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Do quality systems really make adifference?Anne Landin a & Carl-Henric Nilsson ba Department of Construction Management, Lund University, Box 118,S-221 00 Lund, Swedenb Institute of Economic Research, Lund University, Box 7080, S-220 07Lund, SwedenPublished online: 18 Oct 2010.

To cite this article: Anne Landin & Carl-Henric Nilsson (2001) Do quality systems really make adifference?, Building Research & Information, 29:1, 12-20, DOI: 10.1080/09613210150208750

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Do quality systems really make adifference?

Anne Landin1 and Carl-Henric Nilsson2

1Department of Construction Management, Lund University, Box 118, S-221 00 Lund, SwedenE-mail: anne.landin@bekon.lth.se

2Institute of Economic Research, Lund University, Box 7080, S-220 07 Lund, SwedenE-mail: Carl-Henric.Nilsson@fek.lth.se

The purposes of this study were to ascertain whether Swedish construction companies measure the impact of theirquality systems (such as ISO 9000) and, if so, whether the ‘balanced scorecard’ approach is a useful technique as ameasure of performance. The balanced scorecard approach requires each organization to look at itself from fourdifferent perspectives to provide a more comprehensive view of organizational performance: the �nancial perspective,the customer perspective, the process perspective, the innovation and learning perspective. Twelve Swedishconstruction sector companies (clients, architectural-engineering consultants, contractors) with well-established qualitysystems were studied. The results indicate two important points. First, the balanced scorecard can be successfully usedto measure the performance of quality systems in the construction process. Second, the organization and learningperspective is neglected in the Swedish construction process. The use of the balanced scorecard highlighted the factthat a lack of balance often exists between the four perspectives. While it is tempting to conclude that investments inquality systems increase organizational performance, there is little (if any) evidence that this is the case. Manyinvestments in quality systems appear to be based more on blind faith than on facts. Tools are only valuable if theyimprove results, there is a need for further understanding the costs and bene�ts of quality systems in engineering andconstruction organizations.

Keywords: management systems, balanced scorecard, ISO 9000, quality assessment, organizational performance,Sweden

Les objectifs de cette etude etaient de veri�er comment les societes de construction suedoises mesurent l’impact deleurs systemes de qualite (comme ISO 9000) et, dans ce cas, si l’utilisation de la ‘carte de pointage equilibree’ constitueune technique utile pour mesurer ces performances. La methode de la carte de pointage equilibree oblige chaquesociete a proceder a une introspection a partir de quatre points de vue differents a�n de fournir une vue globale desperformances de l’organisation: perspectives �nancieres, commerciales, au niveau des processus, et du point de vue del’innovation et de l’apprentissage. Douze societes suedoises du secteur de la construction (clients, ingenieurs-conseilsarchitectes et ingenierie, contractants) disposant de systemes de qualite reconnus ont ete examinees. Les resultats fontressortir deux points importants. En premier lieu, la carte de pointage equilibree peut servir a mesurer lesperformances des systemes de qualite dans les processus de construction. En second lieu, les parametres ‘organisation’et ‘apprentissage’ sont negliges dans le processus de construction suedois. L’utilisation des cartes de pointageequilibrees a mis en lumiere le fait qu’il existait souvent un desequilibre entre ces quatre points de vue. Alors que l’onserait tente de conclure que les investissements dans des systemes de qualite augmentent les performances del’organisation, on dispose de peu, voire d’aucune preuve dans ce sens. De nombreux investissements dans des systemesde qualite semblent reposer davantage sur une foi aveugle que sur des faits. Les outils n’ont de la valeur que s’ilsameliorent les resultats; il faut donc mieux comprendre les couts et les avantages des systemes de qualite tels qu’ilsexistent dans l’ingenierie et la construction.

Mots cles: systemes de gestion, carte de pointage equilibree, ISO 9000, evaluation de la qualite, performances del’organisation, Suede

Bu i l d i n g Re se a r c h & In f o r m a t i o n (2001) 29(1), 12–20

Building Research & Information ISSN 0961-3218 print/ISSN 1466-4321 online # 2001 Taylor & Francis Ltdhttp://www.tandf.co.uk/journals

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IntroductionThe use of ISO 9000 for quality management is spreadingfrom the manufacturing industry to other sectors such asthe construction sector. The overall purpose of introdu-cing ISO 9000 in a company is to increase the perform-ance of the organization. However, there is little evidencelinking quality management investments to improvementsin organizational performance. Another management toolaimed at controlling organizational performance is ‘thebalanced scorecard’. Neither method is well understood inthe construction industry, but may prove useful inmanaging such companies at the business unit level.

