Impact Of Total Quality Management Management Essay

Abstract

The purpose of this study was to explore the impact of total quality management practices on organizational performance of telecommunication sector. Six determinants of TQM practices were identified and their impact was measured on performance of telecommunication companies. The investigated determinants included top management commitment, customer focus, supplier relationships, employee involvement and empowerment, work environment and benchmarking. Sample size was comprised of five telecommunication companies with cellular market share of 99 per cent in Pakistan. The findings indicate that TQM practices like employee involvement and empowerment to be most critical determinants of organizational performance followed by supplier relationship and customer focus.

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Introduction

Total Quality Management (TQM) is an approach for continuously improving the quality of goods and services delivered through the participation of individuals at all levels and functions of an organization. In the last two decades, large quantity of literature and academic journals have been devoted to analyzing the essences of TQM and how it should be implemented in organizations. Especially in the 1990s, a significant volume of research was performed to investigate the relationship between practices of TQM and organizational performance.

In the last few years, the foundation ideas of TQM have been generally accepted by the business community throughout the world. Within the structure of the “quality revolution”, company’s managers and executives have been busy with articles, books and seminars. TQM has been described as a new reproduction of thinking in business management (Chorn, 1991), and a wide-ranging approach to improve organizational performance and quality (Hunt, 1993). Wruck and Jensen (1994) argued that some authors consider TQM as an approach traditionally exceptional to improve the organizational effectiveness, with solid conceptual foundations which, at the same time, provides us with a tactic to develop business performance; taking into consideration the way companies and their staff operate

As the total quality management philosophy surfaces, creative and futuristic companies in Pakistan tried to adopt it not for the sake of success but for the survival and sustainability. In Pakistani context, the research on TQM has been focused primarily in manufacturing sectors. Khan (2010) discussed that the main focus in service sector has been in the field of education and little research has been conducted in other services like telecommunication sector. The telecommunication sector in Pakistan is flourishing. Mobile service was first time introduced in Pakistan in 1990. Since the last ten years, the sector has been growing from 100% to 150% (Khan, 2010). Currently the users of this sector are around ninety five million and there is a capacity to increase in number of users in coming years (Khan, 2010). Business Monitor International (2010) reported growth potential of cell phone market in Pakistan and estimated that by 2013, the mobile subscribers are expected to reach 157.1 million with penetration rate of 89%.

Purpose

The purpose of this study is to review the total quality management practices being used in telecommunication companies, and the impact of these practices on performance. The main purpose of this study will be to get the proper knowledge of TQM practices and the impact of these practices on the Organizational performance of the telecommunication companies. A link between each determinant with the performance will also be explored through the analysis of various studies.

Rationale

This study will investigate the possible correlation and causal relationship between TQM practices and performance of organizations. Similar studies have been undertaken abroad but in Pakistan there are very few studies available related to TQM practices. Malik, Iqbal, Shaukat and Yong (2010) claimed that in Pakistani context, the impact of TQM on organizational performance has not been explored so far. This was the latest study and it explored the impact of TQM on SMEs’ performance in Pakistan. Telecommunication sector in Pakistan consistently emphasizes quality as exemplified by extraordinary success of these companies during last ten years as (Khan, 2010) claimed that telecommunication companies in Pakistan implement total quality management practices. On the basis of these current efforts this study was an attempt to find out the impact of TQM practices on performance of telecommunication companies in Pakistan.

The findings will help the telecommunication companies to plan such strategies that will be helpful for attaining the quality based competitive advantage. The study will make ready the organizational leaders by providing the information that will be helpful in evaluating TQM practices in their own organizations in Pakistan to enhance organizational performance. The study would add to the sustained efforts toward theory building, enhancement, wider applicability, and provide support in consolidation of knowledge.

Operational Definitions

TQM

Bemowski (1992) claimed that the term TQM was initially used in 1985 by the Naval Air Systems Command to describe the Japanese style of management focused on quality improvements. In this paper we support the position stated by Montes, Jover and Farnandez, (2001), and consider it as a philosophy or an approach to business management. TQM is an approach for continuously improving the quality of goods and services delivered through the participation of individuals at all levels and functions of an organization.

Javier, Antonio, and Luis (2002) argued that TQM has become a universal experience, as it affected Japanese companies as much as US, European and Asia-Pacific ones. Further, Javier, Antonio, and Luis (2002), concluded that the TQM has been described even as a suitable method to improve the competitiveness of companies in developing countries.

