, quality process management, continuous improvement, measurement and control and personnel management. The target group of their study was small, medium and large companies. Their research showed a significant improvement in results across all issues and across all size companies. Leung and Chan (1999) examined the effects of certification on Hong Kong companies. They reported that the majority of respondents found certification useful. In their research, they highlighted shortening delivery times, volume growth, increased sales and improved communication with both customers and subcontractors as benefits of certification.

Prajogo et al. (2012) examined the views of management in ISO 9001 certified companies in Australia and found that effective system implementation had a positive impact on the management of all processes. The positive effect also extended to more effective interactions with suppliers and customers. Fernandes et al. (2017) have conducted a very extensive literature review on the benefits of combining supply chain management and quality management. They reported that the implementation of a quality management system in parts of the supply chain improves the performance of the company. Georgiev and Georgiev (2014) stated after examining Bulgarian companies that the impact of ISO 9001 on company performance in areas such as internal processes, customers, suppliers and subcontractors was significant. Shafiq et al. (2014) studied the effects of ISO 9000 certification on the organizational performance of the textile industry in Pakistan. Their research showed that there was a statistically significant difference in the profitability of certified and uncertified companies.

Zuckerman (1995) stated that firms reported they had benefited from their quality system. The main benefits he highlighted were defining the company's capabilities, more precisely defining customer requirements, assuring the customer of order-based delivery, monitoring employee capabilities, outsourcing work, better tracking of purchase orders, achieving commercial advantage and reducing customer complaints.

Caro et al. (2009) examined customer perceptions of the quality of Spanish insurance companies. ISO 9000 certification made it possible to perceive and understand customer quality, manage satisfaction and internalize the company's image. These issues were perceived by customers to be better in certified than uncertified insurance companies and were related to service quality and corporate image. Gotzamani and Tsiotras (2002) reported improvements in customer satisfaction in Greek companies after quality system certification. In addition to improved customer satisfaction, certification improved the company's quality culture and product quality. They also noted that certification offered companies other operational benefits.

Curkovic and Pagell (1999) stated that the system required training of all staff to improve quality, so companies increased the value of their most important resource. Gotzamani and Tsiotras (2002) stated that certification is rewarding for the entire company and, in addition, it improves employee morale and consideration for quality. They stated that certification also improves a company's quality culture. Casadesús et al. (2001) highlighted the positive effects of certification on personnel in their study of the Spanish industry. They also stated that the benefits of certification included improved procedures, clarification of responsibilities, increased trust, better commitment to work, improved job satisfaction and communication, as well as improved customer relationships and customer service.

Santos and Millán (2013) studied Portuguese certified companies and stated that the main benefits of certification were clearer work procedures, improved standardization, improved corporate image, increased customer confidence in company quality and improved customer satisfaction. They also reported that the development of continuous improvement procedures was the most important benefit of certification.

Based on the above, it can be concluded that prior studies have shown that certification improves the performance of companies, regardless of their geographical location, industry or company size. However, it should be acknowledged that some prior studies have also yielded opposing results. Poksinska (2010) stated that organizations may have a very different degree of maturity for standardizing their operations and because the requirements of ISO 9001 are general, an organization can claim to operate according to the standard and obtain a certificate without developing its operations.

Christmann and Taylor (2006) grouped certifications according to how firms adopted quality-related procedures. They call symbolic implementation cases where quality procedures are not in daily use. Deployment, where procedures are in daily use, researchers call these substantive implementation. Concluded by an external certification, based on audits of the third-party question arises as to the auditor's legitimacy and independence. Like Poksinska (2010), Christmann and Taylor (2006) also state that a company can obtain a certificate even if the system to be certified is separate from the practical operation. Christmann and Taylor (2006) also reported that companies that do not meet the standards' requirements may need to pass periodic certification inspections. Therefore, researchers believe that it is essential for companies to take a strategic approach toward adoption of standards by choosing a quality level that corresponds with their perceptions of costs and benefits.

Rahman (2000) investigated the effects of TQM quality management factors on Australian certified and uncertified SMEs. He showed in his study that of the quality management criteria, only process management was clearly more important for certified companies than for uncertified companies. All other quality management criteria were approximately the same in certified and uncertified companies. This also shows that certification does not automatically raise the level of quality management in a company.

Boiral and Gendron (2011) state that ISO audits do not focus on improving performance, but rather on adherence to a quality management system. Like Christmann and Taylor (2006), Boiral and Gendron (2011) highlighted auditors' professionalism and independence as potential problems, although ISO 19011 and ISO 17021 seek to manage this problem. They also report that decoupling auditing from practical operations may cause customers to misunderstand the level of the company's operations. Audits' accuracy also can be questioned because audits are quite short and often focus on reviewing documents.

