More Than A Passport To European Business

Betz Laboratories Inc. might seem an unlikely champion of ISO 9000, the family of quality standards that is fast becoming de rigueur for doing business in Europe. After all, the company's 12 U.S. plants chalked up sales of $546 million in 1992 by building chemical-treatment systems solely for U.S. customers. Still, the Trevose (Pa.) company invested more than $750,000 last year to get its operations certified under ISO 9000.

The money was well spent, insists Betz Senior Vice-President B.C. Moore. In the process of documenting the company's quality-assurance procedures, one key to compliance with guidelines from the International Standards Organization in Geneva, "we figure we found $100,000 in annual savings just from manufacturing--less waste and scrap and that kind of thing. But the bigger payback," he adds, "is on the marketing side. Being certified legitimizes our quality effort and opens doors that would otherwise be closed." Already this year, Moore says, two U.S. customers have placed big orders stipulating that their water-treatment systems be made by an ISO 9000-certified plant.

HEAVYWEIGHTS. Hundreds of other U.S. businesses are discovering that ISO 9000 can pay dividends. In fact, half of ISO 9000 initiates expect to recoup their registration costs within three years, and roughly 30% got or will get a payback within the first year (chart). That's the finding of the first comprehensive survey of ISO 9000's effect on U.S. companies. Last July, consultant Deloitte & Touche and Quality Systems Update, a Fairfax (Va.) newsletter, sent questionnaires to all 1,679 U.S. companies that were then certified. The number of U.S. registrations has since topped 1,800, up nearly sixfold in just 18 months. Of the companies surveyed, 620 (37%) responded, including 214 with sales of $50 million or less and 143 with revenues of $500 million or more. For the smaller companies, the costs of getting certified clustered in the $12,500-to-$50,000 range, while those for heavyweight manufacturers generally ran more than $300,000.

Not all those companies are fans of the registration process: More than 20% glumly peg payback at 10 years or more. That figure, says P. Foster Finley, the senior consultant at Deloitte Touche who coordinated the study, shows that some companies regard ISO 9000 as "just a cost of doing business," not a tool for uncovering inefficiencies.

Donald Webster, president of NIRSystems Inc., a $20 million maker of laboratory equipment in Silver Spring, Md., is a skeptic. NIRSystems coughed up about $100,000 for certification because two-thirds of its sales are overseas. Webster simply isn't convinced that ISO will help him boost quality. "We've all been trained in the [W. Edwards] Deming philosophy of continuous improvement," he explains, "and our fear is that ISO 9000 will be a barrier to future improvement." Because the ISO approach relies heavily on conformance to documented procedures, he worries that it could tend to lock in the status quo.

Moore of Betz Labs doesn't see it that way. He says the self-examination that ISO 9000 forced at Betz turned up major instances of "chronic waste" from procedures that rarely get questioned. For example, Moore was chagrined to discover that his company's product-development process entailed 59 separate "handoffs" from one department to another. By the time the ISO 9000 inspector returns for next year's annual audit, Betz will be prepared to certify a new 12-step process. Moore predicts that it will chop the company's 9-to-12-month development cycle by at least 50%.

BLOCK AND TACKLE. Even quality stalwarts such as Allen-Bradley Co. take a sanguine view of the process. "ISO 9000 is very rudimentary, true, but if you don't do the blocking and tackling well, you'll never score a touchdown," says Glenn J. Eggert, Allen-Bradley's vice-president for operations. The Milwaukee-based unit of Rockwell International Corp. spent upwards of $300,000 to register all 21 of its U.S. factories, and Eggert predicts the costs will be recovered within three years. He concedes that the payback will come mainly from fuzzy benefits, such as customer service and competitive advantage--"things that you really have trouble quantifying." That doesn't make them any less crucial. Already, many of Allen-Bradley's domestic customers "are moving rapidly to require ISO 9000 registration." Allen-Bradley doesn't yet ask its suppliers to be ISO-certified, "but it's only a matter of time," says Eggert.

Some critics contend that ISO 9000's initial impetus came from European companies--more than 20,000 of which are certified--that saw the standard as a legal way to impede imports. Whatever the case, ISO now has a life of its own. "It has now been adopted by 56 countries, so it's gone way beyond Europe," says Eggert. However imperfect, it's fast becoming a key to competitiveness in all global markets.