Research concerning control systems in the constructionsector have been traditionally focused on the project level,thus omitting a comprehensive view of the company. Thisstudy addresses the issues at the company, or businessunit, level.

In this study, the impact of the implementation of ISO9000 quality management systems in several companies inthe construction sector was analysed with a balancedscorecard. The purpose of the study was to improve ourunderstanding of the relationship between quality systemimplementation and organizational performance at thebusiness unit level.

In ISO 9004-1 (1994) ‘Quality Management and QualitySystem Elements – Part 1: Guidelines’, which describesthe basic goals in establishing a quality system, thefollowing is stated (Chapter 6.1, Financial Considerationsof Quality Systems):

It is important that the effectiveness of a qualitysystem be measured in �nancial terms. The impactof an effective quality system upon the organiza-tion’s pro�t and loss statement can be highly signi�-cant, particularly by improvement of operations,resulting in reduced losses due to error and bymaking a contribution to customer satisfaction.

Such measurement and reporting can provide ameans for identifying inef�cient activities, and initi-ating internal improvement activities.

By reporting quality system activities and effective-ness in �nancial terms, management will receive theresults in a common business language from alldepartments.

Measuring the impact of a quality system solely from a�nancial perspective may not be suf�cient. Traditional�nancial measures can give misleading signals, encouragingcompanies to achieve short-term �nancial results at theexpense of long-term objectives. In the manufacturingindustry, these problems have been observed in he form ofreduced investments and neglected maintenance. One solu-tion to the problem during the second half of the 1990s hasbeen the balanced scorecard (Kaplan and Norton, 1992).

The use of the balanced scorecard in business is wellestablished in large and sophisticated �rms. The use ofscorecards in an organization is strongly driven by astrategic view of the mission of the organization and thevision of how this will be achieved. A good model of thebusiness and the interrelationships between differentactivities and functions is essential. The balanced scor-ecard is a management system which can bring aboutsustained pro�tability and breakthrough improvements incritical performance (Newing, 1994). The model inte-grates long-range strategic plans with short-term measur-able objectives (Kaplan, 1994). The scorecard is not areplacement for �nancial measures, it provides a morecomprehensive view of the company in which the �nancialperspective is one of four perspectives. The other perspec-tives are the customer perspective, based on the marketingstrategy, the process perspective, based on the manufac-turing strategy and the innovation and learning perspec-tive, which deals with the ability to cope with changingcircumstances. Balancing the scorecard implies that theseperspectives are afforded approximately equal importance.Furthermore, balancing is also pursued within eachperspective. All perspectives consist of approximatelythree to �ve different measures, providing a nuancedpicture of the company’s performance but two to threemeasures per perspective may provide a more transparenttool for the organization (Nilsson, 1997).

Theoretical reviewQuality systems such as ISO 9001 are gradually beingimplemented in the construction industry, but theirpurpose is not fully understood at any level of manycompanies in this sector. Other novel management systemssuch as the balanced scorecard are also not well under-stood. Therefore, a brief review of the underlyingphilosophies is presented.

Quality systemsAll of the standards in the International Standards in theISO 9000 family are generic and independent of anyspeci�c industry or economic sector. A quality system canfocus on one or several of the following: the input to theprocess, the process itself, or the output. For instance, thequality of the fruit and vegetable stand in a supermarket isprimarily dependent on the input, cold and freshvegetables and fruits, while the quality of vegetablesserved with a meal at a restaurant is dependent on theinput as well as the production process at the restaurant.Some car manufacturers during the 1970s and 1980smaintained a high quality by monitoring and checkingeach car before delivery. This output-focused qualitysystem was deemed too costly, and an alternative is ISO9000, which focuses on the production process. WhenISO 9000 is implemented, it controls operations such thatthey run, not at a maximum quality level, but at aprede�ned, constant satisfactory level. While a constantlevel of quality is the essence of ISO 9000, it is also the

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major drawback that critics of the system call attentionto, i.e. continuous improvements of the productionprocesses are not encouraged. In the next version of ISO9000, to be released in 2000 this ‘bug’ should have beenremoved.

