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Quantitative research in Total Quality Management

By Navroz Surani
 May 07 - 13, 2001

It has now been over two decades since the core ideas of Total Quality Management (TQM) set forth mainly by Edward Deming, Joseph Juran and Krori Ishikawa gained significance and acceptance in the management field. TQM philosophy has not only been confined to industrial settings but has gradually spread to in health care organizations, educational institutions, and not for profit organizations as well as to in many public bureaucratic organizations in many parts of the world.

A TQM programme consists of a set of powerful interventions aimed at improving the capacity of an organization to compete successfully on the basis of cost, dependability and flexibility. Quality has been seen as a key element of competitiveness.

TQM has evolved beyond its roots in statistics and quality control functions. Many practitioners have considered it to be a framework of "excellent management." Its main themes are a data-based approach to problem solving, a strong emphasis on organizational and behavioural considerations, a customer- oriented, market- sensitive approach to designing and delivering both products and services and a desire for continual improvement (Rao, et al 1996).

The strategy of TQM is rooted in four interlocking assumptions about quality, people, organizations, and the role of senior management. The first assumption states that quality is less costly to an organization than is poor workmanship. A fundamental premise of TQM is that the cost of poor quality (such as inspection, rework, lost customers and so on) is far greater than the cost of developing processes that produce high quality products and services.

The second assumption is about people. Employees naturally care about the quality of work they do and generally have the initiative to improve their work so long as they are provided with tools and training that are needed for quality improvement and management pays attention to their ideas.

The third assumption is that organizations are systems of highly interdependent parts, and the central problems they face invariably cross traditional functional lines which require a system to address the problems collectively by representatives of all relevant functions.

The fourth assumption concerns senior management. Quality is viewed as ultimately and inescapably the responsibility of top management. Quality improvement must be backed by management support and commitment.

In spite of some earlier successes, TQM in recent year has become controversial. Its worth is being challenged and argued. People have started to express mixed opinions about the usefulness of this theory and its effects on improving organizations' performance. There appears to be a lack of clarity as to what constitutes TQM and what are its measurable outcomes.

A review of the literature on this subject reveals that its profile is unbalanced with a strong predominance of descriptive writings based on case studies, anecdotal evidence and personal experiences of practitioners. The field is devoid of major empirical research.

While several institutions have been established to promote quality all around the world (The American Society for Quality, Malcolm Baldrige Award for Quality, National Institute of Standard and Technology USA, Juran Institute of Quality and Deming Prize) it appears that assessment of the success of this philosophy has largely been based on qualitative aspects of outcome. Very few quantitative studies have been conducted which establish a relationship between TQM implementation and company's performance through measurable outcomes.

This literature review is an attempt to unfold some of the quantitative research undertaken in this field and to study specifically what factors lead to implementation of TQM by an organization, what are the key factors for a successful implementation and what are the measurable outcomes which can demonstrate the usefulness of this philosophy for an organization.

Who adopts total quality management?

TQM is regarded as a new model of work organization but not all firms have embraced this new concept. A review of the literature indicates that an overarching purpose for adopting TQM is for the firm to be more competitive and to supply goods and services which are attractive to the customers.

Taking a lead from the phenomenal success achieved by Japanese organizations, several organizations in other parts of the world implemented quality principles and methods in their work settings to achieve the necessary competitive advantage.

Osterman (1994) has identified key factors which prompt organizations to adopt quality management principles (referred to in the study as flexible work practices) at their work places. The study shows that about 35% of private sector establishments with 50 or more employees appear to have made substantial use of flexible work organizations including TQM. This result is consistent with Lawler, Mohrman, and Ledford's (1992) investigation of quality programmes in Fortune 1000 firms.

The findings of the study confirm that the following variables are positively associated with the adoption of innovative work practices including TQM:

A market with international competition;
A high skill technology;
Workers oriented values;
A high road business strategy emphasizing service; quality, and variety of products rather than low costs;
Being part of a larger organization

The study using data on 694 U.S. establishments identified some key independent variables, and with the application of estimation theory (Logit model, Indexation and principal components and Ordered probit model) determined the overall characterization of the establishment in terms of its stage of implementation of TQM.

Interestingly, this study identifies that neither the pressure of union presence nor the pressure to turn to short- term profits has any influence on the introduction of quality management practices. This is a very significant finding because there are practitioners who believe that union presence in the work place is a potential hurdle in introducing programmes like TQM.

While the above study indicates that smaller firms are more likely to adopt TQM, a study by Barron & Gjerde (1996) shows that the concept is more readily embraced by larger firms who have a bigger financial base and a lesser turnover of its employees. Their study, which is based on the development of a production model, predicts that the firms which place higher value on quality (as measured by Tobins Q), have greater proportions of total defects that are introduced by in-house workers, are more likely to adopt TQM. The factors highlighted in this study appear to be "reactionary type" as compared to taking a proactive strategy towards implementing quality management.

What are the key success factors?