All companies

The results of all companies that participated in the study (Table 3) show that significant differences were found between certified and uncertified companies in the dimensions of customer focus (*), processes (**), risk management (*), continuous improvement (**) and digitalization (*). Certified companies performed better than uncertified companies in the dimensions of customer focus, processes, risk management and continuous improvement. The mean score of uncertified companies was better than the mean score of certified companies for the digitalization dimension (*). In addition, it should be noted that uncertified companies scored better in the dimensions of procurement and materials, products/services and digitalization even though the differences in these dimensions were not statistically significant. The dimensions that attained statistical significance were not particularly surprising. With the exception of risk management and digitalization, all others are part of the seven quality management principles defined by ISO (Fonseca and Dominques, 2016; Anttila and Jussila, 2017). The low mean score for digitalization for certified companies can be explained by the fact that certifiers put pressure on companies to continuously improve data collection, storage and analysis, so the impression may be formed that company procedures are inadequate. Conversely, without external pressure, uncertified companies may feel that existing procedures are sufficient. A new requirement for the quality standard has also been the identification of stakeholders and the consideration of their requirements, so it seems strange that the mean scores for certified and uncertified companies in this area were not higher. The SD of the digitalization dimension is clearly the largest for all respondents in this study. This may be due to the fact that the exploitation of digitalization is still in its infancy for both certified and uncertified companies. Based on the seven quality principles of the 2015 (Fonseca and Dominques, 2016; Anttila and Jussila, 2017) updated standard, it seems a little strange that certified companies were not further ahead of uncertified companies in management matters (3.91 vs 3.87).

In summary, can be stated as echoed by Padma et al. (2008), Douglas et al. (2003) and Santos and Millán (2013), that certification benefits companies, although uncertified companies perform very well on several TQM dimensions. These findings, which include all industries and service companies with less than 250 employees, refute Rahman's (2000) research that declared that certification would only affect the processes dimension of TQM.

Industrial companies

The results of the certified and uncertified industrial companies (Table 4) show that there was a statistical difference in the TQM dimensions of customer focus (**), personnel (*), processes (*) and continuous improvement (*). This result is in line with prior studies. For example, Padma et al. (2008) reported an improvement of the mean scores of these elements after certification. For industrial companies, Prajogo et al. (2012) reported process efficiencies that were also observed in this study. They extended their view of the impact of certification to suppliers and customers as had been previously explored in a study by Leung and Chan (1999). This study shows that the impact of certification extends only to customer focus and thus does not support the notion of impacts to suppliers.

The p value of risk management (0.0691) narrowly misses the threshold for statistical significance. Fonseca et al. (2016) stated that the use of risk-based thinking requires the identification of risks and opportunities that may affect the quality management system and the results it achieves. This drives organizations to manage the identified risks. Therefore, the results of this study are unsurprising. Anttila and Jussila (2017) stated that according to the new ISO 9001 standard, risk-based thinking is clearer than in previous versions of the standard. This means that risk-based management is easier to apply in practice, although statistical significance was not achieved in this study. According to Medić et al. (2016), the term “risk-based thinking” in ISO 9001: 2015 refers to quality planning, system implementation, system maintenance and continuous improvement. This requirement contributes to the implementation of a quality system that prevents nonconformities. For this reason, it is somewhat strange that the level of risk management in the comparisons did not achieve statistical significance.

The results for all companies, particularly the industrial companies, draw attention to the fact that the management dimension results are almost the same for certified and uncertified companies, although the updates to the standard specifically support the management dimension. This finding differs from the results of Padma et al. (2008). Their research also showed an increased level of management in connection with certification. Our study also does not support the observation reported by Douglas et al. (2003) on the effectiveness of management oversight. In the results of industrial companies, it should be noted that the areas of procurement and materials as well as digitalization received a better mean score for uncertified companies than certified companies. This seems strange, since the standard requires that certified companies have control over supplier-related procedures. On the other hand, the Finnish industry has been paying attention to materials and inventory management for years. There is no other apparent reason, other than the pressure from certifiers (described earlier), to explain the fact that the mean score for uncertified companies for digitalization was clearly higher than that for the certified companies. In the responses of both groups, the SD of digitalization was the highest of all the dimensions, which is explained by the fact that the issue is still relatively new and some companies are already at an advanced stage, while others are still in the planning stages.

Assessing the TQM dimensions of industrial companies as a whole, it can be concluded that certification is useful because four TQM dimensions can be shown to be statistically significant and the mean scores of these factors for certified companies were better than the mean scores for uncertified companies. Thus, the results of this study mainly support the views obtained from prior studies, such as Douglas et al. (2003), Padma et al. (2008), Georgiev and Georgiev (2014) and Shafiq et al. (2014).

Service companies

A comparison of the results of the certified and uncertified service companies (Table 5) shows that the mean scores showed no statistical significance for any of the TQM dimensions. This result is truly surprising because ISO 9001 requires procedures for management, customer relationship management, personnel, process management, procurement of materials, services, risk management, continuous improvement and stakeholder management. Some of these procedures should be documented in a certified system, which could be thought of as further improving their effectiveness. It is also noteworthy that uncertified companies had a better mean in the dimensions of management, product/service and digitalization. The p values of the service companies are clear; none of the factors have p values near 0.05, which would reflect a clear difference in the answers given by certified and uncertified companies. This particular result for service companies differs significantly from prior studies, such as Caro et al. (2009), who reported positive results for certification in service companies, including improvements in customer quality and customer satisfaction. There is no justification for the idea that certification would benefit service companies, unlike industrial companies.

