2.3 Development of hypotheses
2.3.3 Effectiveness of the TQM model
Research question 4 concentrates on studying the consequences of innovation implementation, when it considers what the effects of TQM are on productivity, profitability and customer satisfaction. The effects the timing of the adoption and the depth of the implementation have on the performance measures are studied. The utilized performance measures include objective data, such as profitability, productivity and customer satisfaction data.
According to Hides et al. (2000), the experiences of adopting a TQM philosophy have been shown to be beneficial to any business. Still, there are also many opposite results and opinions on the effects of TQM (Ford and Evans, 2006), and quite many researchers present that TQM alone cannot improve the results: for example, the study of Kannan et al. (1999) highlights the fact that quality initiatives alone cannot improve profitability and market share, on the contrary they write that the belief that TQM programs automatically lead to improved financial performance fails to recognize other essential elements (Kannan et al., 1999). Even though TQM can have a positive effect on operational and business results, there is no guarantee that it will definitely and alone directly produce superior profitability, since other factors may be present (Zairi et al., 1994; Terziovski and Samson, 1999; Montes et al., 2003). It must be all the business excellence enablers together that contribute collectively to the improvements (Sun, 1999). According to Zairi et al. (1994), TQM is
Timing of the adoption
- Start year of self-assessment (SA)
Organizational Characteristics
- Leadership - Centralization - Formalization - Interconnectedness - Size
Environment Characteristics
- Cultural aspects (countries)
Depth of the implementation
- Initial level of SA points - Current level of SA points - Trend of SA points - Consistency of development H5
H7 H6
H5
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60 only a licence to practice, and Montes et al. (2003) conclude that TQM has an impact on the way organization members apply their knowledge in the organization, and therefore it affects organizational performance. Then on the other hand, advantages such as cost savings and improved productivity and profitability create the leading results for any firm that wants to succeed (Brah et al., 2002). Consequently, research exists showing that quality activities, particularly TQM, have beneficial effects on business performance (Mann and Kehoe, 1994; Pegels, 1994; Terziovski et al., 1999; Joiner, 2007).
Handfield et al. (1998) present that the positive linkage between TQM and financial performance occurs through two processes: first, improved internal performance within the organization leads to less waste, improved efficiency, and ultimately higher return on assets, and second, improved customer satisfaction levels generate increased word of mouth, loyalty, brand value, and so on, leading to higher sales and market share (Handfield et al., 1998). Sun (2000) also points out the relevance of the customer satisfaction perspective in creating business performance. According to the study of Yang (2006), TQM along with human resource management significantly affected quality performance, especially with regard to customer and employee satisfaction. According to Vora (2002), customer and employee satisfaction and streamlined processes together produce improved operational and financial results which will eventually lead to business excellence. The results of Lakhal et al. (2006) reveal positive relationships between quality management practices and organizational performance.
Mann and Kehoe (1994) have shown that all the quality activities investigated, particularly TQM, had a positive effect on the business performance (Mann and Kehoe, 1994). In the same year Pegels (1994) wrote that total quality management is not just concerned with quality, because productivity, timeliness, flexibility and profitability are also important performance measures in a TQM program. Shenawy et al. (2007) used the random effect meta-analysis for studying the TQM’s effect. Their results suggested a model for TQM that incorporated five major components: top management commitment and leadership, teamwork, culture, training and education, and process efficiency. According to their findings, each of these components led to competitive advantage (Shenawy et al., 2007). When effectively implemented, TQM implementations significantly improve financial performance (Hendricks and Singhal, 2000).
As the advantage of using the quality award criteria and their systematic approaches has also been in the interest of researchers, the success of the award winners has been the target of many studies.
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61 The research work of Jacob et al. (2004) examined how Baldrige Award winners perform with respect to several accounting and financial metrics. Their results showed that the award winners performed significantly better than the industry medians in terms of profitability and assets utilization, and according to their results, the winning firms stand out as performance leaders in their industries (Jacob et al., 2004). They got the results by investigating several accounting performance metrics and the firm value of 18 Baldrige Award winners using both raw and industry adjusted measures.