As decision makers become more involved in implementing TQM, questions are raised about which practices are essential for its successful implementation. A review of the literature highlights a significant trend. Most of the companies reporting successful implementation, and duly supported by empirical research, have in one way or the other adopted the famous Deming Quality Management Theory. Deming, who first introduced quality principles to Japanese on large scale has over the years condensed his philosophy into the following 14 points, which have become the action items for top management in adopting TQM. The points which captures Deming philosophy are as follows:

1.Create constancy of purpose towards improvement of products and services;
2. Learn the new philosophy;
3. Cease dependence on inspection of product to achieve quality;
4. Buy materials only if the suppliers has a quality process;
5. Use statistical methods to find troubled spots and constantly improve the system;
6. Institute modern aids to training on the job;
7. Institute modern methods of supervision;
8. Drive out fear;
9. Breakdown barriers between departments;
10. Eliminate numerical goals;
11. Review work standards to account for quality;
12. Remove barriers that rob people of their pride of workmanship;
13. Institute a vigorous programme for training people innew skills;
14. Create a structure in top management that will push the above 13 points everyday;

A study conducted by Anderson, Rungtusanatham and Devaraj (1995) empirically examines the Deming management method by developing constructs of the theory and operationalizing them using measurement standards developed by a world class manufacturing research project team. The study, which initially converted the Deming theory into seven constructs (Visionary Leadership, Internal / External Cooperation, Learning, Process Management, Continuous improvement, Employee fulfilment and customer satisfaction), empirically explores the strength of the relationship between constructs by applying path analysis using actual data collected from manufacturing practices of 41 plants in the United States.

The outcome of the study shows significant impact of visionary leadership on both internal / external cooperation as well as learning and organizational development. The study also highlights that the process management significantly affects continuous improvement as well as employee fulfilment and its impact on customer satisfaction.

Another study conducted by Flynn, Schroeder and Sakakibara (1995) on the subject attempts to establish relationship of specific quality management practices to quality performance. Their study identifies five core infrastructure practices: Customer Relationships, Suppliers Relationship, Work Attitudes, Workforce Management and Top Management support. By comparing these practices with core quality concepts like product design and statistical quality control and feedback, the study concludes that of all the variables, top management support was found to be most critical. This aspect is also an integral part of the Deming philosophy.

Deming's principles are again highlighted in a study conducted by Coyle- Shapiro. (1999) The research, conducted in UK manufacturing setting, identifies employee participation as well as style of management to be the key factors for the success of TQM. The study suggests that supervisors have a positive role to play in getting into TQM, and if employees are fully participating the efforts bring fruitful results. The study also demonstrates that the traditional "direct and control" manner of supervision, or for that matter the "Taylorism" management style, is not at all conducive for the successful implementation of this concept. Moreover the study shows that greater the employees participation in the TQM efforts, the greater will be the perceived benefits.

Yun Lin (1998) has established a relationship between employee empowerment and successful implementation of quality management practices. Empowerment (to authorize or delegate) has been studied by developing a matrix of four dimensions (leaders, employees, culture and management practices) along with '7S' framework of key organizational factors, (strategy, structure, systems, styles, skills, sub-ordinate goals, staff). Based on data collected from a U.S. subsidiary in Taiwan and empirical testing the impact of empowerment on quality, the findings shows a strong relationship between empowerment and quality management. The empowerment concept is also present in Deming's philosophy where he recommends that management should drive out fear from the workplace.

Organizational culture has been studied by Klein Masi, and Weidner (1995). The study classifies the culture into three styles constructive, passive and aggressive, each style having its own behavioural norms. The study involved 823 members of 159 different organizations and measured the organizations culture, its control structure, its service quality and the employee performance. The presence of a constructive culture (where employees are encouraged to interact with one another and work in team setting) showed a direct and positive relationship with the successful implementation of TQM. While this study is a good improvement in that it shows how culture can be made to bring about the change, however the criteria used to measure quality through employees' own perception is questionable. Klein et al. also suggest that TQM programmes are not just "off the shelf" items which can be bought and installed. Their implementation requires a complete change in philosophy and the establishment of constructive culture where people can work together in teams.

Benson, Saraph and Schroeder (1995) have approached the subject through the organizational context factors and have identified a relationship between quality management and organizational factors. The study defines these factors as managerial knowledge, corporate support for quality, past quality performance, company type and rate of product and process change. The finding shows that the organization's response to quality initiatives is directly related to the quality contexts.

While developing a framework of quality management research, Rao, Solios, and Raghunathan(1999), studied TQM success variables through the measurement instruments. The study developed 13 dimensions for quality management along with operational indicators based on managerial perceptions. Data from five different countries (USA, China, Mexico, Taiwan, India) on the operational measures indicated the predictive validity. The constructs developed in this study were: top management support, employee training, employee involvement, supplier quality, customer orientation, quality citizenship, quality information availability, quality information usage, benchmarking, strategic quality planning, product process design, internal and external quality results. All these constructs showed a direct relevance towards improving the quality. It is noteworthy that most of these constructs show great similarity with the Deming management method and his 14 points.

