ISO 9000: A PROGRAM IN TRANSITION ISO 9000: a free trade boon, barrier or boondoggle? Amy Zuckerman -- IN/EX Information Export NAFTA is a reality. The GATT Treaty seems certain to become reality. As the world focuses on treaties and agreements, the thorny question of how to make international trade really work has been receiving scant attention. Will ISO 9000, the international quality standards program that has been touted as a replacement for all quality assurance standards worldwide, compliment or complicate the movement to worldwide free trade? ISO fits neatly into the how-to or day-to-day issues of foreign trade. Companies who buy into the ISO 9000 program -- companies from Minneapolis to Mombasa -- are supposed to be able to select among ISO 9000 certificate bearers worldwide and feel confident that they are dealing with a quality company. By offering this assurance of quality, ISO 9000 is expected to breed credibility in the world market and thereby make overseas working arrangements far easier. If boosters of ISO 9000 talk about creating a quality company, many world market players consider standards programs like ISO 9000 a key to international trade. This is especially true in Europe where there is general recognition that the purpose of quality assurance -- the backbone of ISO 9000 -- is domination of global markets. European ISO officials understand that he who dictates how companies operate are dictating the rules of the game. They understand that ISO 9000 is big business and that the registrars that are the most respected will end up on top. World trade and ISO 9000 standards The connection between international standards and world trade hasn't been lost on members of the US Office of Technology Assessment (OTA), a research arm of Congress. In a 1992 report, the Office of Technology Assessment points out that: "international standards developments will not only affect US competitiveness in Europe, they will also affect US competitiveness in the world market... Many industrialized nations use standards as marketing devices to sell their products in Eastern Europe and to the developing countries of the world... They recognize if they can influence the choice of standards in the developing world, trade will likely follow." The OTA has also predicted much of the competition among standards bodies that is starting to come to the fore today. Calling competition among standards bodies "fierce," the OTA indicates that "increasingly, standards resemble international commodities. In a global marketplace there will not only be more standards bodies competing with one another for sales, industry restructuring will also likely follow, with business alliances cutting across national lines." With the glow of overseas markets beckoning, many companies -- especially those with overseas interests -- are coming to understand the connection between standards and trade. Some have responded to the ISO 9000 promise for market purposes while others have been coerced into ISO 9000 compliance by their multinational customers. Whatever the reason for pursuing ISO 9000, a total of 40,000 ISO 9000 certificates have been issued to companies throughout the world. And there are now 95 countries worldwide that have accepted the ISO 9000 standards on a voluntary basis. The market response to ISO 9000 Talk to those who have achieved ISO 9000 certification here and abroad and you hear a number of things, mostly positive. People like Tim Barry, training and continuous improvement process manager, at American Saw in East Longmeadow, Mass., say ISO 9000 has improved in-house communication and created a major drop-off in employee accidents. He's witnessed fewer product defects, more customers and increasingly satisfied customers. Given the fact that ISO 9000 is market driven program and openly used for marketing purposes, it's also important to listen to certificate holder endorsements critically. Although ISO 9000 has proven benefits, especially on the auditing side, many certificate holders like Clifford Weeks of the TI Group in Arlington, VA. consider ISO 9000 too costly. Some, like Louise O'Sullivan -- president of Groen, a Dover Industries Co. in Elk Grove, Ill. -- have pursued ISO 9000 only to find no customer demand for the certificate. ISO 9000 growing pains With international success has come growing pains for this free- wheeling, free-market program. Members of the Geneva-based International Organization for Standardization (ISO), members of European and American national accreditation bodies, and industry groups both here and abroad, are working on altering ISO 9000. Among the proposed changes are more industry-specific standards and guidelines, as well as more stringent regulations for ISO 9000 registrars (those authorized to offer ISO 9000 certificates.) Calls