On the contrary, the study of Hansson and Eriksson (2002) argues that during the implementation period, the award recipients do not necessarily perform better than their competitors and the branch indices; but on the other hand, the award recipients perform better during the post implementation period. Eriksson and Hansson (2003) have the same findings which indicate that the financial performance develops more advantageous for companies that have successfully implemented TQM, than their branch indices and stated competitors. Wisner and Eakins (1994) made a performance assessment of the US Baldrige Quality Award Winners and paid special attention to financial characteristics. While their study revealed a strong positive relationship between quality improvement programs and the competitive attributes of the Baldrige Award winners, there is no guarantee that these improvements will result in continual financial success (Wisner and Eakins, 1994).
Quality improvement programs should not be viewed as a trivial solution for companies, but rather a means with which to build and maintain a strong competitive foundation that will ensure the opportunity for financial success (Wisner and Eakins, 1994). Therefore, generally speaking, the implementation of assessment criteria and quality management systems helps organizations to keep up with the challenges they face (Wisner and Eakins, 1994; Da Rosa et al., 2001).
After starting the implementation, however, the results do not appear immediately. Firms wanting to implement TQM effectively must have patience. It may take a rather long time to implement TQM as it requires major organizational changes in the culture and employee mindset; that is why the benefits will also be realized in the long run (Hendricks and Singhal, 2000). The findings of Agus and Abdullah (2000) moreover indicate that the length of TQM implementation has a significant impact on the companies’ financial performance, because the long-term TQM adopters are found to outperform short-term adopters. The results of the study of Sun (1999) presented that the number of years of practising quality management is significantly related to both the implementation of TQM
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62 enablers and the results achieved from TQM as well as ISO certification. The longer a company has practiced TQM, the better will its results be. The implementation of TQM must be seen as a long period of continuous improvement, and not as a fast turnkey project. The study of Sun (1999) also suggests that there is a learning effect in TQM implementation, and companies should not be frustrated at the slow showing of benefits at the early stages of TQM implementation. The main conclusion of the study is that in order to be effective, the quality management program must be total or complete (Sun, 1999).
The relevant literature on the effects of the TQM on performance are collected below in Table 3 which shows that most of the studies have been cross-sectional rather than longitudinal ones and they have mainly been conducted on the national rather than the international level. The used performance measures have been both subjective and objective.
Table 3: The studies on the effects of TQM on performance.
TQM improves financial performance To study the impact of TQM on financial
performance Heindricks, K.
B., Singhal, V. R. 2000
TQM tends to have mixed results when covaried for company size and industry type Test the strength of the relationships between
TQM practice and organizational performance, to evaluate the results of three empirical studies conducted 1991, 1993, 1996
Terziovski, M., Samson, D. 1999
Some of the TQM practices contribute to the increase of customer satisfaction and business performance
To clarify the components of TQM and their impact on performance increases the chance of success in a TQM program
o
&
s n To explore the role of measurements in a TQM
program, how much the rate of success improves when the measures are used
Capon, N., Kaye, M.M., Wood., M.
1995
TQM has beneficial effects on business performance o
&
s n To describe the prime effects of TQM and other
quality activities on business performance Mann, R.,
Kehoe, D.
1994
Mgrs use the TQM rhetoric to develop their TQM. This develops a too optimistic view of TQM.
s n To clarify the relationship between technical
practices and rhetoric of TQM To study the impact of TQM on financial
performance Heindricks, K.
B., Singhal, V. R. 2000
TQM tends to have mixed results when covaried for company size and industry type Test the strength of the relationships between
TQM practice and organizational performance, to evaluate the results of three empirical studies conducted 1991, 1993, 1996
Terziovski, M., Samson, D. 1999
Some of the TQM practices contribute to the increase of customer satisfaction and business performance
To clarify the components of TQM and their impact on performance increases the chance of success in a TQM program
o
&
s n To explore the role of measurements in a TQM
program, how much the rate of success improves when the measures are used
Capon, N., Kaye, M.M., Wood., M.