Collectively, the ISO 9000 standards provide guidance forquality management and quality assurance. An effectivequality system should be designed to satisfy customerneeds and expectations, while serving to protect theorganization’s interests (ISO 9004-1, 1994). A qualitysystem is a tool for steering and improving the qual-ity of a company’s products. Systematic work on qualityimprovements requires well-planned routines and, in thisrespect, the standards in the ISO 9000 family serve animportant purpose.

The balanced scorecardDuring the late 1980s, a group of managers of major UScompanies gathered together with Professor RobertKaplan from Harvard Business School (one of themanagers was David Norton from a consultancy �rm).The objective was to answer the question: are wemanaging our businesses with suitable tools for long-termprosperity? If not, how should such a tool operate? Theanswer to the second question is the balanced scorecard.

The balanced scorecard rests on two basic assumptions:

· Running a business is a complex task, so much sothat one measure, e.g. return on capital, is notenough to guide anybody in the company. Severalindicators are needed, preferably from several per-spectives.

· Measuring something is a way of directing attentionto it, or put more popularly; what you measure iswhat you get.

Implementation of the balanced scorecard starts with thecompany’s vision and strategy. Based on the vision andstrategy, the same four questions are posed in turn, foreach of the four perspectives: �nancial, customer, processand innovation and learning.

For the �nancial perspective the questions are:

· How will we appear as a company if we reach our�nancial goals?

· What are the key success factors for reaching our�nancial goals?

· What actions have to be taken in order to reach our�nancial goals?

· What is it critical to measure in order to reach our�nancial goals?

For each of the remaining perspective the word �nancial is

substituted for in term: customer, process and innovationand learning.

The balanced scorecard is usually presented in the form offour boxes around a circle, see Figure 1. The perspectivesare arranged in three horizontal layers, from top tobottom:

· The past: �nancial perspective

· The present: process and customer perspectives

· The future: innovation and learning perspective

These layers provide a balanced time horizon, some veryshort-sighted measures, such as �nancial measures, andsome medium- and long-term measures.

Furthermore, the perspectives are related in a logicalmanner, as indicated by the arrows. For example in orderto achieve �nancially good results the customers have tobe satis�ed. How do we keep customers satis�ed? Theanswer is: Through a well-organized internal process andby continuously learning more and upgrading the pro-cesses and innovating new products.

In general, the balanced scorecard has been recognizedand met with enthusiasm in several industries. Since themid-1990s, many larger corporations have implementedthe balanced scorecard; Ericsson, Atlas Copco andScandia, to mention a few. Many medium-sized and smallcompanies are presently implementing balanced score-cards.

The primary criticism of the model so far is related to:

· The problems of coordinating information gatheringwith several IT systems within a company

· Grasping scorecards with many parameters (systemswith 20 different measures)

· The four perspectives not being suf�cient (commonadditional perspectives are the employee perspectiveand the environmental perspective)

FinancialPerspective

CustomerPerspective

VisionandStrategy

Innovationand learningPerspective

ProcessPerspective

Figure 1 The balanced scorecard strategy and perspectivecausality

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MethodAn investigation was carried out of the indicators used by12 companies in Sweden to monitor the performance oftheir quality systems with the aim of determining how farthese could be constituted as a balanced scorecard. Thecompanies were selected so as to encompass variousquality systems used within the construction process, andwere judged to be at the forefront of quality assurancewith considerable experience of the Swedish constructionindustry. The criteria for the selection of the companieswere:

· They must have had a quality system in thecompany for at least three years

· The quality system adopted should be equal to thequality standard of ISO 9000

· They should have a genuine interest in qualityissues, as evidenced by, e.g. active participation inconferences or debates

· They should be able to show a quality plan for aproject

The project was limited to companies in Sweden withinthe construction sector, and among the companies, fourclients, four architectural/engineering-businesses, and fourcontractors were represented. These categories werejudged to represent the construction process, see Figure 2.

