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Quality strategy and TQM policies: empirical evidence.

Quality Strategy Models

The traditional quality model stipulates an economically optimized level of quality. This model proposes that the total cost of production increases as prevention and appraisal costs to reduce defects rise. Conversely, as inspection and appraisal costs drop the number of defects increases causing quality to decrease (Evans and Lindsay 1989, p. 32). Figure 1 represents this traditional view that quality is costly. The TQM model stipulates that high quality, in fact ever increasing levels of quality, can be obtained while reducing inspection and appraisal costs (Crosby 1978, Deming 1986). W. Edwards Deming proposes that highly developed quality control practices lead to zero or near-zero inspection, appraisal, rework or scrap costs associated with the EQL-AQL model of quality (1986).

The TQM model proposes that high quality products and services lead to increased profitability, market share, employee and customer satisfaction and competitiveness (Crosby 1978, Deming 1986, Juran 1988). High quality has been linked with survival of corporations faced with strong global competitors (Garvin 1988). Numerous anecdotes suggest a correlation between high quality and competitive success in both for profit and not-for-profit firms.

The TQM model is a systematic approach to improving quality based on: team-based work groups, personal responsibility for group success, control of the work process owned by the individual, quality desired over quantity, motivation, and facilitated communication between groups and functional areas. The model is egalitarian in nature with suggestions for improvement sought from every level of the organization and motivation supplied through recognition/award programs and profit sharing. Perhaps the key facet of the TQM model is training employees in a scientific approach to fact-based problem solving using specific tools like: statistical process control charts, cause and effect analysis diagrams, process flow charts, Pareto charts, orthogonal arrays in design, team-building and group dynamics skills, etc. Firms using these tools and concepts to develop employee skills and eliminate root causes of defects are categorized as TQM, while firms using mass inspection to detect and halt shipment of defective products are AQL firms.

Quality as a Strategic Advantage

Much has been written about why it is necessary to improve quality (Deming 1986, Aaker 1988, GAO 1991). The argument is simplistic, counterintuitive (Deming 1986) and difficult to deny or prove. A Quality-based Strategy for Competitive Advantage (QSA) focuses strategic resources on continuous quality improvement (kaizen). The Deming Chain Reaction (Scholtes 1988) or the Spiral of Progress (Juran 1988) justifies expenditures on kaizen that the ECL model can not:

increase quality |right arrow~ decrease costs |right arrow~ improve productivity |right arrow~ capture market share |right arrow~ stay in business |right arrow~ provide more jobs |right arrow~ improve products |right arrow~ continuously repeated

Quality creates not only a price/value advantage over competitors but also enables the firm to charge a higher per/unit sale price through differentiation (Porter 1980, 1986). A strategy of high quality leads to a sustainable competitive advantage (Porter 1980, Buzzell 1982). Firms competing on quality pursue an operational strategy that controls quality of the product/service and seeks continuous improvement. With the QSA argument executives seek a sustainable competitive advantage by developing competence in continuous improvement (Reitsperger 1986). Deming (1986), Juran (1989), Feigenbaum (1956) and Crosby (1990) suggest focusing on improving quality to gain this competence rather than on traditional foci of success: market share, revenues, efficiency, share price or profits. The QSA argument suggests that increased market share, profits and improved competitive position are by-products of competence in kaizen.

Hypotheses

While the TQM model is instrumental to the development of QSA, a high incidence of program failure leads to questions regarding the validity of the model. Speculation on the causes of high failure rates range from invalid model assumptions such as workers unwillingness to adopt productivity improvements that result in lost jobs, TQM's violation of labor statutes (Grazier 1992), consumer's price inelasticity for quality, to managerial failures such as adopting a faulty philosophy and poor implementation. Inadequate implementation of TQM policies through management control systems has been empirically documented (Daniel and Reitsperger 1990). Building on their research, this paper questions whether poor implementation causes TQM and QSA abandonment. Specifically, the paper tests two hypothesis:

H(1) American firms utilize/embrace QSA as a primary strategic objective.

H(2) The implementation of the QSA strategy is supported by TQM policies.

If U.S. firms embrace QSA and yet fail to implement TQM then U.S. executives may want to reevaluate their commitment to quality as a strategic advantage.

