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Strategic quality management and financial performance indicators.


This paper seeks to explore particular aspects of a study initially discussed in an earlier paper[1], which examined the integration of strategy and continuous improvement in Australian firms. In particular, the paper combines both quality and strategy issues considered in the study and examines the possible impact of these issues on business performance.

Five key areas identified from the literature and outlined in the previous paper include: the development of a continuous improvement culture through vision and mission (strategic integration); team-based planning and deployment throughout multi-functional levels (involvement/deployment); customer-focused strategic planning (customer focus planning); measurement and benchmarking for strategic advantage (measurement and benchmarking); and level of priority given to continuous quality improvement and innovation (innovation and continuous improvement (CI)).

The selection of these areas was based partly on the literature imperatives that emphasize the necessity to link quality and strategic advantage (QSA) mainly emanating from the strategic intent literature - with total quality management (TQM). There is a strong perception that QSA has a direct link with increased business performance but the latter is difficult to achieve without the development and implementation of a TQM philosophy. It should be recognized from the outset that although most experts in the subject recognize and foresee that improved performance is the most likely outcome, empirical studies are yet to validate this. Moreover, it should be noted, from this study and others, that there is a definite (and variable) time lag between TQM/QSA implementation and its impact on business performance measures. Through the examination of both historical (four to five years ago) and current aspects of strategic quality management, this work has attempted partially to offset this time lag.


Strategic quality management

Porter[2] has described the development of competitive strategy as "a broad formula for how a business is going to compete, what its goals should be, and what policies will be needed to carry out those goals". Many authors (see for example [3-5]) have stressed the importance of incorporating quality management planning into the strategic planning process. In 1992, the focus for category 3 of the US-based Malcolm Baldrige National Quality Award shifted from the strategic quality plan to the strategic business plan. This was necessary following recognition that organizations winning the Baldrige Award completely integrate quality planning into their strategic business planning. The following attributes have been observed[6] in high performing (award-winning) firms who have successfully integrated these processes:

* TQM/CI implementation is seen as a means to achieve improved customer satisfaction and not an end in itself.

* Quality strategies must be tied to broad business strategies and should be part of the organization's mission/vision statements.

* Goals, priorities and targets must be clear and unambiguous to all employees. They must be deployed throughout the organization while retaining alignment to organization-wide improvement strategies.

* Goals must be quantifiable and the measurement/benchmarking process must provide clear indications of progress towards the goal. These goals must be set aggressively in recognition that competitors are also rapidly improving.

* Planning must incorporate customer focus as a central element and firms must recognize different segments in their current and potential customer base.

* Competitor benchmarking in the area of customer satisfaction is a continuing activity and the information is fed into the strategy and goal-setting process.

* Employees at many levels participate in the planning process.

* Data collection and analysis relating to key internal processes is a fundamental part of routine work. Results of such measurement are used to produce revised goals and targets.

For the purposes of this study, the above points were summarized into five separate indicators of successful QSA/TQM integration and survey questions relating to each QSA/TQM indicator were grouped together. While not specifically included in the factors listed by Marquardt[6], the innovation aspects of the fifth indicator were included in response to recent research such as that posited by Voss[7], which suggests that an organization's ability to prepare itself strategically for innovation is a critical factor in long-term success. Response analysis and correlations with financial indicators were then undertaken to assess grouped responses. Full details of the questions and the response format are contained in the Appendices. Table I (see p. 440) shows the questions allocated to each of the five indicators.

The five indicators selected are:

(1) Strategic integration. Integration of quality plans into strategic business plans and recognition of this in the organization's mission/vision statement(s).

(2) Deployment/involvement. Successful involvement of employee teams at various levels in the strategic planning process and effective deployment of strategies and goals throughout the organization.

(3) Customer-focused planning Goals and targets are consistent with the overall aim of improved customer satisfaction. Measurement of customer satisfaction indicators is linked to strategic planning.

