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Globality, Quality, and Trust — A Government-Private Enterprise Partnership Model
by
Paulette Laubsch
and
Richard Blake









RP13150.pdf


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Category:

Personal Practice of Quality


Reprint Number:

RP13150



Volume 11, Number 2
Spring 2003
Page Number(s) 49-54



About the Authors:


Paulette Laubsch, DPA, is a Certified Public Manager and an assistant professor of administrative sciences, School of Administrative Science, Fairleigh Dickinson University, Teaneck, New Jersey. She was employed by the New Jersey Department of Labor for over thirty years. As Assistant Commissioner, she administered the program described in this paper. She continues to serve in a consultive capacity.

Richard Blake, Ph.D, is a Certified Public Manager and an associate professor of social work at Seton Hall University, South Orange, New Jersey. His consulting and research interests center on matters of public policy and social well-being.




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This article presents an example in which government helps management professionals and private enterprise work together to help assure that international efforts are fundamentally grounded in tenets of quality as codified by ISO 9000.


Background

Obviously, international business has taken place for centuries, albeit in a host of different venues and for different reasons. Over the past three decades, however, we have all witnessed a significant change as large numbers of business entities have recognized and grasped opportunities to function in a global marketplace with regard to management, capital, production, distribution, and consumption. Expansion of markets, improvement of profit potential, and reduction of cost factors join the enhancement of competitive position as prominent forces moving organizations toward globalization.

Various networks have been developed that require standardization, from automated teller machines to transportations systems to telecommunication set-ups (Heskett, Sasser & Schlesinger, 1997). Whereas in the United States these standardization efforts have fostered domestic business by guaranteeing that a part manufactured on the east coast would fit a product on the west coast, they are part of a larger picture. For an increasing number of businesses, international trust and competencies are required. The widget must fit, legally function, and be culturally compatible in a host of new environments — in the global marketplace. Four critical components of production form the foundation of current business interactions: motivation, know-how, opportunity, and trust. These components can be depicted as follows:

 

 




ISO 9000


In 1987, ninety-one countries agreed to a process leading to certification for international commerce. The International Standards Organization (ISO — often identified as the International Organization for Standards, depending on the respective language being translated) was a catalyst behind this quality certification impetus. ISO is a voluntary organization comprised of leaders from business, government, professions, and elsewhere, worldwide. Founded in 1946, it has spawned a continuously growing movement for global quality and certification (Llopis and Tari, 2003). Much has been written about ISO 9000, the name given to the major dimension of this international agreement that establishes and monitors criteria for quality management. The reader can find detailed descriptions of the standards in numerous written and electronic media. Although we recognize there are other ISO derivatives, we confine this discussion to ISO 9000, specifically, to government efforts by New Jersey state government to assist in the certification process.

Companies may assess whether international business should be part of their strategies for success. If the answer is yes, the desire to function internationally, with ISO 9000 certification, requires motivation (see figure). Typical motivators include: enhancement of market; enhancement of competitive position; reduction in costs concomitant with following quality management principles; reduction of costs and enhancement of goodwill associated with diminished product defect and liability issues; improved labor-management relations; and fear of adverse consequences for not proceeding.

Motivation is both straightforward and complicated. There is one set of motivators associated with conducting business internationally; another set of motivators pertains to doing things better; and a third set is directly linked to obtaining the coveted ISO 9000 certification. Surveys conducted of companies working toward their ISO 9000 certification have indicated the desire to use ISO as a starting point for implementation of total quality management into their operations (Schuler, 1995). Since this certification reacts to a need to receive recognition for a level of standardization and it also pushes organizations forward toward institutionalization of quality, ISO 9000 certification both responds to, and creates, motivation.

Experts in quality are crucial to ISO 9000 efforts. They help provide and assure the know-how (see figure) of managing for quality. They often serve as consultants to organizations seeking this important certification; and, in this role, they can recommend, through the ISO 9000 hierarchy, that an organization be certified as operating under the tenets of total quality. The organizations seeking certification place their goal (ISO certification) in the hands of these experts. Thus conceived, the know-how the consultants provide, as signified through training, monitoring, and certification, is a public, global indicator of trust (see figure). In the local marketplace, customers of local businesses can easily develop opinions concerning the quality of goods or services. In the global marketplace, the reputations of companies are not as easily determined, and company certification becomes an indicator of trustworthiness that can facilitate relationships between customers and companies. In another sense, organizations trust that these consultants know how to attain the desired certification and can maneuver through the bureaucratic maze to get that accomplished.


Creating an Opportunity Structure for ISO 9000 Certification

Thus far, we have noted that the quality driven tenets of management, operationalized and monitored by ISO, are the key ingredients of know-how, motivation, and trust. We now address the fourth dimension, opportunity (see figure). Opportunity can be defined as the conditions under which motivation, know-how, and trust can be encouraged, developed, and brought to full fruition. Although government can play a pivotal role in enabling certification for quality and regulating globalization efforts, what role should it have in the process?

