So many standards to follow, so little payoff

Companies have spent a lot of money to comply with ISO's popular management standards. Now, many wonder why they bothered.

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In 1904, electrical experts from around the world gathered in St. Louis. Noting that different countries had different names and units for electrical gear, they came up with the idea of creating an international industry standard so that machines made in one country could run on another country's power source. A century later, a Geneva-based group called the International Organization for Standardization, or ISO, continues that work; over the years, it has established more than 15,000 standards for everything from screw threads and the dimensions of freight containers to the JPEG digital-photo format.

More recently, ISO has been moving into a new area: setting standards for nearly every aspect of a business's operations. At last count, in 2003, more than 600,000 companies worldwide had been certified to ISO's management standards. Moreover, many of the world's largest enterprises, such as Ford, Northrop Grumman, and some branches of the federal government, demand that many of their suppliers be certified.

And therein lies a problem for entrepreneurs. Getting an ISO certification is expensive and time-consuming. What's more, doing so requires codifying nearly every aspect of business operations -- something that runs counter to the style of a fast-moving entrepreneurial organization. But if you don't go through the process, you often can't work for the big guys. "The larger customers always have it in their RFPs -- are you ISO certified?" says Eric Vetrano, senior VP of operations at Redemtech, a tech outsourcer in Columbus, Ohio. "We got shut out a few times since we didn't have a certification." Redemtech has since remedied that, obtaining its ISO 14001 certification earlier this year.

ISO began setting management standards in 1987, beginning with a framework of rules known as ISO 9000, which governed the production-line operations of major manufacturers. In 2000, the organization broadened the rules to apply to service companies as well, covering everything from hiring to market research. In 1996, it introduced a set of environmental policies known as ISO 14000, and the organization is currently considering new standards for safety, corporate social responsibility, and financial planning. To qualify for either 9000 or 14000 certification, a company must write a specific, step-by-step guide for each process, and then demonstrate that it follows the procedure. Such management rules, says Alan Bryden, ISO's secretary-general, are "distillations of good management practice worldwide for the way an organization accomplishes its work."

But can something as ephemeral as good management be distilled, analyzed, and measured like a manufacturing process? Peter Kolesar, a quality expert at Columbia Business School's Deming Center, isn't so sure. "When you try to make a simple parallel between blowing plastic bottles for detergent and running one-of-a-kind advertising campaigns, the ideas don't carry over in this nice, mechanistic way," Kolesar says.

Certification also requires a lot of time and money, which can be especially hard on entrepreneurial companies. John Huey learned just how involved the process was when he directed the ISO certification for the division of Delaware North Companies that manages guest services in tourist spots like Yosemite and Sequoia national parks. First, Huey drafted an environmental-management policy. Then, he documented the company's environmental impact, tracking water use, energy use, and food recycling. Next, he devised a plan to reduce waste, researched legal requirements for pollution and contracts, trained employees, brought in a consultant to prepare for the compliance audit, and conducted his own preliminary audit.

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