(4) Measurement and benchmarking. Benchmarking processes are an accepted part of the organization's activities (including the planning and goal-setting processes), and involve performance aspects beyond the standard financial measures.

(5) Innovation and CI. Both innovation and continuous improvement have strategic importance and are included in the organization's broad objectives.

Validity of the selected indicators for strategic quality management

The first key indicator, strategic integration, is a vital function for improved business performance. In communicating corporate objectives, corporate management need to show their commitment to the total philosophy of quality by building it into their vision and mission.

At the business level, the integration of TQM and QSA requires not merely adding aspects of TQM to existing frameworks (say, to production processes) but, rather, adopting a holistic approach. This was an early but very visible flaw examined in Skinner's work[8] which highlighted companies often adding to, but not changing, factory processes, and this is no less evident in TQM implementation.

The effect of this has been well documented as Western companies have more often disbanded so-called TQM initiatives (such as zero defects or defect-free exhortations), and returned to approaches based around the concept of acceptable quality levels. In these traditional approaches, the emphasis is more on mass inspection, rework and the scrapping of defective goods and services, and a "delivery at all costs" mentality pervades the organization. Western companies, in comparison to Japanese companies, who have been more successful in developing strategic integration, have been the losers in the TQM/QSA endeavour[9]. In a report by McKinsey[10], it was also recognized that Australian companies still require much improvement in this area.

Employee involvement through the use of quality teams is a vital function within TQM. As Barclay[11] indicates, team-based work groups depend on executives sharing the opportunity to resolve problems, set schedules and take responsibility for daily operation and work-process development. Indeed, employee involvement was one of the principal functions of the TQM philosophy espoused by Deming[12], and is now most notable in contemporary organizations employing flatter structures. Involvement of employees from a wide range of levels and functions in an organization in policy deployment and product development is also a feature of many companies successfully integrating QSA endeavours and TQM. Techniques such as Hoshin planning [13] and quality function deployment (QFD)[14] have generated considerable interest among firms seeking structured approaches to assist them in their deployment/involvement initiatives.

In moving to customer focused planning, high-performance companies are making the provision of customer value the organization's primary strategic intent[15]. In order to provide best value for their customers, managers are recognizing the importance of maintaining significant levels of interdependence. This interdependence not only extends to vendors and customers in the external environment, but also to the way in which the company views its internal relationships. Every product or job within functional areas has an internal customer. Provided all actions and requirements between internal functions are clearly linked to the requirements and expectations of the external customer, this is a powerful approach for quality improvement implementation in areas of company operation which are far removed from interaction with external customers.

In the same way that the company expects consumers to purchase only quality finished products, internal receivers of partly finished or processed goods command the same level of quality. Frequently, this will mean a redefinition of manufacturing's role and image in the organization. As Edmondson and Wheelwright[16] explain, new skills, new knowledge, and new methods for doing things will be required at all organizational levels.

The benefits of creating interdependence and strong relationships between producers' suppliers (or suppliers and customers) have been evident for some time now. In Porter's study[17], these relationships were identified as vital processes for creating horizontal linkage in the value chain as manufacturers and their suppliers, through strong communication and participation, continually add value by refining processes and innovations. When Hayes[18] observed Japanese firms, he found that the objective, as in all partnerships, was a mutually beneficial long-term relationship. What many Japanese companies refer to as "co-destiny"[18] (see also [19]).

Measurement and benchmarking activities are very much in line with QSA determinants of world's best practice. Best practice companies regard benchmarking as a vital and necessary part of sustaining competitive advantage. Specifically, benchmarking is the continuous process of measuring products, services and practices against the toughest competitors and/or recognized industry leaders[20,21].

Two aspects of benchmarking should be noted: strategic and process. Venetucci[22] defined strategic benchmarking as comparing the strategies of two or more competing or non-competing performers to determine their relative strengths and weaknesses. The most immediate benefit is to identify weaknesses and/or flaws in a strategy before implementation in order to revise and alter existing strategic choices. A comparative analysis of this type can also assist potential high performers to pinpoint critical success factors - often missed in earlier analysis - which may lead to new or special capabilities underpinning operational plans.