Before proceeding, we wish to recognize that there is considerable argument regarding ISO 9000.1 However, arguments about ISO 9000 are outside the scope of this article. There is ample evidence, even face validity, that quality-driven management works. Khan and Hafiz (1999), Renzi and Capelli (2000), Waks and Frank (1999), Wayhan, Kirche, and Khumawala (2002), and Zuckerman (1999) are but small sample of the literature portraying the efficacy of ISO 9000 quality. We take the position that ISO 9000 is operational and institutionalized, and additional support by government presents a significant innovation.

ISO 9000, a voluntary certification under voluntary auspices, has different levels of importance placed on it by different countries and industries. It may, under certain circumstances, be mandatory or even a de facto requirement for doing business. For example, in 1995 Japan obligated software manufacturers to be ISO certified (Daugtrey, 1995).

In order to gain the know-how and concomitant public trust associated with ISO 9000 delineated quality, a motivated business must have opportunity to participate in the training and certification process. Government could help provide assistance to organizations to enable this opportunity. Philosophically, one could argue that businesses pay taxes and should be eligible for government services. Certification can be seen as growing or protecting jobs, certainly an issue of concern for government. Foreign companies may be aided greatly by their respective nation-state governments, thus putting American companies that do not receive such subsidization at a competitive disadvantage.

In the United States, New Jersey is one of several governmental entities that have aggressively participated in ISO 9000 certification efforts.2 Using state revenues diverted from its unemployment insurance tax, the state has a grant program through which eligible companies can receive financial support to obtain training and subsequent certification. The intent is to protect and grow businesses and jobs within the state. By allowing funds to be used for ISO training purposes, the state recognizes the value of such certification to companies, regardless of size, operating in New Jersey and the potential benefit to those companies and therefore the state. For small and medium sized companies, this support is essential since they lack personnel with the knowledge of the training and process, time and resources to explore such program, and funds to provide the necessary training. Thus, the state recognizes the need for an opportunity structure to enable motivations for know-how, certification, and trust.


The Pragmatics of Providing Opportunity

At any and all levels of government, a number of issues must be addressed to enable opportunity for ISO 9000 certification. In the following, we present, in no particular rank order, the major dimensions of the opportunity for certification made available by the State of New Jersey. It is important to note, however, that there are a number of possibilities and alternatives for providing government assistance.

Source of Revenues. A fundamental question is where the money is to come from. Obviously, through its coercive potential, government has many ways to obtain money. Theoretically, an entity of government could choose any option to fund such a program. Many of these options are likely to be socially and politically unpopular, or even in conflict with some other law or jurisdiction.

In New Jersey, a portion of the state’s unemployment insurance tax was diverted to a dedicated program, the Workforce Development Partnership Program (WDPP), to fund various forms of training. A portion of the WDPP monies can be utilized for training leading to ISO certification. WDPP has been in existence for eleven years. It has proven to be politically popular; it also provides funding for training for workers displaced by a rather sudden and traumatic change in the state from an industrial to a more service oriented economy. This type of funding is somewhat unpredictable from year to year. As workers are displaced, receipts of unemployment insurance tax receipts are reduced, and simultaneously, additional claims for unemployment benefits are made. WDPP is an attempt to stop this potentially spiraling phenomenon.

Eligibility. In New Jersey, virtually any organization that wishes to function internationally may apply for a grant to facilitate quality training that can be used to qualify for the ISO certification. Theoretically, an entity of government could target specific industries or even specific companies as potential beneficiaries of the program, however this is clearly likely to meet with criticism regarding special interests.

A business needs to signify in an application to the New Jersey Department of Labor, Workforce Development Partnership Program, Customized Training Division, that it has reasonably anticipated outcomes and that there is reasonable probability that it will be successful, in terms of quality management, ISO 9000 certification, and enhanced business and employment. Consultants with expertise in ISO 9000 typically assist companies in the preparation of these grant applications.

Companies are required to provide a means-tested financial match; on a limited basis, and for specific reasons, an in-kind match is possible. This serves several purposes: the program is not seen as a giveaway; it allows the amount of public money to be stretched to a larger pool of applicants; and it allows for discretion so as to provide funding for not-for-profit organizations, as well as smaller, particularly new, minority or female owned businesses. The intent is to be fair, recognizing that fairness is a complicated issue. Also, the intent is to use the funds for actual training and certification, not for costly or cumbersome investigations.

Maintaining Business. It is ironic, and conceivable, that a company could use state, or other government entity, money to achieve international certification, and then use this certification to expatriate itself from the very government that provided the assistance. New Jersey constrains grant recipients from such action by requiring repayment of monies received for companies that leave the state within a given period of time. These funds are then reallocated. This may not seem as a significant deterrent, but organizations do not want to add to the cost of relocating the repayment of such training monies.

