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Proposed relationship of TQM and organisational performance using structured equation modelling a

b

c

N. M. Zakuan , S. M. Yusof , T. Laosirihongthong & A. M. Shaharoun

b

a

Department of Manufacturing & Industrial Engineering, Faculty of Mechanical Engineering , Universiti Tun Hussein Onn Malaysia (UTHM) , Parit Raja, Batu Pahat, Johor, Malaysia b

Department of Manufacturing & Industrial Engineering, Faculty of Mechanical Engineering , Universiti Teknologi Malaysia (UTM) , Skudai, Johor, Malaysia c

Department of Industrial Engineering, Faculty of Engineering , Thammasat University , Thailand Published online: 28 Jan 2010.

To cite this article: N. M. Zakuan , S. M. Yusof , T. Laosirihongthong & A. M. Shaharoun (2010) Proposed relationship of TQM and organisational performance using structured equation modelling, Total Quality Management & Business Excellence, 21:2, 185-203, DOI: 10.1080/14783360903550020 To link to this article: http://dx.doi.org/10.1080/14783360903550020

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Total Quality Management Vol. 21, No. 2, February 2010, 185 –203

Proposed relationship of TQM and organisational performance using structured equation modelling N.M. Zakuana, S.M. Yusofb, T. Laosirihongthongc and A.M. Shaharounb


a Department of Manufacturing & Industrial Engineering, Faculty of Mechanical Engineering, Universiti Tun Hussein Onn Malaysia (UTHM), Parit Raja, Batu Pahat, Johor, Malaysia; b Department of Manufacturing & Industrial Engineering, Faculty of Mechanical Engineering, Universiti Teknologi Malaysia (UTM), Skudai, Johor, Malaysia; cDepartment of Industrial Engineering, Faculty of Engineering, Thammasat University, Thailand

Total quality management (TQM) has been considered as an infrastructural strategy in the operations management research field. It is one of the most recognised models for operational excellence besides lean operation, supply chain management, and technology management. Both manufacturing and service organisations tend to implement this strategy in order to maintain their competitive advantage. The purpose of this paper is to develop the conceptual model of TQM implementation in relation to organisational performance. The authors have reviewed the literature on TQM and organised the paper along two main themes: the evolution of TQM considered as a set of practices, and its impacts on organisational performance. Two research questions are proposed in order to re-validate TQM constructs: (1) Is the set of practices associated with TQM valid as a whole? (2) What performance measures should be considered to exhibit the effectiveness of its implementation? Keywords: organisational performance; automotive industry; TQM constructs; performance measures constructs; structural equation modelling

Introduction In today’s highly competitive market, the demand for quality is the single most critical factor for companies to survive in the ever-expanding global marketplace. Quality is vital in determining the economic success of manufacturing companies (Curkovic et al., 2000; Garvin, 1988) where world-class manufacturing companies gain competitive edge and greater market share through extraordinary levels of performance by providing quality products with competitive prices as required by demanding customers. The concept of total quality management (TQM) has been developed as a result of intense global competition. Organisations with international trade and global competition have paid considerable attention to TQM philosophies, procedures, tools and techniques. According to Juran, international competition requires higher levels of quality achievement by organisations (Blackiston, 1996). However, the implementation of quality management has not occurred at the same pace in different regions of the world. Early implementation started in Japan, the US, Europe, and later followed by the developing countries. To compete in the global market, companies in developing countries must also implement quality management practices, tools and techniques in all sections of their industries. Despite the number of

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ISSN 1478-3363 print/ISSN 1478-3371 online # 2010 Taylor & Francis DOI: 10.1080/14783360903550020 http://www.informaworld.com

