Quality Management and Job Quality How the ISO 9001 Standard for Quality Management Systems Affects Employees and Employers, Article Critique Example

a) Introduction: The article by Levine and Toffel (2010) establishes a compelling link between the adoption of the ISO 9001 quality management standard and improved organizational performance. Some important limitations notwithstanding, the authors found that adopters performed better than matched peers in a number of important respects pertaining to efficiency and growth. The adoption of the ISO 9001 standard appears to yield higher growth, increased payroll and employee wages, and increased organizational longevity, a finding of considerable significance for the field of quality management in general as well as industry practitioners.
b) Analysis: In their article, Levine and Toffel (2010) evaluated the effects of the ISO 9001 quality management standard on adopting organizations: specifically, whether the adoption of ISO 9001 does indeed translate to increased sales and employment, increased wages, increased workplace safety and health, and increased organizational survival (p. 978). The subjects of their study were an assortment of “California-based single-plant firms across an array of industries”; ISO 9001 adopters were matched with nonadopters on the basis of “industry, location, size (baseline sales, employment, and total payroll), and preadoption injury rates” (p. 978). In their review of the literature, Levine and Toffel found a number of studies supporting a positive correlation between ISO 9001 adoption and improved performance, including increased production growth, reductions of waste and pollutants, and increased employee productivity and attention to detail—albeit at the cost of innovation (p. 979). According to Levine and Toffel (2010), the adoption of ISO 9001 can serve as a credible honest signal of quality, particularly in industries wherein it can be difficult to ascertain quality (p. 980).

Levine and Toffel (2010) used injury data from ISO 9001 adopters and nonadopters, coupled with compensation and payroll information from the Workers’ Compensation Insurance Rating Board (WCIRB) (p. 982). Data from Dun & Bradstreet and the ISO 9000 Registered Company directory enabled them to ascertain ISO 9001 status and company characteristics (p. 982). The authors were then able to ascertain injury rates for the companies in their sample, as well as the total injury costs of compensation and the costs of payroll (p. 982). Moreover, they calculated a measure of “average occupation riskiness” in terms of “a weighted average of workers’ compensation pure premium rates across a firm’s employment in 500 occupation codes” (p. 982). With these metrics, they could evaluate both the characteristics of ISO 9001 adopter versus nonadopter firms, as well as causation of any significant differences between them.

The findings from Levine and Toffel (2010) were revealing: firstly, larger firms were more likely to adopt ISO 9001 (p. 984). The authors found that adopting firms had “median sales and payroll of… $3.48 million and $1.04 million, respectively,” compared to “$0.78 million and $0.16 million, respectively, for non-adopters” (p. 984). Moreover, adopting firms were found to have already had higher labor productivity and higher wages, even before ISO 9001 adoption (p. 984). Moreover, there was also a significant correlation between ISO 9001 adoption and below-average workers’ compensation injury costs prior to adoption, though no statistically significant relation regarding injury rates was observed (p. 985). However, Levine and Toffel endeavored to control these potentially confounding factors by carefully matching ISO 9001 adopters with similar, nonadopter firms, and found that these matched nonadopter firms “had similar preadoption trends as our treatments” (p. 985). Furthermore, Levine and Toffel used propensity score matching, including dummies for year, industry, and California geographic region, to create their “matched control group” to ascertain the effects of ISO 9001 adoption (p. 986). From this, they were able to ascertain that ISO 9001 does indeed increase organizational survival, employment growth, sales growth, and total payroll growth, as well as decrease compensation costs ; however, it does not increase labor productivity (pp. 988-992). The positive effects of ISO 9001 adoption were also more marked in smaller firms (pp. 991-992).     
c) Gaps/limitations: Levine and Toffel (2010) identified a number of limitations in the study: notably, they were unable to acquire data for “all determinants of adoption that we would like to include” (p. 992). Another limitation is one of causation: they were able to identify differences, but were unable to conclusively interpret them in terms of causation (p. 992). In this vein, the authors ran a robustness test for financial stress, in order to ascertain whether or not it was simply the case that firms with greater fiscal strength were more prone to adopt ISO 9001 and to experience the positive effects noted: using financial stress metrics, they concluded that ISO 9001 adopters and matched nonadopters were similar in this regard (p. 992). Another robustness test was conducted for growth: Levine and Toffel (2010) sought to ascertain whether ISO 9001 adopters might be more prone to higher growth even before adoption (p. 993). Here, the authors sought to control for “employer fixed effects, industry-specific time trends, and a host of observable characteristics”; they also noted similar sales trends between ISO 9001 adopters and nonadopters, and the fact that poor credit ratings were not correlated with decreased likelihood of ISO 9001 adoption (p. 993). Similarly, for safety practices, Levine and Toffel faced the possibility that ISO 9001 adopters might already have had better safety practices than nonadopters; however, they argued that because they matched adopters and nonadopters by industry and regulatory regime, such safety practices rooted in particular organizational cultures should not exercise a confounding effect on the results of the study (p. 993). Thus, it may well be that some adopting firms were already safer than matched nonadopters, but this does not rule out the correlation between ISO 9001 adoption and increased safety.