for reform in Europe With growing competition on the ISO accreditation and registrar front from the US and Far East, European ISO officials are leading the call to infuse credibility into the ISO 9000 program. There appears an urgency on the part of Europe an ISO 9000 reformers. This pressure is compounded by the European media -- including the Financial Times of London and well known Dutch newspapers -- which increasingly has been voicing industry concerns about the rampant commercialization of the program. Even ardent ISO 9000 supporters in Europe like Willen Deken, deputy secretary of the influential Dutch Council for Certification (RV C), will tell you that ISO 9000 has fallen short of its promise to produce international quality assurance standards that will replace all other standards of their kind. Deken talks about "tightening" of regulations surrounding registrars as a means of infusing "credibility" into a program where credibility is the product. The ISO, itself, is finding itself hard put to defend the way its program has been administered worldwide. There are ISO members calling for the Geneva-based organization to create a regulatory arm rather than leave that task to a myriad of national accreditation bodies all of whom function differently. There is also talk of creating one international accreditation body to create a far more integrated program. And there is growing concern that the ISO 9000 standards better reflect individual industry needs and are more closely connected to product standards. As Neil Cook, ISO Executive Assistant for Special Projects points out: "It is possible to have an ISO 9000 system and still manufacture poor quality products (ISO 9000 News, July/August 1993)." Changes for the US program If ISO 9000 is strongest in the oil, chemical, electronics and computer industries, it has plenty of industry detractors. It's often heard among industry groups -- from tool manufacturers, to automakers, steelmakers and woodwork machinists -- that ISO 9000 is a program created by consultants to benefit consultants. "It's a cash cow for consultants," reports Chuck Hadley, executive director of the Chicago Metal Working Consortium. "Is ISO 9000 really necessary?," wonders J.W. Kisling, a St. Louis manufacturer of restaurant equipment who serves on the executive committee of the National Association of Manufacturers and is pushing ISO 9000 cost reform through NAM's Small Manufacturers Forum. These concerns about credibility and alleged conflict of interest have not gone unnoticed in US ISO 9000 circles. Several years into its operation, the US Registrar Accreditation Board (RAB) has just issued conflict-of-interest guidelines to be discussed -- and reportedly adopted -- by all accredited US registrars. American talks with the Dutch In the meantime, the RAB and the American National Standards Institute (ANSI) have been conducting talks with the influential Dutch RVC in an attempt to gain mutual recognition for product standards and for US and Dutch ISO 9000 registrars. (ANSI supervises the RAB and the RVC is the Dutch national accreditation board.) Why bother with the Dutch? Members of the RVC are among the theoretical creators of ISO 9000. Besides the British, the Dutch have been the largest backers of ISO 9000 and run one of the most stringent ISO 9000 programs in the world. The Dutch, as well as other European accreditation bodies, have been known to refuse recognition of US certificates if a registrar has not been accredited by the RVC. Although agreements on products may be appearing soon, the US and the Dutch have not yet come to accord on quality assurance. That's according to Deken of the RVC who says the US has not yet agreed to meet the Dutch criteria for registrars. George Lofgren, president of the US RAB, reports no knowledge of such concerns. These talks are taking place at a time when the RVC is admittedly looking for a location for a US headquarters. As both the RAB and RVC are competitors for registrars, the proposed Dutch invasion should add just one more competitive wrinkle to what the Europeans acknowledge is a highly competitive program. American international moves And as the US negotiates with the RVC, its RAB is actively pursuing creation of some sort of international accreditation body. To this end, the RAB has helped found the International Accreditation Forum (IAF) to discuss means of uniting a program that could easily splinter into 95 separate fifedoms. What role the RAB would play in this sort of system is unknown. Is the US government poised to intervene? From the Commerce Department to the House of Representatives there are plenty of people concerned about the administration of ISO 9000 in the US. The Commerce Department's National Voluntary Conformity Assessment Systems Evaluation (NVCASE) agency, for