The numbers of employees and the sales volumes of thecompanies are listed in Table 1. Interview data werecollected from 27 individuals during 1994. The respon-dents held positions in the companies such as CEO,regional manager or quality manager. During each inter-view, notes were taken, so as to capture the most salientdetails, views and nuances. The material that appeared tobe particularly representative and pertinent was thenselected for further analysis. The study was not intendedto provide answers such as: 27% of the companies didthis or that. Such information is of little practicalrelevance (McCloskey, 1992). Instead, a qualitativemethodological approach was considered more apt forthis study. Although no quantitative conclusions can bedrawn, a deeper understanding of the subject is obtained(Yin, 1981; Eisenhart, 1989). The data from thecompanies representing the various agents within theconstruction process were used as the basis for theinterpretations arrived at. The interviews involved openquestions concerning different aspects of the qualitysystem (Landin, 2000). A qualitative method was em-

ployed to classify the data and to gain insight into theproblem, see Figure 3. Three investigators were present ateach interview. The use of multiple investigators has twokey advantages (Eisenhardt, 1989):

· They enhance the creative potential of the studybecause team members often have complementaryinsights which add to the richness of the data.

· The convergence of observations from multipleinvestigators enhances con�dence in the �ndings.

First, the remarks made by the respondents concerning theeffects of the quality system they employed and themeasurements used, were identi�ed, and listed. The datawere divided into different categories depending on thesubject. The interview data were then analysed and sortedinto different categories or key factors several times untilall of the data had been �tted into one of the categories.The key factors were settled when the content in eachreached a balance. The results reported here represent acollective analysis of all cases organized according to thekey factors emerging from the interviews. Each key factorwas evaluated in terms of both its importance and its usein practice as indicated by the respondents. Finally, thekey factors that emerged were �tted into the fourtraditional categories of a balanced scorecard.

Empirical � ndingsThe analysis of the results of the interviews at 12 differentcompanies covering the whole construction processshowed the companies to be strongly convinced that itwas both bene�cial and pro�table to employ a quality

Clients A/E-firms Contractors

Figure 2 The chosen categories cover the constructionprocess

Table 1 The size of the companies included in the study

Number ofemployees

Sales volume(US$m)

Clients1 7000 12952 197 1213 71 74 8249 712

Architectural/Engineering-companies5 734 756 162 317 119 148 88 10

Contractors9 6891 1163

10 38322 419111 2367 19512 101 20

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system. Reasons of a logical character were commonlyreferred to in connection with quality techniques.

It was reasoned that taking the correct action from thebeginning through conscious and effective planning, andputting this into practice through sound management,would result in lower costs than if erroneous actions hadto be corrected. Although this line of reasoning is simpleand obvious, and constitutes a strong argument for theuse of a quality system, it is by no means certain that aquality system used in real life ful�ls the purpose forwhich it was designed, especially if the effects are notexamined properly, and if it fails to be linked with speci�cgoals.

The danger was thus seen that the implementation of aquality system could involve the introduction of routinesthat had no positive effect on the organization and weresimply a waste of time.

The result was nine key factors as follows:

· Time required for quality work

· Control of inspections

· Certi�cation cost

· Customer satisfaction

· ISO 9000 certi�cation

· Zero defects at delivery

· Competitiveness

· Ef�ciency

· Follow-up

The ‘time required for quality work’ denotes the timespent by management and the employees on the qualitysystem in the company. ‘Control of inspections’ meansthat the inspections that should be made must be planned

All the collected datafrom the twelve companies

Selection of dataconcerningeffects of qualitywork

The data sorted into relevant key factorsK1

K2K3

K4

K5

K6

K7K8

K9

Each key factor was evalatedin terms of importance and usefulness

Key factor, importance, measured

K1K2

K3

K4K5

K6

K7

K8

K9

The key factors fitted intothe balanced scorecard

Figure 3 Methodology

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so that they are relevant and not too costly in eachproject. A certi�cate from a third party costs a certainsum of money, depending on different factors such as thesize of the company and line of business, and this isincluded in the key factor ‘certi�cation cost’. However,when a company introduces a quality system according toa standard, one of the goals can be to obtain third-partycerti�cation and this is covered in the key factor ‘ISO9000 certi�cation’.