Organizational Performance

Although many researchers have tried to put out a clear definition of performance, the dispute continues nowadays in the academic literature, especially regarding some dimensions of terminology, analysis level and abstract basis for judgment (Ford and Schellenberg, 1982). Venkatraman and Ramanujan (1986) think about three different levels of performance within organizations. Thus, they make a distinction among financial performance, business performance and organization effectiveness, while the later has been subsequently known as organizational performance (e.g. Chu-Hua et al., 2001; Terziovski and Samson, 1999). This paper focuses on the relationship between TQM and organizational performance. For this study we measured the level of organizational performance through analyzing the different dimensions of performance. For instance, increase in number of employees’ involvement and empowerment; increase in customer satisfaction level; building reputation of providing quality service; reduction in service lead time, cost of quality, and waste; and increment in firm’s reputation.

Literature Review

Montes, Jover and Fernandez (2001) argued that within the structure of the TQM, a difference can be made between contents and elements of TQM. The earlier has been known under the names content, principles, precepts, values or basic attributes similarly, the later called elements, practices, processes, interventions, techniques etc.

Vinod, Franck, Danuta and Uma (2008) found through their data analysis that there was a positive impact of TQM on all investigated dimensions of company performance. They elaborated these dimensions of company performance as employee relation (improved employee participation and morale), operating procedures (improved products and services quality, process and productivity, and reduced errors), customer satisfaction (reduced number of customer complaints), and financial results (increased profitability).

Terence (2007) stated that the effective competition and management practices do have significant positive impact on performance of the professional housing maintenance services. Henrik and Jonas (2003) stated that the financial performance was more advantageous for companies that have successfully implemented TQM, than their competitors.

Javier, Antonio, and Luis (2002) suggested that TQM affect on behavioral and learning processes through the system/persons interface. The system affects performance by interacting with the individuals in terms of individual/system adjustment and through organizational obstacles and barriers. Simultaneously, the personal factors can have an impact on the system nature and work performance.

Daniel and Amrik (2002) found that TQM significantly and positively related to innovation performance, in terms of both products and processes. Additionally, significant causal relationships between quality performance and innovation performance were found, suggesting that achievement of one aspect of performance could impact the other.

The findings of study by Vas, Alex, David and Mitchell (2000) showed a significant association between TQM activities and competitiveness, as the study indicated that 74% of TQM companies had achieved potential winner or world class status. The analysis also showed that companies which systematically adopt best practice starting with ISO 9000 and continuing with TQM were achieving significantly higher performance levels.

Chong and Rudus (2004) investigated the impact of TQM and market competition on organizational performance by studying questionnaires from 89 managers from manufacturing firms. Outcomes showed that there is a positive correlation between market competition and TQM practices of customer focus, product design, and organizational performance.

Still there are others having a point of view that is contradictory with the above. Powell (1995) suggested that most practices, associated with TQM, like training, process improvement, and benchmarking do not generally produce advantage; but the certain tacit, behavioral, imperfectly imitable features like culture, employee empowerment, and executive commitment can produce advantage. Further, concluded by Huarng and Chen (2002), that these tacit resources, not the TQM practices and techniques, drive TQM success; and those organizations that obtain them could surpass competitors with or without the accompanying TQM ideology.

Brah, Wong and Rao (2000), argued that TQM entails extreme training costs, demands idealistic employee commitment levels, consumes excessive amounts of management time, increases paperwork, and procedure and emphasizes processes over results. Some other studies show that TQM does not result in a considerable improvement in performance (Fisher, 1992), while others commented that performance of some organizations, in fact, deteriorated after the implementation of TQM (Eskildson, 1995). Reasons offered for TQM’s failure to improve performance include ineffective implementation (Griffen, 1988), lack of suitable corporate culture (Longenecker, 1993), inadequately defined performance measurement (Brown, 1993), and lack of management support (Katz, 1993).

Identification and analysis of TQM practices that affect performance

There are different quality practices that affect business performance. Promoters of TQM claim that there is a universal set of practices that, if implemented, will lead to high performance (Whitney and Pavett 1998). According to Deming (1982), higher quality leads to less rework, lesser costs, higher competence, lower prices, and improved market share. Garvin (1988) explained how conformance of quality results in lower warranty and product responsibility costs, lower rework and scrap, and lower manufacturing costs. TQM practices, which influence performance, considered in this study are discussed below.

1 Top Management Commitment

The level of visibility and support that management takes in implementing a total quality environment is significant to the success of TQM implementation. Jaideep (2001) revealed four distinctive ways that management can support TQM implementation: allocating budgets and resources; manage through visibility; monitoring growth; and planning for change. These components guide towards the attitude of reducing management waste, which reduce efficiency. Management should plan to lessen conventionally structured functional levels and unnecessary positions. Jaideep (2001) argued that simplifying the organization will direct to the establishment of an infrastructure of integrated business functions participating as a team and supporting the strategic vision of the company.