Although the robustness tests are generally compelling, there was one significant interpretative gap: differing effects of ISO 9001 adoption by industry. As Levine and Toffel (2010) explained, the largest industry-specific group in their sample consisted of organizations in one of two industries: “electronic and electric products and final metal products” (p. 993). Together, these organizations composed nearly half of the total sample (p. 993). Levine and Toffel found that the effects of ISO 9001 adoption for companies in these two industries were relatively similar vis-à-vis matched nonadopters (p. 993). However, there was a compelling difference between ISO 9001 adopters in both of the two predominant industries and their ISO 9001 adopter peers in other industries: the former experienced greater rates of growth relative to their peers than did the latter—again, relative to their industry-specific nonadopting peers (p. 993). Simply put, ISO 9001 adoption affected firms in the industries of electric and electronic products and final metal products more dramatically than it did firms in other industries, even though adopters in the other industries still experienced tangible benefits in terms of growth in payroll and wages (p. 993).

This raises another important point: the generalizability of this study. The organizations surveyed by Levine and Toffel (2010) all possessed a number of features in common: though they differed significantly by industry and by size, all were based in California and all were single-plant firms (p. 978). As the authors explained, they had compelling reasons for limiting themselves to single-plant firms: the adoption of ISO 9001 is implemented on the level of a particular plant, while the data that they needed for outcomes are “typically available only at the firm level” (p. 980). This raises a number of important questions: how might the effects of ISO 9001 adoption vary under different regulatory regimes, i.e. in other American states or internationally? How might the effects of ISO 9001 adoption vary in larger, multi-plant firms?
d) Implications—1) Quality Management: This study establishes a positive correlation between ISO 9001 adoption and increases in organizational survival rates, growth in employment, sales, and total payroll (Levine & Toffel, 2010, pp. 988-990). The linkage between ISO 9001 adoption and decreased employee compensation costs is also of some significance significance (p. 990). However, here a caution is in order, inasmuch as the authors noted that adopters were already notable for lower-than-average injury costs prior to adoption, and could find “no evidence that this gap widened or narrowed after adoption” (pp. 993-994). It is also worth noting that the adoption of ISO 9001 does not seem to be correlated with increases in individual employee productivity (p. 990). In other words, ISO 9001 adoption is linked to the formation or reinforcement of increased organizational effectiveness, efficiency, and attendant profitability. In particular, Levine and Toffel (2010) emphasized that ISO 9001 adopters had “far lower organizational death rates than matched firms within their industry”, a clear sign that ISO 9001 adoption is of profound significance to total quality management (TQM) efforts (p. 993). Another key finding was that after the adoption of ISO 9001, the adopting firms experienced considerably greater and more rapid growth in sales and in employment than did their matched, nonadopter peers (p. 993). Moreover, the adoption of ISO 9001 has important positive ramifications for employees, as well: Levine and Toffel found that total payroll, in particular, as well as annual employee wages experienced a similar dramatic growth in adopting firms versus their matched nonadopter peers (p. 993).

2) Industry Practitioners: From the preceding it may be readily surmised that the adoption of ISO 9001 is an imperative for any organization seeking to increase its success in terms of growth. ISO 9001 adopters are consistently faster-growing, are capable of employing more people and offering them better compensation, consistently last much longer, and are likely to incur lesser costs in terms of employee compensation for injuries. This is what ISO 9001 has to offer industry practitioners: greater performance, growth, and profitability.

However, as discussed previously, Levine and Toffel (2010) found that the organizations which obtained the greatest benefits from the adoption of ISO 9001, specifically higher rates of growth, were those in the electric and electronic products industry or the final metal products industry (p. 993). Thus, although ISO 9001 adoption was correlated with positive results in organizations of every industry in the study, the effects seem to differ on the basis of which industry is considered (p. 993). For industry practitioners in industries other than the aforementioned, the challenge will be to ascertain what steps, if any, should be taken in order to realize more of the benefits of ISO 9001 adoption. Moreover, the fact that smaller firms realized greater benefits from ISO 9001 adoption versus larger firms is relevant: larger firms may have to undertake greater organizational initiatives in order to realize more benefits from ISO 9001 adoption (pp. 991-992). On the other hand, one of the study’s more encouraging findings for industry practitioners was that firms with poor credit were not less likely to adopt ISO 9001, and experience the attendant benefits (Levine & Toffel, 2010, p. 993). For struggling firms, the adoption of ISO 9001 would seem to offer a sound template for improved organizational performance.
e) Conclusion: The findings of Levine and Toffel (2010) make a compelling case for the efficacy of the ISO 9001 quality management standards. The matched samples of adopter and nonadopter firms demonstrate that ISO 9001 adoption is correlated with firm growth, increased payroll and employee salaries, increased longevity, and some decrease in compensation costs for injuries. Although some important questions remain, particularly pertaining to industry-specific benefits, it is clear that ISO 9001 adopters can expect to experience tangible benefits.

References

Levine, D. I., & Toffel, M. W. (2010, June). Quality management and job quality: How the ISO 9001 standard for quality management systems affects employees and employers. Management Science, 56(6), pp. 978-996. DOI: 10.1287/mnsc.1100.1159