The key factors were �tted into the different perspectivesin the balanced scorecard and the results follow.

Financial perspectiveTime required for quality workAll the companies set aside time for quality work. Noneof the companies measured the amount of time, but thedata revealed the following. In one of the largecompanies, four or �ve people were engaged full time.In one of the medium-sized companies, higher manage-ment devoted some 30–40% of their time to qualitywork. In another of the medium-sized companies twopeople were engaged in quality matters full-time and everyemployee underwent a half-day training course in qualitytechniques. The time required for quality work wasjudged to be of great importance but was only partlymeasured.

Control of inspectionsInspections were not viewed as an effective approach toquality management. In seven of the companies, effortswere made to minimize inspections and to concentratequality efforts to early stages of the process. It was feltthat the inspections carried out should be as close aspossible to the activity involved. These companies alsostressed the point that quality assurance is not the same asmaking inspections. The respondents noted for example,‘Inspections are costly’ and ‘Checklists do not help’.Control of inspections was deemed to be of highimportance but was not measured.

Certi� cation costThe direct costs were those connected to certi�cation, i.e.the costs associated with engaging an accredited certi�ca-tion agency. The calculated cost varied between three ofthe companies from US$ 100 to 1000 per employee. Therest of the companies merely stated that certi�cation ‘isnot inexpensive’. Eight of the 12 companies wanted togain certi�cation. The certi�cation cost was judged to behighly important, but was only partly measured.

Customer perspectiveCustomer satisfactionAlthough the interest in measuring customer satisfactionwas evident in six of the 12 companies, only one of thecompanies made any genuine effort to actually measure it.Customer questionnaires were used and the results

analysed with statistical models. Only a few of thecompanies had received demands from customers forquality assurance. Nevertheless, all the companies wereconvinced that the maintenance of a quality system wasworthwhile. However, customer satisfaction was judged tobe of moderate importance and was seldom measured.

ISO 9000 certi� cationCerti�cation of the quality system was the goal of eight ofthe 12 companies. According to the respondents, a qualitysystem should encompass the whole company, not simplya particular section, or a particular department. Itappeared that repeated internal auditing of a qualitysystem was something all the companies were basically infavour of. Some of the companies were, on the one hand,suspicious of the certi�cation procedure but, on the otherhand, thought that those of their suppliers that had acerti�cate were better than those who did not. ISO 9000certi�cation was judged to be highly important and waseasily measured.

Zero defects at deliveryFour of the 12 companies had the goal of achieving zerodefects. Actually, for one of the companies, this was theonly goal mentioned. The reason that this key factor wasmentioned could be that it is easy to measure, althoughnone of the companies could verify a trend towards fewerdefects. Zero defects at delivery was judged to be ofmoderate importance and was seldom measured.

Process perspectiveCompetitivenessThere were high expectations that the implementation of aquality system would increase the company’s competitive-ness. Although no one provided any concrete example ofthis, there was a strong belief in the relationship betweenquality systems and competitiveness. Respondents main-tained, for example; ‘A quality system makes the productbetter and cheaper’, ‘A quality system generates moreprojects’, and ‘Quality assurance is a matter of survival’.Competitiveness was judged to be of great importance butwas not measured.

Ef� ciencyTen of the 12 companies regarded a quality system asbeing identical to a system aimed at attaining greateref�ciency. Although the companies were convinced thatwork on quality led to an increase in ef�ciency, none ofthem had any de�nite concept of how great the gain was.There was also the fear that bureaucracy would increaseand that the routines of a quality system were notcompletely realistic. Ef�ciency was judged to be of greatimportance but was not measured.

Follow-upNone of the companies could identify any concretestrategy for achieving positive effects in connection with

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quality work, although some of the companies expressedthe opinion that following-up the effects of a qualitysystem was important. One of the respondents said: ‘Youwould not put millions into a project (like a qualitysystem) if you did not believed that you get them, andmore, back’. The only concrete measures employed werethe number of negative assessments found in the �nalinspection protocol and the time required for correctingerrors. Follow-up was judged to be of moderate im-portance and was not measured.