Industrial companies compared to service companies

Upon comparing the results of certified industrial companies with the results of certified service companies (Table 4 vs Table 5), it was found that industrial companies were only superior in the dimensions of management, processes, product/service and continuous improvement. In all other TQM dimensions, service companies received better mean scores. Looking at the results of uncertified companies (Table 4 vs Table 5), only in the management dimension is the mean score of industrial companies better than the mean score of service companies. In process the mean score is the same. The results show that the level of the TQM dimensions is clearly estimated to be higher in uncertified organizations than in certified companies. The findings of this study show that there is a greater difference in the TQM dimensions of certified and uncertified companies in the industry sector than in the service sector. This finding does not fully support the results of previous studies that reported that certification had a positive impact on company performance for both industries (Douglas et al., 2003; Prajogo et al., 2012) and services (Caro et al., 2009).

The criteria for ISO 9001 certification are the same regardless of the company's industry, so it is interesting that so many TQM dimensions are perceived to be better in certified service companies than in industrial companies. It is equally interesting that the TQM dimensions of uncertified service companies are at such a high level that there was no statistical difference between certified companies, and that the TQM dimensions were perceived to be clearly better than in industrial companies. It should be noted that the mean scores of the system deployment dimension for both certified and uncertified service companies were higher than for industrial companies. This is likely to have influenced the positive perception of the TQM dimensions for service companies.

Small companies

Upon comparing the results of certified and uncertified small firms in the study, it was found that there were statistically differences in the results of the continuous improvement (*) and processes (**) dimensions. The mean scores for the certified companies were better than the uncertified companies in all other dimensions except product/service and digitalization. The results of the process and continuous improvement dimensions are expected in the sense that when building a quality system, these dimensions are priorities for development and they reflect the functionality of the system in which the certifiers are interested. These results support the idea that certification would have a positive impact on these TQM dimensions for small firms.

Medium-sized companies

Comparing the results of the certified and uncertified medium-sized companies, it can be seen that the mean scores showed no statistical significance for any of the TQM dimensions. This result also differs from expectations in the sense that of the 11 TQM dimensions, uncertified companies have better mean scores in five dimensions than certified companies. It is important to note that this is the only comparison group where the mean score of the system deployment dimension was better for uncertified companies than for certified companies. This result is quite striking because certification specifically looks at the effectiveness of the implementation of existing practices, so the expected result was that implementation would receive a better mean score in certified companies than in uncertified companies. The results of this group of companies showed no evidence that certification would improve their TQM dimensions.

Considering the results of the study, grouped by company size, certification had a statistically significant effect for companies with 5–49 people, and there was no effect for companies with 50–250 people. The impact of certification is noticeable in the processes and continuous improvement dimensions. This result is partially parallel to a study conducted by Rahman (2000), in which he reported that certification only affected the processes of SMEs.

Exploitation of results

All SMEs can use this study's results to ensure that they have designed and implemented procedures that are appropriate and effective for all 11 dimensions of the TQM study. Certifiers can benefit from the research by focusing on training their own staffs, especially on those dimensions in which certification cannot make a statistically significant difference with non-certified companies. The training must be accompanied by procedures that enable the matter to be presented to SMEs in a non-consultative way. Accreditation bodies can benefit from research by reviewing training programs for certification bodies and ensuring that auditors are trained to review the requirements of the standard so that clients feel like they will benefit from certification. Educational institutions that train future quality managers and CEOs can leverage research by training students in the design and effective implementation of procedures that meet the standard's requirements. Consultants who train companies or help them build effective operating systems can emphasize their programs based on research findings so that low-impact TQM dimensions' impact is enhanced. Considering the use of the study presented above, it is clear that certified companies' future TQM levels will be higher than those of non-certified companies, and that a huge number of certified companies will get more value for their money.

Further research

In the future, researchers should ensure that the responses to the TQM dimensions reflect the views of the entire organization, as there is reason to believe that employees see practical issues differently than management. For this reason, it would be fruitful to consider how the views of employees could be better weighted than is the norm for current studies when assessing process performance. In addition, future research should better account for the fact that data from SMEs are significantly influenced by the type of company, so that results from different types of companies can be distinguished from one another. As this study shows, it cannot be argued that certification has a positive impact on the TQM dimensions of all types of SMEs. There is already a wealth of information on performance issues in general. In the future, research should therefore focus on the individual elements of TQM dimensions, their structure and their impact. If future studies focus on the details of the TQM dimensions with an emphasis on insights obtained from employees, it is likely that the results will better describe the actual functioning of the TQM dimensions and provide more useful information to companies.