186 N.M. Zakuan et al.


publications and quantity of research on TQM, there is actually little empirical work that has been carried out in developing countries, particularly in the ASEAN region. Quality in the international context The importance of TQM in business organisations has increased significantly over the past 20 years. International total quality management aims at understanding total quality management in the global context. The concept of ‘international’ serves as the motivation in developing a global TQM standard for evaluating TQM practices within countries (Rao et al., 1999). The practice of TQM also has influence from the national level to the international level (Kim & Chang, 1995), which helps organisations to compete internationally and gain a competitive edge in the global market (Liu & Kleiner, 2001). Currently, developed and developing countries are at different stages of the quality movement especially in automotive industries. Most research on quality practices in the automotive industry has primarily focused on developed countries since the early 1990s such as the United States and Japan (Benson et al., 1991; Ebrahimpour & Johnson, 1992; Flynn, 1992; Rogers, 1993). Studies on the implementation of quality practices in developed countries are found to be very common and thus most quality practices nowadays are based on the experience of developed countries such as the practices of Toyota, GM Motors and Ford (Dale, 2003; Womack et al., 1990). Benito and Dale (2001) reported on some empirical observations of the way in which the Spanish auto components industry implements supplier quality practices. They pointed out that suppliers which are more advanced in the use of quality practices are achieving better operational performance in terms of quality, reliability, cost, flexibility and design. Johnson and Khan (2003) conducted a study into the use of failure mode and effect analysis (FMEA) in the automotive industries in the UK. They established the method for determining the effectiveness of FMEA. A recent study by Iwaarden et al. (2006) of European automotive manufacturers showed that the application of a management control model in the field of quality management practices is found to be useful in explaining what changes are necessary to maintain high quality levels. Quality practices research has been extended beyond developed countries to other countries around the world such as China and India (Rao et al., 1999). In China, Lee (2004) conducted a study to investigate the status of quality practices and the perception among Chinese small manufacturing companies. He pointed out that by adopting certain quality management practices, it can help Chinese small manufacturers achieve competitive advantage in both domestic and international markets. Lin et al. (2004) showed that Taiwanese and American firms can benchmark the efficient practices of Japanese firms in order to be the best-in-class. The study found that the efficiency of quality management practices is highest in Japanese-owned firms, even though a majority of employees are Taiwanese. It was also found that American-owned firms’ efficiency is higher than that of Taiwanese-owned firms. Yoo et al. (2006) describe the differences in quality practices implementation in manufacturing companies among four countries: Korea, USA, Mexico and Taiwan. They suggested that transferring quality practices from a home country to another country is required to achieve the overall business objective, and at the same time it is worthwhile to consider similarities and differences in the global context. Meanwhile, Raghunathan et al. (1997) surveyed 228 US, 78 Chinese and 168 Indian manufacturing companies including in the automotive industry. They found that it is important to compare quality practices between developed and developing countries to understand the status and


Total Quality Management 187 there are opportunities for developing countries to learn from the successes and failures of the quality practices of developed countries. They also suggested that developed and developing countries need to use uniform instruments and methods of analysis for future studies. Aziz et al. (2000) surveyed 540 Malaysian and 180 UK companies, focusing on manufacturing small and medium enterprises (SMEs). They found that there is a reliance on inspection and relatively low use of sophisticated statistical methods for quality improvement in both countries. They also stated that the types of quality practices used by the UK and Malaysian SMEs are related to the types of quality practices promoted by their own governments. Parast et al. (2006) conducted a comparative analysis of quality management practices in US and Mexican manufacturing companies, using the Malcolm Baldrige National Quality Award (MBNQA) criteria as a framework. The results show that there are differences between the USA and Mexico in the critical success factors of quality management practices. Social responsibilities and supplier quality were significant in explaining variability of quality results in the two countries. Further similarities were found in the effect of quality management practices on customer focus and satisfaction in those countries. Schniederjans et al. (2006) conducted a study on quality management practices in manufacturing companies in India, Mexico and USA. A reason for selecting the USA and Mexico for comparison can be suggested by the relocation of US firms to Mexico under the North American Free Trade Agreement (NAFTA). Another reason for selecting the USA and India for comparison is the outsourcing phenomenon that is a result of Indian firms being the greatest beneficiary of US firms that outsourced to India (Lee et al., 2003). Schniederjans et al. (2006) suggested that a cross-comparison study may be helpful in understanding the similarities and differences in quality management practices in various countries. The international comparative studies on quality practices implementation can provide an insight into quality practices at a global level. Sila and Ebrahimpour (2002) reviewed all quality practices in a survey-based research between 1989 and 2000. Table 1 shows the results of the countries investigated and the number of corresponding articles. In relation to that, some of the former comparative research into quality practices implementation in countries from 2000 to 2007 have been summarised in Table 2 (Zakuan & Yusof, 2007). TQM constructs Numerous studies have examined what constitutes quality management, what the common barriers to quality management implementation are, and what factors are critical for the success of quality management (Ahire et al., 1996; Flynn et al., 1994; Rao et al., 1999; Saraph et al., 1989; Sila, 2007; Yusof & Aspinwall, 2000). Although these studies have provided different results such as critical factors, they have identified a common set of practices considered essential to the success of quality management implementation. To generate distinct generic constructs, a list of constructs proposed in a large set of articles was analysed. Table 3 gives the generic constructs with their corresponding practices proposed by other authors. Each construct was then analysed as to whether it was different from or similar to the constructs previously suggested. This process resulted in a proposed set of eight constructs: quality leadership; customer focus and satisfaction; quality information and analysis; human resource development; strategic planning management; supplier quality management; quality results; and quality assurance.