Differences in strategy can signal shifts in the industry cost drivers which may favour one competitor over another. Tracking competitors (even nonthreatening ones) may point to major differences in strategy and tactics. If competitors are achieving major economic gains, say through vertical integration, opportunities may emerge for the tracking company through a more flexible subcontracting strategy.

Process benchmarking measures specific processes by comparing both the cost to perform the process and the level of success with which it is executed[22]. This is generally the aspect initially adopted by companies when first engaging in benchmarking and measurement activities. Primarily, it highlights performance weaknesses and sets goals for re-engineering activities. As a basis for managerial control, it serves to emphasize how productivity innovations result from variations or adaptations of existing processes from industry to industry. Best-performing companies, and those successfully integrating their TQM/QSA initiatives, are generally involved in both strategic and process benchmarking and undertake such measurement both internally and externally.

Similarly, the level of priority given to continuous quality improvement and innovation is another key ingredient of the TQM model. Company-wide creativity is nurtured in companies exercising a high degree of TQM/QSA integration. Employees are encouraged to generate radical ideas and are rewarded for championing their cause[23]. It is no surprise that these companies have innovated not just with new products but also with the processes which shape them. These companies create a culture where continuous improvement is the norm. Continuous improvement programmes, because of the high level of process understanding and study, are often the reason why new processes are created and old ones discarded. This is in direct contrast to the marginal adjustments which characterized earlier conventional plants.

Collectively, the five indicators selected for this study form a composite of the attributes of integrated TQM/QSA initiatives which, ideally, should be reflected in productivity gains and business performance improvement.

Links between quality management and business performance indicators

In one of the more comprehensive examinations of the impact of quality on business performance, Garvin[3] found that a strong association existed between productivity (both labour and capital) and quality as well as between profitability (ROI) and quality. Garvin found that the relationships between quality and profitability were less well established because of the many other variables affecting ROI measures. Other studies (e.g. [24-27]) have found strong relationships between productivity improvement and organizational success in such factors as customer satisfaction programmes, product quality improvement, reduction in waste and strategic quality improvement.

In an extensive study of New Zealand manufacturing firms, Maani et al.[28] and Sluti et al.[29] used structural equation modelling (SEM) to test the relationships between typical measures of quality (such as scrap, rework and customer complaints), process utilization and output, manufacturing performance and overall business performance. They found strong links between quality improvements and process utilization. Links were also observed between quality factors and manufacturing performance. For overall business performance indicators, significant (although weaker) links were found between quality and return on sales (ROS) measures but links with return on assets (ROA) and market share were less significant.

Research methodology

Following a successful study into the strategic management approaches adopted in large Australian-based companies[30] the focus of this research moved to medium to large companies. While it was recognized that large Australian companies devoted considerable attention to QSA/TQM integration, it was believed that this was less true for medium-sized organizations. As recent reports (e.g. [10]) have suggested that medium-sized companies (especially manufacturers of elaborately transformed goods) provide the best opportunities for Australia to reverse its worsening international debt situation, attention was directed to Australian companies ranked from 150 to 1,000 by turnover in descending order, based on Business Review Weekly and Australian Stock Exchange listings.

Following elimination of companies mainly concerned with primary industries (mining, agriculture, fishing, etc.), 150 companies were selected to participate in the survey. A questionnaire was constructed with three sections. Section I included questions relating to strategic management. Section 2 mainly involved questions concerning strategic aspects of quality and continuous improvement. Section 3 involved questions concerning company structure.

Only section 2 (questions 22 to 38) of the questionnaire has been used for the analyses discussed here. These 17 questions measured both current and previous (four to five years ago) importance and performance, as well as the current trend in each characteristic examined. (A further five questions in this section related to Porter's value chain concept but are not discussed in this paper.) Appropriate five-point scales were used for the Importance, Performance and Trend responses for each characteristic. The structure of the response boxes was adapted from that described by Shores[13].

