An Investigation of the Relationship between Profitability and ISO 9000 Certification for Fortune 500 Companies

This study examined the relationship between ISO 9000 Quality Management Systems and profitability to determine if there is any relationship between implementation of ISO 9000 and their profit or loss. Fortune 500 companies in the United States were selected as the research population. Data were collected from Fortune magazine, Quality magazine, the U.S. Securities and Exchange Commission (SEC), ISO Survey, ISO Secretariat, Registrar Accreditation Board (RAB), and ISO Directory of ISO 9000 and ISO 14000 Accreditation and Certifications Bodies. Companies that remajned on the Fortune 500 list from 1990 to 2000 were selected for this study. The research utilized a sample paired t test to determine the significance of the relationship between profitability and ISO 9000 certification for the companies in assets, profits, sales, and stockholders\u27 equity, respectively. Indices of profit earning efficiency (PEE) and stockholders equity efficiency (SEE) were developed to measure profit earning efficiency. One hundred and nineteen (119) companies remained on the 500 Fortune list from 1990 to 2000. Sixty-nine of those 119 companies have achieved ISO 9000 certification. In assets classification, 36 of 69 companies were found to have significant changes after implementing ISO 9000 certification. Of those 36 companies, 33 companies were found to have an increase in assets. In sales classification, 30 of the 69 companies were found to have significant changes after implementing ISO 9000 certification. Of the 30 companies, 29 companies were found to have increases in sales. In profit classification, 13 companies out of the 69 were found to have significant changes. All of those 13 companies were found to have positive net increases. In terms of PEE, 12 out of the 13 companies had a positive increase, and only one company decreased slightly. In stockholders\u27 equity classification, 34 out of 69 companies were found to have significant changes. Of the 34 companies, 25 companies were found to have increased in stockholders\u27 equity. In terms of SEE, 12 out of the 34 companies were found to have significant increases. It was determined that the selected companies have gained benefits on profitability due to implementing ISO 9000 Quality Management Systems. This research uncovered three major findings. First, the selected companies with significant changes have gained benefits in terms of profitability due to implementing ISO 9000 certifications. Second, the majority of selected companies devoted their resources and efforts to implementing ISO 9000 Quality Management Systems as one of their management tools. Third, the selected companies represent various industrial sectors, which indicate that ISO 9000 Quality Management Systems apply to a broad range of industries. This research has developed two effective measures for large companies on their profitability: PEE and SEE. PEE reveals the efficiency of a company for using minimum assets to generate maximum profits before and after implementing ISO 9000 Quality Management Systems. SEE represents the effectiveness of a company to increase its market value. On the other hand, the annual growth rate was not effective to examine large companies for their profitability