188 N.M. Zakuan et al. Table 1. Countries investigated and the number of corresponding articles.


Country Australia, New Zealand USA, Canada USA, UK, Middle East, Singapore/ Malaysia India, China, Mexico Australia, Europe USA, Japan USA, Canada, Germany, Japan USA, Mexico Japan, UK USA, Spain, Europe USA, Spain USA, Costa Rica USA, India, China, Mexico USA, Germany, Denmark, Canada USA, India, China, Mexico, Taiwan An international survey of 45 major corporations USA, Germany, Japan USA, Germany, UK USA, UK, Canada USA, Korea, New Zealand

USA, Canada, Western Europe, Japan, the Pacific Basin, Mexico, Latin America, Southeast Asia, Eastern Europe

No

Country

No

7 4 1

Germany, UK Spain, Netherlands, UK Asia/South Pacific, Europe, North America

1 1 1

3 3 3 2 2 2 1 1 1 2 1 1 1

China, Norway Argentina, Brazil, Chile, Mexico Twelve countries – Russia, USA, etc. Eastern and Western Companies Nordic countries and East Asia Japan, Korea USA, UK, Japan USA, Taiwan USA, Luxembourg USA, Mexico, Australia USA, Japan, Korea, EU, Mexico Australia, Japan Australia, Singapore

1 1 1 1 1 1 1 1 1 1 1 1 1

1 1 1 1

Australia, New Zealand, UK Australia, UK Brazil, UK Denmark, East Germany, West Germany, Finland, France, UK, Ireland, Italy, Netherlands, Norway, Sweden, Switzerland, Spain, Turkey East (Japan, Korea and Taiwan) and West (Denmark, Finland, Sweden and Australia)

1 1 1 1

1

1

Source: Sila and Ebrahimpour (2002).

Table 2. Research on comparative study in quality practices implementation between countries 2000–2007. Year

Author

Focus area

Sector

Countries

2000 Aziz et al. 2002 Ahmad and Schroeder 2003 Noronha 2003 Khoo and Tan 2005 Jabnoun

Quality practices Manufacturing TQM Automotive

UK, Malaysia US, Germany, Italy, Japan

TQM TQM TQM

Manufacturing Manufacturing Manufacturing

2005 2006 2006 2006 2006 2006

Benchmarking MBNQA Quality practices Quality practices Quality practices Quality tools

Automotive Manufacturing Automotive Manufacturing Manufacturing Automotive

TQM TQM

Manufacturing Manufacturing

China, Hong Kong, Taiwan US, Japan Saudi Arabia, Australia, Canada US, Japan, Europe India, Mexico, US European Korea, USA, Mexico, Taiwan USA, Mexico Germany, France, England, Italy Australia, Singapore Spain, US, Korea

Rothenberg et al. Schnirderjans et al. Iwaarden et al. Yoo et al. Parast et al. Hermann et al.

2006 Feng et al. 2007 Tari et al.

Total Quality Management 189 Table 3. Constructs proposed by literature. Constructs

Related constructs


Quality leadership (QL)

The role of top management leadership (Saraph et al., 1989), top management support (Flynn et al., 1994), top management commitment (Ahire et al., 1996), management leadership (Yusof & Aspinwall, 2000), leadership (Sila, 2007) Customer focus and The role of quality department (Saraph et al., 1989), customer satisfaction (CFS) involvement (Flynn et al., 1994), customer focus (Ahire et al., 1996), customer orientation (Rao et al., 1999) Quality information and Quality data and reporting (Saraph et al., 1989), quality information analysis (QIA) (Flynn et al., 1994), quality information and availability (Ahire et al., 1996), information and analysis (Sila, 2007) Human resource development Workforce management (Flynn et al., 1994), employee training (HRD) (Ahire et al., 1996), education and training (Reed et al., 2000), support for human resource development (Sila, 2007), human resource management (Parast et al., 2006) Strategic planning Process design management (Saraph et al., 1989), process management (SPM) management (Flynn et al., 1994), design quality management (Ahire et al., 1996), strategic planning process of quality management (Parast et al., 2006) Supplier quality management Supplier involvement (Flynn et al., 1994), supplier quality (SQM) management (Ahire et al., 1996), supplier quality (Parast et al., 2006; Rao et al., 1999), supplier quality assurance (Yusof & Aspinwall, 2000), supplier management (Sila, 2007)

These eight constructs were analysed through comparison of quality management practices across different studies as shown in Table 4, and also by combining the constructs extracted from the Malcolm Baldrige National Quality Award criteria, the ISO/TS 16949 standard, and the ISO 9001:2000 requirements. It is believed that the proposed constructs are comprehensive because they: (1) constitute practices that represent the hard and soft aspects of quality management; (2) encompass the most prestigious quality award and standards criteria widely accepted by quality management scholars and practitioners; (3) have been considered as critical practices in quality management (Sila & Ebrahimpour, 2002); (4) correspond to the Malaysian Prime Minister Quality Award (PMQA) and Thailand Quality Award (TQA) criteria. It is believed that these are suitable to be used in the Malaysian and Thailand automotive industry context. Performance measures constructs Having proposed a set of TQM constructs, this section presents an overview of performance measures constructs. A review of past empirical studies on organisational performance indicates that there are variations in measuring performance of organisations (Monge et al., 2006). Different variables used for measuring organisational performance have been identified from the literature as shown in Table 5. Prajogo and Sohal (2004) measured organisational performance from quality performance (e.g. reliability, performance, durability and conformance to specification) and innovation performance (e.g. product and process innovation).