Innovation and learningThere were no key factors that indicated that thecompanies found the organization and learning perspec-tive important or that they tried to measure any keyfactors associated with it. This may partly be explained bythe lack of requirement for systematic improvements inthe standard.

When the key factors were �tted into the balancedscorecard the results showed the measures used in the

Financial Perspective

Consumer Perspective Process Perspective

Innovationand LearningPerspective

Time required for quality workhigh importance, partly measured

Control of inspectionshigh importance, seldom measured

Certification costhigh importance, partly measured

Customer satisfactionmoderate importance, seldom measured

To be certifiedhigh importance, always measured

Zero defects at deliverymoderate importance, seldom measured

Competitivenesshigh importance, seldom measured

Efficiencyhigh importance, seldom measured

Follow-upmoderate importance, seldom measured

No key factorsfound in the study

Interpretation of the use of the key factors:

The key factor’sjudged importance

How the key factorwas measured

low moderate high

seldom partly always

Figure 4 Balanced scorecard with the key factors identi� ed in the study

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different perspectives. Two main results could be identi-�ed:

· The balanced scorecard can be used to measure theperformance of quality systems in the constructionprocess.

· The innovation and learning perspective is not usedin the Swedish construction process to the sameextent as other sectors.

The results are illustrated in Figure 4. The �gure alsoillustrates how important the key factors were judged tobe, and to what extent they were measured.

Discussion and conclusionsThe total effect of a quality system cannot be fullymeasured in practical or in theoretical terms. This is, inpart, due to the complexity of the matter and tocontinuous changes occurring in the environment. Cau-tion is thus called for in interpreting the results. However,this does not amount to giving up, and declaring itimpossible to evaluate the effects. It is important that allroutines in the quality system that fail to contribute toquality improvement and ef�ciency are removed. Amanagement control system such as a quality system isnot static, but must be altered and remoulded continu-ously based on changes that occur in the situation inwhich the company �nds itself. Accordingly, the weightplaced on a speci�c measure may, and should, changeover time.

The question for the researcher/company is whether theimplementation of quality systems really makes a differ-ence. While it is tempting to conclude that investments inquality systems increase organizational performance, thereis little (if any) evidence that this is the case. Many ofreports in the popular press, as well as in academicjournals, are based on success stories. Failures are seldomreported, hence the average report is skewed towards toooptimistic a point of view. Unfortunately, many invest-ments in quality systems appear to be based more onblind faith than on facts.

The cost of quality has many de�nitions; one is thecost of quality management plus the cost of rework(Neese, 1991). The cost of rework has been investi-gated and found to be considerable in relation to thecontract sum in the construction process (Josephsson,1994). Surprisingly enough, the rework cost was notmentioned by the respondents as a way of measuringthe cost of quality.

The balanced scorecard is an interesting tool as ameasure of the performance of quality systems. In thisstudy, the balanced scorecard was very useful because itreveals a clear lack of balance between the four differentperspectives. The companies in the construction industrymust pay attention to the fact that the perspective of

innovation and learning is not used to its full potential.A balance between the four perspectives is important,otherwise there is a risk that these companies will notbe able to compete on the market in the long run.Among the other perspectives in the balanced scorecard,the �nancial perspective seems to be deemed the mostimportant since all three key factors were judged to behighly important. In spite of this the key factors wereonly partly measured, which is an interesting contra-diction. Both the ‘process’ and the ‘customer’ perspec-tives seem to be of moderate importance to thecompanies.

The secret lies not in discovering one magic tool, butrather in learning which tools to use, how and when(Rigby, 1993). Most companies today operate in aturbulent environment with complex strategies that,though valid when they were launched, may lose theirvalidity as business conditions change (Kaplan andNorton, 1996). Tools are only valuable if they improveresults, and improved results will only occur whencompanies establish the capability to serve customer needsbetter than their competitors (Rigby, 1993). There is aneed to develop knowledge through future research on thecost and bene�ts of quality systems in the engineering andconstruction industries.

AcknowledgementsWe wish to thank BFR for their �nancial support and allthose who at different stages of the project gave their timeand effort to interviews and discussions. We would alsolike to thank the anonymous referees for their valuablecomments, which have had a major impact on thestructure of the paper.

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