It is important to distinguish between the quality philosophy and its implementation. By using four working hypotheses, WH (1-4), to show perceptions on the strategic intent of the quality philosophy, and four more, WH (5-8), to show implementation views, this paper provides evidence on both strategic orientation and implementation of QSA through TQM. The working hypotheses are depicted in Tables 1 and 2. This paper also examines executives' involvement with the implementation of specific TQM policies to actuate the strategy. Graphs 1-3 show evidence of TQM policy implementation.

Research Methodology and Sample

To test the hypotheses, a multi-industry sample of service and manufacturing organizations was used. The data was generated by interviews with 40 U.S. executives at 31 organizations. Questionnaires were sent prior to these interviews, which averaged 2 hours in length and occurred during October and November of 1990. The paper uses Likert scale questions to measure strategic intent and implementation consistent with the TQM model. The study was designed to be easily understood for consistency in recognizing the investigated paradigms. The researcher distinguished between TQM and AQL organizations based on whether firms relied primarily on building defect prevention skills and techniques (TQM) or applied defective detection programs (AQL).

Nine firms had major manufacturing operations. Every firm had significant marketing, finance and service production operations. Firms sales revenue ranged from $45 million to $2.7 billion. Each organization is either a major market force in the industry or superior in some facet of its operation. Some firms competed directly with each other. Manufacturing associated industries were: petroleum refining, electricity generation, cement production, clothing manufacture, sugar cane production, chemical production, fertilizer production, fruit and beverage canning, and light steel production. Service associated industries were: petroleum marketing, air transportation, education, hotels, banking, insurance, clothing retailing, ocean cargo transport, telecommunications, retailing packaged goods, auto retailing and rentals, and wholesale pharmaceutical sales.

Findings

Quality as a Strategic Advantage (QSA)

The study shows that most executives see quality either as a very, or most important strategic objective |Table 1, WH(1)~. Similarly, quality was seen as a strategic advantage by most executives. Only two executives stated that quality was not most, more or equal in importance to other objectives. Both managed a legalized monopoly. Executives showed strong beliefs that their firm's were better than competitors on quality of both services and goods |Table 1, WH(2) and WH(3)~. Contrary to the previous findings shareholders were perceived to be divided in their demand for high quality products |Table 4, WH(4)~. The data in Table 1 supports H(1) proposing that QSA is the primary, strategic intent of U.S. executives.

While high quality was the most frequently suggested primary strategic objective of most firms, some executives showed contempt for the QSA approach viewing it as the latest fad. A few comments illustrate this minority view:

-- "These Quality programs imply that you are satisfying the customer, our experience shows that the customer is more concerned about price."

TABULAR DATA OMITTED

-- "Quality improvement creates too many disillusioned parties, you begin giving the employees the impression that this will make their job secure."

-- "... quality is just the latest buzzword, it will go away as soon as someone has a bad experience with a program."

Overall, however, we find that most firms operate under the assumption that quality is a competitive dimension to be pursued. Thus H(1), suggesting that QSA finds wide support in the U.S., is supported by the data in Table 1. Having found strong support for H(1) in the data, the next section deals with H(2) the implementation of QSA through TQM policies.

QSA Implementation through TQM Policies

Table 2 shows the implementation of QSA strategic intent through TQM policies. TQM implementation is measured along four themes: communication of objectives and needs of the firm WH(5); support for new ideas and innovators WH(6); support for cross-functional teams WH(7); and financial support for training WH(8). Inconsistency between quality philosophy and implementation shows executives suboptimizing strategic intent. This is seen in infrequent communication of quality objectives, weak or no support for innovation and developing cross-functional teams, and insufficient training for employees in job duties and quality skills. While most executives indicated adherence to a QSA strategy, the gap between strategic intent and behavior shows strategic suboptimization.

Comparing the totals from responses 4 and 5 (very and most important or consistent) from WH(1) (25.0 + 57.5 = 82.5%) and WH(5) (27.5 + 37.5 = 65.0%) TABULAR DATA OMITTED points to a specific inconsistency where executives state their strategic intent and yet fail to communicate this to employees. Executives who suboptimize strategic intent are, in the vernacular, "not walking the talk." The following graphs show specific examples of how TQM firms and AQL firms suboptimize the stated strategic intent by failing to implement the paradigm's parameters.