1995
TQM has beneficial effects on business performance o
&
s n To describe the prime effects of TQM and other
quality activities on business performance Mann, R.,
Kehoe, D.
1994
Mgrs use the TQM rhetoric to develop their TQM. This develops a too optimistic view of TQM.
s n To clarify the relationship between technical
practices and rhetoric of TQM
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1) Sample size and type (data collected), 2) Nature of the study: longitudinal (l)/cross-sectional (c), 3) Nature of the data: national (n)/international (i), 4) Performance measurement: objective (o)/subjective (s)
As the earlier studies on TQM implementation and usefulness of the TQM procedures show, there are opinions for and against its effects on the performance of the company. Based on these earlier writings, it is proposed that the length of the implementation time, for example, the timing of the adoption (experience) and the depth of the implementation of the TQM model does have an effect on the performance of the company. Based on this argument, the two hypotheses are presented as follows:
H8: The timing of the adoption of TQM has a positive effect on performance.
H9: The depth of TQM implementation has a positive effect on performance.
s
There is a strong positive relationship between TQM practices and To explore the relationship between the extent of TQM implementation and organization performance
Joiner, T. A.
2007
The used components lead to competitive advantage i
c Meta-analysis of 51 studies To integrate findings of empirical studies into
effect of TQM on competitive advantage Shenawy, E.
E., Baker, T., Lemak, D.J.
2007
There is a positive relationship between quality management To explore the relationship between quality
management practices and their impact on performance
Lakhal, L., Pasin, F., Limam, M.
2006
There is a statistical correlation between the adoption of the values of TQM and successful quality
To study the effects of the different models and tool of quality management
Largosen, Y., Largosen, S., 2005
There is a significant correlation between the assessment scores and actual scores received from SQA (Singapore Quality Award To use the self-assessment tool to assess quality
performance in various functions of the organizations To determine the success factors of a quality
program Brah, S. A.,
Tee, S. S. L., Rao, B. M.
2002
TQM content must fit the business strategy
-c To provide a framework for studying the
relationship between TQM and organizational performance.
There is a strong positive relationship between TQM practices and To explore the relationship between the extent of TQM implementation and organization performance
Joiner, T. A.
2007
The used components lead to competitive advantage i
c Meta-analysis of 51 studies To integrate findings of empirical studies into
effect of TQM on competitive advantage Shenawy, E.
E., Baker, T., Lemak, D.J.
2007
There is a positive relationship between quality management To explore the relationship between quality
management practices and their impact on performance
Lakhal, L., Pasin, F., Limam, M.
2006
There is a statistical correlation between the adoption of the values of TQM and successful quality
To study the effects of the different models and tool of quality management
Largosen, Y., Largosen, S., 2005
There is a significant correlation between the assessment scores and actual scores received from SQA (Singapore Quality Award To use the self-assessment tool to assess quality
performance in various functions of the organizations To determine the success factors of a quality
program Brah, S. A.,
Tee, S. S. L., Rao, B. M.
2002
TQM content must fit the business strategy
-c To provide a framework for studying the
relationship between TQM and organizational performance.
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Figure 6 presents the summary of the hypotheses H1–H9.
Figure 6: Summary of the hypotheses H1–H9.
From the presented hypotheses, hypotheses H1–H4 were connected with Research question 2, considering what factors explain individuals’ perceptions of TQM and change agent behavior, and related to individual change agency and perceived effectiveness of the innovation. Hypotheses H5–
H7 pertaining to Research question 3, exploring how to measure the diffusion of an administrative innovation within organization and what the determinants of the diffusion are, were related to diffusion within the global organization. Research question 4 about the effects of TQM on productivity, profitability and customer satisfaction concentrated on the consequences and effectiveness of the implementation and was studied with hypotheses H8 and H9.
Timing of the - Initial level of SA points - Current level of SA points - Trend of SA points
Effectiveness of the TQM model (continuous improvement process)
65 3 RESEARCH METHODOLOGY