Appendix 1 includes a copy of the response scales used for each category and the answer box provided for each question. Appendix 2 lists the questions as presented in the questionnaire.

Of the 135 companies agreeing to participate in the survey, 75 completed and returned at least one usable questionnaire. Companies were asked to target up to five senior or middle managers to complete and return the questionnaires. These companies were split fairly evenly between listed and private ownership. A third of these companies (25) provided five usable questionnaires, a further 15 returned four questionnaires and 12 companies returned three, resulting in 69 per cent of responding companies providing three or more usable questionnaires. For each company, a score was determined for each question by averaging the responses from individual managers.

An analysis of the variation in responses from different managers in each company was carried out for each question, using statistical control charts (s-charts). Five companies were identified as exhibiting greater variation in the responses to more than a small number of questions (three) than could be explained by chance. In these cases, responses from a particular manager were found to be generally inconsistent with the remaining managers from that company, and the responses from the "inconsistent" manager were excluded from the averaging process.

Examination of the replies concerning respondents' backgrounds indicated that only 18 per cent had been with the company for less than three years. Functional positions of responding managers was divided in roughly equal percentages (10 to 14 per cent each) between: divisional/state manager; operations manager; financial manager/chief accountant; manufacturing manager; purchasing manager; and sales/marketing manager. Smaller percentages (about 4 per cent each), came from chief executive officer/managing director/general manager; group manager; personnel manager; and technical/DP manager.

The 75 responding companies represented all States of Australia, but were predominantly from the more industrialized States of NSW and Victoria. Figure 1 gives a breakdown of the sample by industry sector (as categorized by ASIC groupings) and indicates that a reasonably broad cross-section of industries is represented in the sample.

From this total sample of 75 responding firms, a subset was identified for which both questionnaire responses and financial performance data were available. Depending on the financial performance ratio being examined, this represented between 35 and 41 firms. The financial data were obtained from ASX listings, or from individually sourced company annual reports in the case of non-listed companies.

While a range of financial performance ratios was collected, it was felt that of the typical financial performance measures used in the marketplace, these three might more closely reflect improved performance of the firm with more limited impact from external factors:

(1) earnings on shareholders funds (EOSF) - calculated as (profits after taxes (net profit)/total shareholder equity).

(2) return on total assets (ROTA) - calculated as (earnings before interest and tax/total assets).

(3) labour productivity ratio (LPR) - calculated as (sales/number of employees).

An examination of the performance ratios collected indicated a distorting of the data by two or three firms at either end of the range of values calculated. After removal of these few outliers, the following mean and range values were found for the sample of firms remaining:

(1) EOSF: mean = 7.04; range = -7.67 to 23.20;

(2) ROTA: mean = 4.05; range = -3.45 to 14.40;

(3) LPR (in $'000s): mean = 313.2; range = 38.1 to 946.9.

With the exception of the mean ROTA figure, these values are consistent with commercially prepared means for Australian businesses generally[31]. The average ROTA figure is somewhat lower than the commercially reported business average. This may be due to the absence of large multinational firms in our sample which could well produce a sample with a lower ROTA average.

Survey results

Sample distribution

The distributions shown in Figure 1 indicate that the sample of 75 firms responding to the survey were well distributed across the manufacturing/ service continuum as well as across the major ASIC classifications. Figure 1 also shows that the subset of 41 firms used for the financial indicator analysis has a reasonably consistent distribution across the various areas. The major difference between the complete survey response group and the financial indicator subset is in the slightly larger proportion of banking, finance and insurance classified firms in the subset and the slightly smaller proportion in the wholesale and retail sector. These distributions, together with the comparisons of financial indicator data and aggregated figures from Australian firms, generally indicate that a reasonably representative sample of medium to large Australian firms has been considered.

Question classifications and indicator scores

Table I lists the groupings of questions related to each of the five identified indicators of successful QQA/TQM integration. Pearson correlation coefficients (r) between the four questions grouped in each indicator were always greater than 0.40 with the majority falling between 0.50 and 0.75. All correlations were significant at the 99 per cent level or higher.