instance, is tracking the program. However, its chief Stanley Warshaw says his agency won't push regulation of ISO or other standards programs without a nod from industry. "The prevailing attitude (among private sector groups) is that government stay out of the system," explains Warshaw, adding that Commerce is prepared to intervene, if necessary. Baldrige office concerns Warshaw's agency isn't the only Commerce Department entity scrutinizing ISO. Curt Riemann, the director of quality programs for the competing Malcolm Baldrige Award, has "Serious concerns with the ISO instrument and its use." (Commerce's National Institute of Standards and Technology (NIST) administers the Baldrige Award) Riemann has outlined these concerns in a 22-page critique entitled The Malcolm Baldrige National Quality Award and ISO 9000 Registration: Understanding Their Many Important Differences. Riemann generally concludes that ISO 9000 falls short on many fronts including continuous improvement, management development and the creation of quality products. Conflict of interest concern... Then there's the aforementioned 1992 OTA study which also calls for standards institutions to get out of the publishing game, which OTA researchers consider a major source of conflict of interest. "Most standards organizations function to some extent as publishers; they seek to maximize standards sales since their survival depends on them." The OTA goes on to recommend separating "the functions of standards publication and distribution from those of standards coordination, promotion and distribution." And, in general, the OTA concludes that "self-interest in US standards organizations takes precedence over national interest." Based, in part, on this report and at the behest of NIST, the National Academy of Sciences has just launched a study of US standards programs and their impact on international trade. ISO 9000 will be an integral part of this investigation. ISO costs Ironically, the question of ISO 9000 costs -- the most criticized part of the program -- is receiving the least attention from the ISO reformers. Companies will spend about $35,000 for basic ISO 9000 registration fees and that doesn't count hidden costs such as employee time. ISO officials say they are more concerned about infusing "credibility" into the program than lowering costs. They still argue that quality should be costly even though this is a for-profit program. There are a growing number of manufacturers, both here and abroad, who take exception with the notion that quality must be costly: Members of the National Association of Manufacturers (NAM) Small Manufacturers Forum, for example, are creating a cross-industry council to lobby for ISO 9000 price concessions for small and midsize companies. The big three auto companies are weaving ISO 9000 standards into a new set of quality systems they will ask their suppliers to implement sometime in 1994. By this approach -- a one-stop shopping approach -- they hope to save their suppliers additional expense and to spare them from dealing with a program which many big three officials consider "immature." Reactions to cost concerns Some international registrars (faced with mounting competition) are responding to their customers' demands for lower costs. There are registrars that are experimenting with price concessions to small companies. Some customers are willing to financially assist their suppliers defray the price of admission to ISO 9000. Experts in the field agree that it's for you, the consumer interested in ISO 9000, to set that bottom line. Cost saving ideas... There are other ways to shave thousands of dollars from the ISO 9000 process: Disorganization and action based on panic, rather than planning, can add dollars to a process that should not prove difficult (or overly costly) to those with proper preparation. Lack of preparation and planning have added to misspent hours and misspent cash. Companies from the largest multinational to the smallest shop recommend businesses negotiate with registrars and consultants before embarking on the registration process. Question those who tell you that you are not a quality company if you are not willing to pay whatever it takes to earn ISO 9000 registration. Learn from other companies that have earned their ISO 9000 certificates. Ask certificate holders how much money they spent on the registration process and how they could have reduced costs. Ask registrars and consultants (most of whom are for-profit entities) what percentage of their incomes derive from ISO 9000 registration work. Be aware that many people who tell you quality should be costly earn their living at the expense of other companies. And always be aware that ISO 9000, as implemented in today's world, is big business. But it is not a bottom-line