Waal and Counet (2008) argued that lack of management commitment is one of the most severe problems organizations encounter, and this becomes one of the reasons for organizations’ failure. As discussed by (Goulden, 1995) that quality improvement in organization has an emphasis on senior management top-down initiatives. Ahire and Shaughnessy (1998) concluded that firms with high top management commitment implement the other TQM practices like customer focus, employee involvement and empowerment, and benchmarking which ultimately result in better performance. Brah, Tee and Rao (2002) explained that personal involvement and leadership of senior executives in setting in setting strategic directions for quality and building a leadership system are the key factors contributing towards high organizational performance, individual development and organizational learning.

2 Customer Focus

Through customer focus, organization can achieve the desired target of customer satisfaction. Customer satisfaction is at the heart of TQM philosophy. A practical approach to responding to changing customer’ needs are critical to attract and maintain customers. Customer focus should be addressed from two main areas: internal customer service and external customer assurance. Components of an internal customer service plan should include providing timely and reliable deliveries, cost saving suggestions to management and authorizing employees to self-implement solutions, cross-training employees for mastery of more than one job and providing sufficient technical training; while an external customer service program should include delivering customers with timely information and quick reaction to complaints, and maintaining a corporate objective to reduce the quantity of questions or complaints while recognizing all successful efforts by employees in providing outstanding service (Kasul and Motwani, 1995b). Jaideep (2001) explained that measures require being those which show where improvement has been made and where improvement is possible, rather than merely monitoring people’s work, because traditional production measures used to assess personal performance rather than provide information that helps people improve.

Nwokah (2009) found that customer focus is significantly related to performance of organization. His (Nwokah, 2006), earlier study also confirmed that increase in customer focus lead to an increase in company’s sales growth, its profitability, and its market share performance. Cai (2008) commented that organizational customer orientation affects customer relationship practices which ultimately influence the organizational performance. Brah, Tee and Rao (2002) argued that an organization’s effectiveness in recognizing its customer needs and expectations, disseminating this information throughout the organization, managing customer relations, and measuring and improving customer satisfaction are the key to its better performance.

3 Supplier Relationships

Due to increased competition and globalization, companies now support the need to work more closely with their suppliers. In TQM setting, suppliers become strategic partners. The suppliers’ dealing with customers provides opportunities for improvement of products, services, and processes. Jaideep (2001) argued that partnerships with suppliers have the greatest demand to most companies due to the mutual risks linked with the development of new products. Supplier partnerships should be based on a quality program and established documentation of progress towards continuous improvement in quality. Material availability is a simple measure recommended by Maskell (1989) to remove problem areas where the material is not available when and where it is needed.

Brah, Tee and Rao (2002) discussed that the main reason for the failure of many companies is that they do not recognize the role played by supplier in an organization’s quality performance and its contribution to customer satisfaction.

4 Employee Involvements and Empowerment

Employees involvement manifest itself into team work, unity of purpose, mutual trust and respect for all, involvement at all levels and shared approach throughout the organization (Khan, 2010). This cooperation creates synergy and facilitates superior individual and team performance that affects the success of quality initiatives in the organizations. Employees must be oriented to a company’s values and beliefs of dedication to never-ending improvement, be informed of company goals, and be made to feel a part of the team (Jaideep, 2001). Proper training includes clarification of overall company operations and product, and service quality attributes. Specific measures for evaluating training include; the time and money spent by organizations in training employees and management in quality principles, problem-solving skills, and teamwork (Black and Porter, 1996). Specific measures of employee empowerment include; the extent to which cross-departmental and work teams are used, the degree of employee autonomy in decision making, the degree of employee interaction with customers, and the extent to which employee plan systems are being used (Powell, 1995; Zeitz et al., 1997).

Psomas and Fotopoulos (2009) discovered that company’s quality performance is equally influenced by adoption of quality practices by employees. Brah, Tee and Rao (2002) commented that consistency of an organization’s human resource practices with its strategic directions is also an indicator of better performance, because success is achieved through people and not through the use of system no matter how good they are.

5 Work Environments

This factor emphasizes adding value to processes, increasing quality levels, and raising productivity per employee. However, Jaideep (2001) claimed that there are different practices emphasized to improve performance, and the list of these practices contains: improving work center methods and installing operator-controlled processes that lead to a lower unit cost, accepting kaizen (continuous improvement) philosophies, reducing the operator material handling duties, promoting a design for a manufacturing program, and achieving a compact process flow.