Government Regulations. Another issue pertains to government regulation of the certification process. The funding for this opportunity grant program works its way, indirectly, to the quality consultants who do the training, monitoring, and subsequent recommendation for certification. This is a delicate matter. On the one hand, it is possible to see public monies in the hands of persons who may not be licensed or otherwise sanctioned by government, thus raising questions of assurances of competency as well as ethics. On the other hand, care must be taken to not violate the free market spirit of this, or the rights of professionals. Also, there must be some validity to the education and certification processes that these professionals have gone through, often under the auspices of professional organizations. It is possible for a government to license or otherwise monitor this process.

New Jersey’s Department of Labor mandates that uniform procedures must be followed throughout the state; and, like other states, New Jersey has various departments that address respective constituencies and social issues, many of which impact labor and industry, directly and indirectly. In New Jersey, anyone who is providing training must be approved as such by some entity of government within the state if federal or state monies are to be used to pay for training. If an entity of government within the state employs someone, full or part time, as a quality trainer, this is sufficient to qualify the person, or group of persons, as eligible to participate in the WDPP. This has proven to be a boon to community colleges that may bring a person or group onto staff as a trainer and then work with respective companies in a training and consultant role.

The New Jersey Department of Labor maintains a registry of people who have been approved as trainers. It monitors their activities and monitors the outcomes of the certification training process. The intent is to be fair and accountable, yet laissez-faire. Of course, there are instances where companies, usually larger companies, use their own staff for some or all of the required training. This bypasses some of the training approval aspects and may be considered as an in-kind match in the determination of a respective grant. Regardless, the outcomes are monitored.

Attracting Business. This state funded program is designed to grow the number of jobs in New Jersey or at least maintain them. An entity of government can do this, absent higher government regulations to the contrary. The benefits have a multiplier effect in terms of the state’s economy and overall well-being and in terms of the quality business environments people work in or are served by within the state.

The Future. Since its inception in 1992, this program has worked successfully. Approximately five hundred companies, of varying sizes and industry types, have participated in state subsidized ISO 9000 training. There has been a marginal increase in the number of participants each year. The future is unclear, however. As mentioned previously, discretionary unemployment tax receipts are unpredictable. Also, there is no control on the number of applicants. Conceivably, there could be a significant increase in the number of companies wishing to participate, thus creating several scenarios: first come-first served; waiting lists pending some saturation point of companies in the state; earmarking a percentage of funds for respective industry types; seeking alternative sources of revenue; increasing the match; and developing other eligibility criteria. Alternatively, there could be a significant decrease in the number of applicants, thus raising other options. As a consequence, a zero-based governmental management philosophy is needed.


Summary

Although presented as parochial to the State of New Jersey, this model for government aid to business is applicable to the broad array of governments in the United States and elsewhere. As companies expand their interest in standardization of processes and the potential of increased quality, other companies view these efforts in a competitive mode. The emphasis on quality is becoming institutionalized in New Jersey businesses. The WDPP provides a missing element, opportunity, to complement and reinforce motivation, know-how, and trust.


Notes

1. ISO is opposed by some on grounds that: it represents the efforts of an international conspiracy; uniform standards should only apply to product or service outcomes, not management protocols; standards should be more entrenched in government regulation than by a voluntary, and perhaps self-serving, organization; standards should be guided by the free marketplace, outside the purview of government; it represents a fad; and others.

2. Other examples include: the State of Florida developing standards for their fire companies that are ISO compliant; Manufacturing Extensions Programs in various states such as Tennessee that support certification through the community college systems; and the U.S. Environmental Protection Agency and its Environmental Management Systems.


References

Daughtrey, T. (1995). Software quality. ASQC Quality Software Newsletter. 4, 7 (retrieved April 25, 2003 from deming.eng.Clemson.edu/pub/tqmbbs/misc/japansw.txt).

Heskett, J. L., Sasser, Jr., W. E. & Schlesinger, L. A. (1997). The service profit chain. New York: The Free Press.
Khan, M.K. & Hafiz, N. (1999). Development of an expert system for implementation of ISO 9000 quality systems. Total Quality Management, 10, 47-59.

Llopis, J. & Tari, J.J. (2003). The importance of internal aspects of quality improvement. International Journal of Quality & Reliability Management, 20, 304-324.

Renzi, M.F. & Capelli, L. (2000). Integration between ISO 9000 and ISO 14000: Opportunities and limits. Total Quality Management, 11, 859-856.

Schuler, J. (1995). Quantifying quality: Surveying SEMI members on their views toward ISO. Channel Articles, 8.

Waks, S. & Frank, M. (1999). Application of the total quality management approach principles and the ISO 9000 standards in engineering education. European Journal of Engineering Education, 24, 249-258.

Wayhan, V.B. Kirche, E.T. & Khumawala, B.M. (2002). ISO 9000 certification: The financial performance implications. Total Quality Management, 13, 217-231.

Zuckerman, A. (1999). Winning numbers: ISO 9000 and TC-176 meet Y2K. The Journal for Quality & Participation, 48-50.


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