For each of the strategic quality management indicators, individual company scores were determined by adding up the scores for that company in each of the component questions. For example, adding the scores of a given company for questions 25, 27, 29 and 35 gave that company's score for the strategic integration indicator. A separate score was calculated for the three measures, four to five years ago performance, current performance and current importance for each company. The individual company scores were then averaged across all companies included in the financial indicator subset. This was carried out separately for each of the five strategic quality indicators and the three measures, four to five years ago performance, current performance, and current importance. This calculation resulted in possible maximum and minimum values of 20 and four respectively. The resulting 15 average scores are displayed in Figure 2.
Table I. Allocation of questions to the five identified indicators
of successful strategic quality planning

                                    Questions included in
Indicator                           each indicator

1. Strategic integration            25, 27, 29, 35
2. Deployment/involvement           22, 24, 26, 30
3. Customer-focused planning        31, 32, 34, 36
4. Measurement and benchmarking     23, 28, 33, 34
5. Innovation and CI                33, 34, 36, 37

The most noticeable observation from Figure 2 is that, on average, the firms believe they have undergone marked improvement in all areas of strategic quality management over the past four to five years. All indicators show an increase in performance of between 36-43 per cent. Interestingly, the mean response for the customer-focused planning category (three) showed the greatest increase from the lowest mean of four to five years ago. Firms generally indicated that they performed better in the areas of strategic integration and deployment/involvement and not as well in customer-focused planning and innovation/CI. The figure also indicates that managers' rate importance of each area higher than the performance achieved in that area within their firm.

Correlations between survey responses and selected financial performance indicators

Questionnaire responses for the four to five years ago performance entry (see Appendix 1) were correlated with selected financial performance ratios on a firm-by-firm basis. The past performance measure was chosen rather than the current performance since the primary survey data were collected in 1992/93, with financial ratios calculated using 1991 financial year results. The four to five years ago responses were selected also partially to offset the recognized lag between strategic decisions and actions regarding quality management, and the impact of these actions on financial indicators.

Thus, a firm's relative self-assessed ranking of its performance in about 1988/89 in several aspects of strategic quality management was correlated with its relative performance as measured by selected standard financial performance measures as reported in 1990/91.

Pearson (linear) correlation coefficients (r) were calculated for individual firm responses to questions 22 to 38, correlated with the above three performance ratios for each firm. Firms were categorized as manufacturing or service, based on their ASIC code, and correlation coefficients were calculated for the total group and the manufacturing and service subgroups separately. The significance of each coefficient was determined by calculating the probability (p) (shown in brackets after each value) that the coefficient equals zero (i.e. is not significant).

Table II reports the significant Pearson correlation coefficients and their significance. Only those satisfying the following conditions for significance have been reported in the Table:

-0.25 [greater than] r [greater than] 0.25 and p [less than] = 0.10.

The first fact evident from Table II is that there are many more significant correlations for the LPR ratio than for the other two selected ratios. This is [TABULAR DATA FOR TABLE II OMITTED] probably due to the greater sensitivity of sales figures to changes in business performance than either EOSF or ROTA ratios. Of course, the more cynical observer may argue that those firms claiming business improvements through various quality management interventions have often engaged in major downsizing activities which would rapidly improve the LPR value.

The lack of significant correlations for the manufacturing subgroup is more difficult to explain, although the very broad spread of the industries covered in this subgroup compared with the less diverse nature of the services subgroup may partially explain this result. The negative coefficient for ROTA and the quality team's response is also surprising. That is, the higher a firm's relative assessment of its performance regarding the development and support of quality teams, the worse its relative performance as measured by ROTA.

In general, the data indicate a positive correlation between strategic company-wide quality management issues and financial performance ratios, in particular labour productivity. This is especially evident for issues relating to benchmarking, inclusion of product and/or service quality in the mission and vision statements and the use of situation analysis in the planning process. Correlations of strategic quality management indicators with return on assets or earnings on shareholders' funds are considerably less evident.