Oluleye and Olajire (2001) examined the performance of two print media work systems in a developing economy, one privately owned and the other largely owned by government agency. It was found that privately owned organization was able to achieve continuous improvement in productivity. They (Oluleye & Olajire, 2001), concluded that the differences in the performance of both organizations were visible due to quality of work force, level of capacity utilization, technology of production employed, and skills development training schemes adopted. Ilozor, Love and Treloar (2002) found that the physical properties and design of the work place can influence organizational performance.

6 Benchmarking

The concept of benchmarking implies establishment of a criterion, standard or reference point against which to establish targets and measure progress. Generally it is a process used in management and particularly strategic management, in which organizations evaluate various aspects of their processes in relation to best practice, usually within the sector. This then allows organizations to develop plans on how to implement such best practice, usually with the motive of increasing some feature of performance. Benchmarking may be a one-off event, but is often treated as a continuous process in which organizations continually search for to challenge their practices. A company must hold strong acceptance and maintenance of a total quality measurement and benchmarking plan. Jaideep (2001) argued that researchers approve a “zero defect” and a “do it right the first time” approach towards the quality program. Quality programs should evaluate the percentage or the number of parts that diverge from the acceptable in order to prevent the reappearance of a defect.

Research Methodology

The basic objective of this study is to determine the correlation and causal relationship between TQM practices and organizational performance. A linear multiple regression model has been used to assess the contribution of independent variables in predicting organizational performance of Telecommunication companies. The following model has been developed for study:

O.P = βo+β1TMC+β2CF+β3SR+β4EIE+β5WE+β6BE+ε

Where

O.P = Organizational performance

βo = Constant of proportionality

TMC = Top management commitment

CF = Customer focus

SR = Supplier relationship

EIE = Employee involvement and empowerment

WE = Work environment

BE = Benchmarking

ε = Error term

Top Management Commitment

Customer Focus

Supplier Relationship

Employee Involvement and Empowerment

Organizational Performance

Work Environment

Benchmarking

BB

Six hypotheses are developed that are related to TQM practices, and their impact is measured on Organizational Performance.

H-1= There is positive relationship between top management commitment and organizational performance.

H-2= There is a positive relationship between customer focus and organizational performance.

H-3= There is a positive relationship between supplier relationship and organizational performance.

H-4= There is a positive relationship between employee involvement and organizational performance.

H-5= There is a positive relationship between work environment and organizational performance.

H-6= There is a positive relationship between benchmarking and organizational performance.

Research design and analysis techniques.

The sampling frame in this study was five major telecommunication companies with 99% of cellular market share chosen for analysis. All employees of these five major telecommunication companies in Pakistan were taken into consideration. Unit of analysis was the managers, assistant managers, executives and officers at all levels in telecommunication companies. Primary data was collected through self-administered questionnaire and scale of measurement is Likert scale. Questionnaire was got filled form managers, executives and officers of telecommunication companies. Response rate was 79% as 250 questionnaires were floated in three major cities and 198 questionnaires were got back.

Questionnaire used in this study has been adapted from the one used in the study of (Malik, et al, 2010). Section A of questionnaire is related to general information about telecommunication company, section B is related to TQM practices and outcomes of these practices in which 18 questions were related to TQM practices. These were measured on Likert scale having range of five points. A score of five means that the respondent strongly agrees three is proper implemented that specific TQM practice, a score of three means that the respondent is indifferent and a score of one means that the respondent strongly disagrees. A total of ten questions relating to performance of implementing TQM were measured on the Likert scale of five points. A score of five means that the respondent agrees there are great improvements from TQM adoption, a score of three means indifference and a score of one means that the respondent agrees there are great debasements from TQM adoption.

Data analysis has been done in three stages. SPSS has been used to analyze the data. In the first stage, reliability of the data has been checked by applying Cronbach’s Alpha which measures internal stability or average correlation of items in a survey instrument to determine its reliability. In second stage Pearson correlation analysis has been applied to assess the strength of relationship between dependant and independent variables. In third stage multiple regression analysis is applied to check the impact of independent variables on the dependent variable.

Research Findings

Reliability analysis

The scale was tested for reliability by using Cronbach’s Alpha. Table-1 illustrates test results. The overall values of Cronbach’s alpha for independent variables are above 0.65 which means that the constructs were reliable to measure the performance. Whereas alpha value of dependent variable ‘Performance’ is 0.846 which is also in the acceptable range and means that individual constructs were reliable to measure the parameters of performance.