The criteria used to measure quality success to determine the prestigious Malcolm Baldrige award winners (leadership, information and analysis, strategic quality planning, human resource utilization, quality assurance and customer satisfaction) also forms the part of the variables as described under the Deming methodology.

What are the measurable outcomes?

This section of the review aims to address a very basic and fundamental question i.e. what has been the impact of TQM on actual firms' performance? Many studies claim to show that companies have benefited largely from a focus on events such as winning a quality award or achieving some form of certification/recognition. Very few empirical studies have been undertaken to demonstrate the real impact of this philosophy on firm's key financial and other success variables.

Easton and Jurrell (1998) have examined the impact of TQM on the performance of 108 firms that begun TQM implementation between 1981 and 1991. While recognizing TQM as a critical competitive strategy, the researchers agree to the point that there is a growing controversy regarding the effectiveness of TQM. In their study, the performance of selected firms which adopted TQM was assessed by examining the unexpected changes in financial performance for a five-year period following the beginning of deployment of TQM. The performance was measured through both the accounting variables (net income and sales) as well as stock returns. The study was largely focused on identifying the companies excess unexpected performance if any over the period of five years and comparing the same with the unexpected performance of those control companies that did not implement TQM. The excess unexpected performance was attributed to TQM efforts.

By using and comparing the results of the surveyed firms with the controlled portfolio of the firms, the study has taken care of any unexpected changes that may be due to exogenous factors which affect future performance of the firm. The findings of the study show that those firms that implemented TQM (event firms) performed better on various accounting variables as indicated by the ratios of net income to sales, net income to assets, operating income to sales and operating income to assets. The study also revealed that the improvement is greater in the later years (three to five years) than in the earlier years.

Consistent with the accounting variables, the cumulative returns indicate improved long-term performance for TQM firms with stronger results. For the full sample studied, the median excess cumulative return was 21.2% in year five.

Richard et al. (1995) studied TQM outcomes in 61 hospitals in USA and found that it was positively linked was greater perceived patient outcomes and greater human resource development. Interestingly, their findings show that large size hospitals experience lower clinical efficiency with regards to higher charges and higher length of stay due to more bureaucratic culture that serves as a barrier to quality implementation. The study also revealed that those hospitals with quality focus experience shorter length of stay and lower charges for selected clinical procedures, which both ultimately helped in enhancing customer satisfaction and revenue generation. While the study made a good attempt to describe the benefits of TQM for a healthcare setting, its findings are based on a very diverse group of hospitals with a small sample size, which makes the generalization little difficult.

In a study conducted by National Institute of Standard and Technology, (USA), the financial/stock market performance of the winners of the prestigious Malcolm Baldrige awards has been compared with comparable organizations classified under Standard and Poor 500 companies. The findings revealed that the award- winning companies outperformed S&P 500 companies by 5.8 to 1 during the period 1988 to 1999. This analysis shows that award-winning companies are doing far better on the stock price, which is reflective of their competitive advantage, and excellent performance for which quality management may have played an important part.

Prospects for future research

TQM philosophy can help an organization improve itself and, in the process serve better its community and its members. If TQM is to prosper in the future, researchers will have do a thorough job of highlighting the mechanisms through which TQM practices realize their effects. There is still plenty of room for additional research based learning on how this theory and practice could be improved. It appears from the literature review that many organizations have actually implemented a portion of what actually Deming Juran and others originally laid out.

Few attempts have been made to synthesize a framework for measuring quality management process. There is a need to first agree on common sets of measurable instruments and then apply those in measuring the success of quality. The absence of a commonly accepted measurement yardstick is a potential hurdle in the development and further growth of this philosophy.

While researchers have made a good attempt to monitor success of TQM by studying the stock prices of firms which implemented TQM, it appears that this criterion is too simplistic and may lead to inappropriate conclusions. Stock prices, as we know fluctuate due to several reasons, some of which are beyond the control of the management. Researchers must endeavour to identify other more relevant and appropriate measures to study the impact of TQM on firms' performances.

With the globalization of businesses, researchers will have to answer many conceptual and practical questions regarding the future success of TQM. For example, how can a global corporation deal with diversity of customer requirements? Is it really possible to empower quality management to all functions in a global setup?

In summary, if TQM is to maintain a prominent place in management literature, its rhetorical excesses will have to be replaced with concrete measurable outcomes of its usefulness, and the researchers will have to do a better job of illuminating the mechanisms through which TQM practices realize their full impact. The future for TQM though uncertain looks bright.

Navroz Surani is an accomplished Human Resource Professional who has spent over 19 years in this field. He currently holds the position of Director Human Resources at the Aga Khan University in Karachi.

Navroz holds an MBA and LLB from University of Karachi and has recently obtained a Masters in Industrial Relations from the Queen's University in Canada, with specialization in human resource management.

Navroz has delivered several presentations and lectures in the areas of human resource management all over the country. He has been an Hon.visiting faculty member at Greenwich University and has been a guest speaker at IBA,, Szabist Institute, Asian Management Institute, and Commecs, as well as at many other organizations. He is a member of the Society of Human Resource Management, U. S.A.