Giving-up Management System Certification: a Potential Early Warning Signal?

Abstract

The paper presents the dynamics in number of top management system certificates (ISO 9001, ISO 14001) focusing on the situation in Slovenia in the last two years when a significant increase of cancelled certificates was noticeable. We studied this phenomenon in order to find out its reasons and effects on the performance of the organizations. Some recognized relations between quality management systems and company performance from literature review were used for setting hypotheses which were analytically proved. We assumed that quitting management system certificates was related to decrease in busi­ness performance. Empirical part of our research was based on the data of Slovenian certification bodies and on published annual financial reports of Slovenian organizations. In the survey some characteristics and performance of the organizations which gave up certification were analysed. We came to interesting findings that cancelling certificates was related to decrease in business performance and often even to closing of organizations. The downsizing of the business was increasing through the time. So, 2 years after cancelling certificates only 8% of the organizations still present growth in their income and revenue, besides almost 40% of them quit or would have to quit their business. It was also found out that the business performance after cancellation of the certificates was related to the business performance before it and to the reason for cancellation as well. Two years after cancellation there was a 3-times higher proportion of failed organizations (= 45% of previously non-profitable organizations) among the organizations that had operated at a loss before the cancellation of their certificates, compared to those previously having a profit. Among the claimed reasons for certificate cancellation organizational changes (in 35% of all the organizations losing certificates) and cancellation of certificates by certification bodies (in 41% of these organizations) were the most common ones related to the failure of these organizations.