Table-1 Reliability Analysis

Variable No. of Alpha Reliability

Items Coefficient

Top management commitment 3 0.684

Customer focus 3 0.787

Supplier relationship 3 0.740

Employee involvement and

Empowerment 3 0.657

Work environment 3 0.794

Benchmarking 3 0.850

Performance (dependant variable) 10 0.846

Descriptive analysis

In demographic analysis of the data it was found that all the telecommunication companies implemented TQM in all of the departments. Major response was given by officers and executives, having percentages of 36.4% and 34.8% respectively, while only 18% of managers responded. Maximum employees were of 16 years of education which constitute 47% of total respondents, while only 10% were of above 18 years of education. Major share in giving response was taken from Islamabad i.e. 47%, while Faisalabad and Lahore contribute 27% and 26% respectively. Out of total respondents 77% were male and 23% were female, and out of all respondents 70% were married and 30% were unmarried

Correlation analysis

Correlation provides answer to three fundamental questions about two variables or two sets of data in a research. First it tells whether there is any relationship between two variables and if so, what is the direction of relationship and afterward, the magnitude of the relationship (Malik, Iqbal, Shaukat and Yong, 2010).

Table 2 Correlation Matrix

OP

TMC

SR

CF

EIE

WE

BM

OP

TMC

.481**

SR

.482**

.447**

CF

.602**

.399**

.250**

EIE

.713**

.296**

.155*

.313**

WE

.660**

.311**

.343**

.295**

.697**

BM

.520**

.379**

.396**

.456**

.169*

.315**

**Correlation at significant level at 0.001

* Correlation at significant level at 0.05

Value of the correlation coefficient (r) of dependent variable i.e., performance (OP) with independent variable employee involvement and empowerment is 0.713 which means that both are positively correlated. In the same manner a positive relationship has been found between performance and customer focus, and work environment in which value of correlation coefficient is 0.602 and 0.660 respectively. There is a weak positive correlation between top management commitment (TMC), and supplier relation (SR) with performance (OP).

Regression analysis

Regression is a broad term for all methods attempting to fit a model to observed data in order to quantify the relationship between two groups of variables. The fitted model may then be used either to just describe the relationship between the two groups of variables, or to forecast new values. In regression analysis, the relationship between independent and dependent variables should be linear. It means that the mean response scores at each value of the predictor variable should fall on a straight line (Malik, et al, 2010).

Results of regression equation have been tabulated in the following tables.

Table 3 Model Summary

Model

R

R Square

Adjusted R Square

Std. Error of the Estimate

1

.889a

.791

.784

.27346

a. Predictors: (Constant), BM, EIE, SR, CF, TMC, WE

The model summary table shows the results of entering six independent variables (predictors) against performance and R (0.889) is the correlation of the six independent variables with the dependent variable, after taking into consideration all the inter-correlations among the six independent variables. The above model shows value of R-square as 0.791 which means 79% variance in performance is explained by these six independent variables and substantiates our hypothesis and model.

In present study, six hypotheses were developed regarding the positive relationship between TQM practices and organizational performance of telecommunication sector. Table 4 shows the value of the best-coefficients of these predictor variables. The estimated regression equation is as under:

OP = -.089+0.031TMC+.190CF+.119SR+.350EIE+.071WE+.140BM+ ε

The value of beta-coefficients of employees’ involvement and empowerment is significant which substantiate our hypothesis regarding this variable whereas the values of beta-coefficients of customer focus, supplier relationship and benchmarking also show significant results and we can infer that the estimates of column B can be considered as true except two variables i.e., top management commitment and work environment where values of beta-coefficient are not significant proving these estimates unreliable and less contributable towards measurement of organizational performance as compared to other independent variables.

Table 4 Coefficients

Model

Unstandardized Coefficients

Standardized Coefficients

t

Sig.

B

Std. Error

Beta

1

(Constant)

-.089

.155

-.573

.568

TMC

.031

.041

.031

.761

.447

CF

.190

.028

.269

6.794

.000

SR

.199

.036

.218

5.488

.000

EIE

.350

.035

.486

10.090

.000

WE

.071

.036

.099

1.991

.048

BM

.140

.030

.186

4.606

.000

a. Dependent Variable: OP

Table 5 shows results of one-way ANOVA. Here all results regarding differences in performance are significant at 0.0001 level. This implies that there is a positive impact on performance if TQM practices are implemented in an organization.

Table 5 One-Way ANOVA

F-ratio Sig.

Top management commitment 08.919 0.000

Customer focus 22.47 0.000

Supplier relationship 17.756 0.000

Employee involvement and empowermen