These findings are consistent with those of Maani et al. [28] and Sluti et al. [29] who also reported that links between quality and sales-related performance measures were more significant (and more readily identifiable) than those between quality and assets-related or market-share performance measures.

Question 38, while not incorporated into any of the five indicators, was included to examine the global orientation of the firm. Interestingly, this question gave a significant negative correlation with the LPR measure. This may indicate that those firms actively expanding into overseas markets suffer some initial productivity loss because of the increased costs required in gearing up to meet export requirements and overseas expectations regarding quality, delivery and cost.

An examination of the financial indicators against four to five years ago performance survey responses (aggregated into the five indicators of successful strategic quality management identified above) gave similar results. Using the same significance criteria as for Table II, and without subdividing the sample into manufacturing and service based groups, only the LPR correlations gave significant values. The categories of strategic integration (r = 0.36; p = 0.04), and measurement and benchmarking (r = 0.35; p = 0.05) were found to be significantly correlated to the productivity ratio, while involvement/deployment (r = 0.28; p = 0.12) was substantial.


As noted above, the labour productivity ratio appears to be considerably more sensitive to QSA/TQM initiatives than either return on assets (ROA or ROTA as used here) or earnings on shareholders funds (EOS, or EOSF as used here). Values for both ROA and EOS type ratios are susceptible to variable financial decision making These decisions may be more reflective of companies seeking short-term financial gain at the expense of longer-term profit maximization. In short, such measures vary to the extent that the ratios can reflect external demands for performance rather than internal processes of change.

In terms of the five broad QSA/TQM indicators, both strategic integration (indicator 1) and measurement and benchmarking (indicator 4) show the strongest positive correlation to the labour productivity ratio. The result for indicator 1 tends to support the generally accepted best practice view wherein quality programmes become an integrative mechanism in strategic business plans. As these plans proceed to the evaluation stage, an increase in performance is the most likely outcome. Where companies adopt a holistic approach to continuous improvement, inefficient work practices will be filtered out of administrative systems, and design, production and support systems will become more streamlined and efficient. Improvement in labour productivity ratios will reflect such system improvements.

Similarly, strong correlations associated with benchmarking and productivity tend to reinforce the view that such activities represent a strategic core competence in the pursuit of sales. Notwithstanding extraordinary company activities as an underlying cause for increased sales, the sampled number of firms is large enough to confirm that benchmarking and measurement activities - especially where organizations are forced to match, if not build, core competences - are directly related to productivity increases.

In comparison to other indicators, it is interesting to note that managers rate deployment/involvement (indicator 2) as the highest in importance and performance. Strategic integration (indicator 1) is rated the next highest. These ratings are consistent with the significant correlation between this indicator and the labour productivity ratio. Indicator 2, while rating highly in importance and performance, is not significantly correlated to productivity. Only one of its individual component questions shows a correlation, and this for service firms only. Thus the QSA/TQM indicator, ranked most highly in both importance and performance, shows only a weak correlation with productivity as measured here. Figure 2 also demonstrates that firms rate importance higher than performance in all five indicators.

Although indicators 1 and 4 show the strongest matching correlations to the productivity ratio, certain components of the remaining indicators over both service and "all" companies nevertheless indicate some correlation. Service companies quite noticeably display the strongest matching correlations. The somewhat weaker correlations in the "all" companies category - which includes both service and manufacturing - may be explained by the very diverse nature of manufacturing firms in the sample resulting in large fluctuations in their responses to QSA/TQM initiatives. In a recent Australian study by Murray and Jenkins[32], similar large disparities were found in companies' response to best practice initiatives.

By comparison, the service companies in the sample include a large representation from insurance and banking companies. In terms of consistency, a tighter clustering of companies with similar value chain characteristics might display like-minded responses to QSA/TQM determinants with a similar impact on their productivity and performance measures.