AQL or TQM?

The following graphs present a dichotomy of managerial paradigms: TQM or AQL. TQM firms were identified by a managerial approach to quality assurance that focussed on preventing defects. AQL firms were identified by a managerial approach to quality assurance that focussed on mass inspections, rework, and scrapping defective goods and services. Graph 1 shows executives' stated preference for high quality (DEFECT-FREE BIAS) or on-time product delivery (DELIVERY BIAS). While a TQM policy will state that on-time delivery is important, a key feature of TQM is to insist on delivering products with zero-defects. Executives at nearly every TQM firm would delay delivery instead of shipping defective product, whereas at AQL firms two-thirds opted for delivery. These executives stipulated that profit, survival, beating competitors and improving shareholder value were more important than defect-free products. Executives' plans (and budgeted resources) for process and quality improvement (KAIZEN INITIATIVE) shows their commitment to future implementation of QSA. Graph 1 shows a similar contrast between TQM and AQL firms in both defect-free/delivery bias and future plans for improvement. This graph shows stipulated policies towards quality improvement. Graphs 2 and 3 show implementation of policies.

Communicating Corporate Objectives

How frequently and to whom executive's communicate the firm's strategic objectives is important to implementation of the TQM model. Frequent and regular communication develops the "all on one team" atmosphere or attitude critical to teamwork and TQM (Scholtes 1988). The evidence presented in Table 2 shows that most executives saw themselves communicating sufficiently, regularly and often (see WH(5) responses of 3, 4, 5 = 85%). Yet, Graph 2 indicates that part of the problem in communicating the firm's strategic objectives may result from inadequate definitions or lack of common terminology. Firms used three types of definitions to develop a common quality vocabulary:

1. Corporate-wide as stated in the mission statement.

2. Quality characteristics for the product/service.

3. Specific characteristics defining defective products.

Only 58% of TQM, and none of the AQL, firms had corporate-wide quality definitions. Less than half of either TQM or AQL firms identified quality characteristic measures or developed defective product definitions. This may be a common problem because of multiple perspectives and types of quality (Garvin 1988). Interestingly, AQL firms identified quality characteristics and defined defective products with similar frequency as TQM firms. Thus, lacking clear quality definitions in TQM firms may prevent proper QSA implementation. This finding provides additional evidence that basic policy measures to implement TQM are lacking. A common Quality vocabulary is essential to TQM implementation. The same is true for employee involvement, which is one of the basic premises of TQM implementation.

Employee Involvement

Employee involvement and team based work groups depend on executives sharing the opportunity to resolve problems, set schedules and take responsibility for daily operations and work process development. WH(7) suggests that executives somewhat supported cross-functional teams which are integral to employee involvement. Graph 3 depicts the proportion of employee involvement (EI) as a quality policy, the percentage of front-line workers involved in planning and the proportion of workers given responsibility for quality. While it is evident that a large proportion of TQM firms show EI, employees are much less involved in setting work schedules, in planning, and in taking responsibility for quality. This provides further evidence that executives are not succeeding in implementing strategic intent through appropriate policy implementation.

Summarizing the findings:

First, there is a strong strategic intent to promote quality as a strategic advantage through TQM (H1 confirmed). Second, there is a lack of implementation of TQM through appropriate communication and TQM specific policy measures (H2 rejected).

Conclusion

Executives in the U.S. share a strong belief that continuous quality improvement is an important strategic objective. Yet, with all the literature, seminars, consultants, electronic bulletin boards, and anecdotal models for improving quality, many of these firms are failing to address and implement a proper TQM methodology. Specifically, corporate objectives for quality improvement were not clearly communicated to all levels of employees. Weak quality definitions derived from motivational, feel-good, training further exasperated communication difficulties and quality and defect definitions were absent. These findings indicate that many U.S. executives have not learned the lessons provided by evidence from early Japanese transplants in the west (Reitsperger 1986).