oriented business. The ISO 9000 hierarchy: the players... International ISO 9000 program International Organization for Standardization (ISO) Purpose -- To create and promulgate ISO 9000 quality assurance standards internationally. Does not regulate this program. Based in Geneva. Status -- Non-profit, though some ISO 9000 board members operate ISO 9000 consulting firms. Products for sale -- Subscriptions to ISO 9000 News, memberships. National accreditation bodies Examples -- US Registrar Accreditation Board (RAB), Dutch RVC, British BSI, etc. Purpose -- Charged by the ISO to accredit private sector companies to carry on ISO 9000 work in the field. Some accreditation bodies (mostly European) double as regulators within national boundaries. European Organization for Testing and Certification (EOTC) Purpose -- Established by the European Community (EC) to promote harmony between European and international ISO 9000 organizations. Status -- Non-profit, 70 percent funded by EC. Will have to become self-supportive within the decade. Registrars (Certifiers in Europe) Examples -- Lloyds, TUV, KEMA, American Gas Association (A.G.A.), Underwriter's Laboratories (UL), etc. Purpose -- To offer ISO 9000 registration (or certification). These are the entities, most operating for-profit, that actually determine who will earn ISO 9000 registration or certification. Some offer ISO 9000 consulting services. ISO 9000 consultants Purpose -- These are individuals/companies that offer ISO 9000 assistance in the field. Status -- For profit; unregulated. US ISO 9000 program American National Standards Institute (ANSI) Purpose -- To create standards (product and quality assurance) for US industry. Offices in New York City Status -- Non-profit, memberships offered. Products for sale -- Includes standards series for ISO 9000 and other programs. ISO 9000 role -- Coordinator of national ISO 9000 program. US representative to the Geneva-based ISO. American Society for Quality Control (ASQC) Purpose -- "A society of individuals and organizations dedicated to the ongoing development, advancement, and promotion of quality concepts, principles and technologies... (with the aim of) facilitating continuous improvement and increase customer satisfaction by identifying, communicating and promoting the use of quality principles, concepts and technologies, and thereby be recognized throughout the world as the leading authority on, and champion for quality. (From ASQC mission statement)" Status -- Non-profit. Products for sale -- Includes books on quality issues, videos, audio tapes, and maintains a promotional catalogue that lists mugs, posters and other items for sale. ISO 9000 role --_ "Parent" agency to the US RAB. United States Registrar Accreditation Board Purpose -- The RAB, a subsidiary of ASQC, oversees accreditation of ISO 9000 registrars. Status -- Non-profit (some board members operate for-profit ISO 9000 consulting companies). CEEM Status -- For-profit publishing and seminar house based in Fairfax, Virginia. Has published the works of US RAB Chairman Robert Peach (an ISO 9000 consultant), and other well known ISO 9000 consultants. ISO 9000 role -- Maintains records on US companies who have been ISO 9000 registered, as well as names of ISO 9000 registrars operating in the US. Will offer information gratis to the media, but sells this information to the general public. _____________________________________________________________________ Amy Zuckerman is a freelance and contract researcher, writer, reporter and literary broker. As the principal of IN/EX Information Export, a Pelham, Massachusetts research and writing firm, she has done significant work in the metal tooling industry in recent years. She is the author of ISO 9000 Made Easy: a Self-Help Guide to Certification. Editors note: This material is adapted, in part, from ISO 9000 MADE EASY: A Self-Help Guide to Certification by Amy Zuckerman (published by IN/EX Information Export, Pelham, Mass.) with research assistance by David Biederman. European interviews were conducted in the fall of 1993 with periodic updates. Those interviewed included members of the Dutch RVC; the Dutch Foundation for quality (KDI), and the Dutch-based international registrar KEMA. Meetings were also held in Brussels with the EC-backed European Organization for Testing and Certification (EOTC) and the European Committee for Standardization, which is an EC committee. ISO officials in Geneva, US ISO officials and industry groups were interviewed by phone. This article first appeared in the January/February 1994 issue of the Journal for Quality and Participation. Zuckerman is also quoted at length in a recent Industry Week article on ISO 9000. The AMA will be publishing an updated version of her ISO 9000 MADE EASY A Self-Help Guide to Certification.