Relationship between quality certification and financial and non-financial performance of organizations

Islam, Md Mazharul, Karim, M.A., & Habes, Essam Mohammed (2015) Relationship between quality certification and financial and non-financial performance of organizations. The Journal of Developing Areas, 49(6), pp. 119-132.

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Abstract

At present, many countries have either embraced ISO9001 or used it as the basis of their national quality certification systems. However, few studies have been conducted to examine the benefits companies’ gain from achieving and implementing ISO9001 standards (Chikuku et al. 2012; Psomas et al. 2013; Sampaio et al. 2011a,b). Analysis has brought much more confused and uneven results across the countries. Turning to the experience of Malaysia, this country has witnessed a spectacular growth at an average rate of 9.89% per annum of ISO certificates issued to companies operating within its borders (ISO Survey 2012). While many companies rush to be ISO 9001 certified whether this brings about better benefits (both the financial and the non-financial) is still an open question. In this study, the research problems were first formulated from the literature and then a questionnaire survey was conducted to test the hypotheses. A survey was administered to chief executives officers and managers across manufacturing and service organizations in Malaysia. Multivariate analysis and SPSS macro developed by Preacher and Hayes were used as statistical techniques to the financial and non-financial benefits of ISO9001 certification. The survey instrument was a two-page questionnaire comprising three sections. The first section of the questionnaire covered the company’s profile. The second section consisted of 25 items on internal benefits and third section consisted of 7 items on external benefits measured on 1–5 Likert scale to assess the benefits of ISO9001 certification. Total 201 valid responses were received. Results of the study indicate that there was no significant direct relationship between ISO9001 certification and organizational financial performance, while strong statistical evidence was found to support the direct relationship between ISO9001 certification and non-financial performance. The findings of the study discovered that financial performance is actually directly related to two non-financial measures, namely quality performance and local and international business performance, which are directly and significantly influenced by ISO9001 certification. Therefore non-financial performance measures are involved in the mediational process. The findings will assist practitioners in taking right courses of action that make the implementation of this standard more effective. For example, the study findings study suggests that companies should put emphasize on nonfinancial factors to improve their financial performance.

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ID Code: 94884
Item Type: Journal Article
Refereed: Yes
Keywords: Quality management, Nonfinancial and financial performance, Manufacturing and service organisation
DOI: 10.1353/jda.2015.0079
ISSN: 1548-2278
Divisions: Current > Schools > School of Chemistry, Physics & Mechanical Engineering
Copyright Owner: Copyright 2015 Tennessee State University College of Business
Deposited On: 13 Apr 2016 23:17
Last Modified: 14 Apr 2016 21:47

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