Employee involvement in planning, decision-making and corporate strategy also were limited in both TQM and AQL firms. Responsibility for quality lay with executives, managers and quality departments too often. Feedback to employees on setting and measuring quality objectives, and developing plans for improvement were frequently lacking. When Human Resources departments administered quality programs, rather than operations or production people, turf wars often bobbled programs.

While recognizing the importance of QSA, large proportions of executives failed to actuate the TQM model in specific, critical areas. Failures of QSA and TQM programs in the U.S. seem to result from implementation and non-committal executives rather than use of a faulty operating model (TQM). While others have shown that consultants deliver poorly conceived TQM programs (Glover 1992) the evidence suggests that executives are suboptimizing QSA with specific implementation failures in communication, supporting innovation, sharing responsibility, and developing employees' skills.

What did firms do right? Some increased training for employees. However, little retraining or continuous skill building was evident suggesting that executives thought training was a singular event for employees and that with books and videotapes available, people would read, watch and become experts. Some firms shared responsibilities for quality planning and decision making. These firms created mission statements with quality and customer satisfaction as pieces of the quality structure. Some firms started measuring things like customer satisfaction and specific quality characteristics. But these firms represented less than one-third of the sample.

Considering the proliferation of quality experts in the last ten years one must conclude there is great need for quality improvement and training. More research needs to be done on how to introduce QSA effectively and how to equip employees with useful techniques/skills.

This paper shows the consistencies between treating continuous quality improvement as a strategic objective and the actions/behaviors that lead to improved quality products and services. The inconsistencies shown point to failed execution rather than flawed assumptions of QSA or TQM.

References

Aaker, D., Strategic Marketing Management. New York: MacMillan, (1991), pp. 210-211.

Buzzell, R., "Product Quality," Plmsletter 16 #4, Cambridge 1982.

Crosby, P., Quality is Free. New York: McGraw-Hill. (1978).

Crosby, P., Leading. New York: McGraw-Hill (1990).

Daniel, S. and W.D. Reitsperger (1991) "Management Control Systems for J.I.T.: An Empirical Comparison of Japan and the U.S.," Journal of International Business Studies, 21(4), pp. 603-615.

Daniel, S. and W.D. Reitsperger, "Linking Quality Strategy with Management Control Systems: Empirical Evidence from Japanese Industry," Accounting, Organizations and Society, 16 (1991), pp. 601-618.

DeGeorge, G. and K. Hammonds, "Where Did They Go Wrong," Business Week, October, 25 (1991), pp. 34-38.

Deming, W., Out of the Crisis. Cambridge: MIT press (1986).

Evans, J. and W. Lindsay, The Management and Control of Quality. St. Paul: West publishing, (1989), pp. 32.

Feigenbaum, A., "Total Quality Control," Harvard Business Review, 34(6), (1956), pp. 93-101.

Garvin, D., Managing Quality. New York: Free Press (1988).

General Accounting Office (GAO) Report, "Management Practices: US Companies Improve Performance Through Total Quality Efforts," Washington, DC. GAO/NSIAD-91-190, May 1991, pp. 18-28.

Glover, G., "Total Quality Management Guidelines for Leaders," TQM Executive Series, Pacific Asia Quality Foundation, Volume 1, (1992), pp. 21-30.

Grazier, P. "Legality of EI Teams in Question," EI Newsletter, April, (1992), p. 2.

Juran, J., Juran on Planning for Quality. New York: Free Press, (1988).

Juran, J., Juran on Leadership for Quality. New York: Free Press, (1989).

Porter, M., Competitive Strategy. New York: Free Press, (1980).

Porter, M., Competitive Advantage. New York: Free Press, (1986).

Reitsperger, W. D., "Japanese Management: Coping with British Industrial Relations," Journal of Management Studies, 23/1 January, (1986), pp. 80-82.

Scholtes, P., The Team Handbook. Madison: Joiner Associates, (1988), pp. 1-19.

Author

Charles A. Barclay, Lecturer, University of Hawaii, and Consultant with QMS Partners Honolulu, HI, U.S.A.
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Title Annotation:Special Issue: Strategic Quality Management; Total Quality Management
Author:Barclay, Charles A.
Publication:Management International Review
Date:Feb 1, 1993
Words:2891
Previous Article:Manufacturing performance reporting for continuous quality improvement.
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