The results in this survey lend strong support to previous research; most notably, confirmation that selective QSA/TQM initiatives can be linked to financial performance expressed in labour productivity ratios. No such link was found in ROA or ROS ratios when correlated to QSA/TQM. In terms of productivity, this research confirms the importance of integrating QSA with TQM initiatives. Companies who embrace holistic rather than one-off approaches to such strategies can be expected to increase their productivity as these processes are implemented throughout the company.

This research also highlights that the pattern of stated importance of QSA/TQM imperatives in firms of this size range is at odds with their stated performance. There are also anomalies regarding stated importance/performance and measured performance in terms of labour productivity ratios (LPR) over "all" companies, especially in the significant indicator of deployment/involvement (indicator 2). Given that involvement of employee teams in the planning and deployment processes is generally accepted to be very important, this area should be flagged for further consideration in subsequent research.

In addition, current research activities are targeting a small number of companies in the sample for a longitudinal study. This is an attempt to overcome the time lag and loss of detail occurring with Likert-scale based surveys and aggregated means. It is hoped to use a combination of quantitative and qualitative research methodologies to investigate the strategic quality management initiatives in these individual firms.


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Appendix 1. Questionnaire response codes and response proforma

Respondents were asked to consider each of the statements shown in Appendix 2 in relation to their view of their company. They were asked initially to reflect on the importance and performance of the aspect covered by the statement within their company four to five years ago. They were then asked to consider the importance, performance and trend regarding that aspect currently within their company. The key to the five-point answer scales was provided as a foldout section visible on each page of the questionnaire (Table AI).

Appendix 2. Survey questions used in this study

Each of the 17 statements listed below was followed by an answer box which simplified the completion of the question. The format of the answer box was as shown below:


The 17 statements (Q22 to Q38) on which respondents were asked to comment regarding their company are as follows:

Q22 Plans are established at every level of the business. The plans are linked vertically and horizontally along the lines of the organizational structure.

Q23. Plans incorporate goals which are established with realistic and achievable measures.

Q24. Plans are jointly developed between teams and leaders and consensus or agreement is generally achieved.

Q25. Product or service quality is an integral part of your mission and vision. This concept within the vision is well communicated and broadly understood by all employees.

Q26. Organizational and individual responsibilities for quality and customer satisfaction are clearly communicated and understood by all managers and employees.

Q27. Situation analysis is a key part of the planning process at all general and business levels. This analysis is comprehensive and the key to creating the strategies which drive the organization towards achieving its vision.

Q28. A structured approach is used to identify and evaluate the effectiveness of implemented strategies in the pursuit of organizational goals.

Q29. Goals and strategies at all levels are coherent. (Explanation: goals and strategies at different levels are integrated; they also recognize shared responsibility across levels.)

Q30. Quality teams or self-managed teams are a way of life and have formal support and facilitation from top management.

Q31. Customer responsiveness is stressed through all levels of planning. The concept of internal customers is used extensively.

Q32. The company uses a structured process such as quality function deployment (QFD) to translate customer requirements into product (or service) and process definitions or specifications.

Q33. Benchmarking of critical performance indicators is used within the company. Comparisons are made between your company's performance and direct domestic competitors as well as successful international companies in your field.

Q34. Benchmarking is used to examine a range of critical indicators (such as output quality, customer-satisfaction levels) as well as traditional financial indicators.

Q35. The company's productivity/quality goals are clearly based on and linked to strategic long-range plans.

Q36. The company's annual quality/productivity objectives are given equal or greater ranking than other annual company objectives (such as return on investment, dividends per share, market growth, etc.).

Q37. A large part of the company's strategic plans include strategies aimed at tapping into new markets and developing new products. Innovation in this sense is an active part of the culture and vision of the whole company.

Q38. Strategies of the company include opening up overseas markets and finding ways to compete. This means creating competitive advantage.
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Author:Chapman, Ross L.; Murray, Peter Charles; Mellor, Robert
Publication:International Journal of Quality & Reliability Management
Date:Apr 1, 1997
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