No.

Saraph et al. (1989)

1

The role of top management leadership

2

Flynn et al. (1994) Top management support

Ahire et al. (1996)

Rao et al. (1999)

Yusof and Aspinwall (2000) Parast et al. (2006)

Sila (2007)

Proposed constructs

Top management commitment

Top management commitment Quality citizenship

The role of the quality Customer department involvement

Customer focus

Customer orientation

3

Quality data and reporting

Quality information

Internal quality information usage Benchmarking

Quality information availability

Measurement and Quality feedback information and analysis

4

Training

Workforce management

Employee training

Employee training

Education and training Human resource development

5

Employee relations

Employee involvement

Resources

6

Product/service design Product design Process management Process management

Employee empowerment Employee involvement Design quality management Statistical process control usage

Product/process design

System and process Improvement tools and techniques

Strategic planning process of quality management

Process management

Strategic planning management

7

Supplier quality management –

Supplier quality management Product quality

Supplier quality

Supplier quality assurance –

Supplier quality

Supplier management Organisational effectiveness –

Supplier quality management Quality results

8

–

Supplier involvement –

9

–

–

10

–

–

–

Supplier performance

Internal quality results –

External quality results

Management leadership –

–

Continuous improvement process

Quality leadership

Leadership

Quality leadership

Customer focus and satisfaction

Customer focus

Customer focus and satisfaction

Information and analysis

Quality information and analysis

Support for human Human resource resource management development –

Quality results Quality assurance of products and services –

–

Financial and market results

Human resource development

–

Quality assurance

–


Table 4. Comparison of quality management constructs across different studies.

Total Quality Management 191 Table 5. Performance measures proposed by different authors. Author(s)

Variables

† Satisfaction level † Business result Prajogo and Sohal (2004) Organisational performance † Quality performance † Innovation performance Jun et al. (2006) Human resource performance measure † Employee satisfaction † Employee loyalty Sila (2007) Performance measure † Organisational effectiveness † Financial results † Market results Lakhal et al. (2006) Organisational performance † Financial performance † Operational performance † Product quality Lin et al. (2005)


Measure Organisational performance

In this study, organisational performance will be measured through two categories, which are satisfaction level, and business results following Lin et al.’s (2005) suggestion. Satisfaction level in organisational performance comprised two items, namely employee satisfaction and customer satisfaction, while business results for organisational performance comprised four items: productivity, number of successful new product, cost performance, and profitability. Relationship between TQM and organisational performance A considerable body of empirical evidence suggests that TQM implementation improves organisational performance. Using a random sample of 950 companies in Singapore, Brah et al. (2000) determined how an organisation could benefit from TQM implementation in terms of improved financial and operating performance. Kunst and Lemmink (2000) investigated the relationship between quality implementation and organisational performance in hospitals and discovered that TQM leads to higher business performance, which indicates efficiency, cost effectiveness, and higher perceived service quality by patients. Kanji and Wong (1999) used Kanji’s business excellence model integrating TQM principles and concepts in a supply chain model to measure performance. They suggested a new supply chain management model be created using TQM principles and concepts to help companies achieve excellent performance. In the Netherlands, Zhang (2000) reached almost similar conclusions. He found that quality implementations have a positive impact on product quality and TQM has much better effects on the overall business performance than ISO 9000. Lee and Zhou (2000) studied the manufacturing strategies and business practices in traditional firms and TQM firms in the Chinese manufacturing industry and discovered that organisations that implement TQM perform better than traditional firms. Prajogo and Brown (2004) also conducted a similar study within Australian organisations and the results indicated a strong link between TQM practices and quality performance. Using a case study approach in the region of Murcia, Spain, Martinez-Lorente et al. (2004) also concluded that TQM improves many aspects of performance such as customer satisfaction and business performance. Based on a survey from Norway, Sun (2000) reported that the TQM criterion contributes to the improvement of customer satisfaction and organisational performance. Parzinger and Nath (2000) examined the relationship between TQM and software quality and determined that TQM implementation improves the software quality thus increasing customer satisfaction.


192 N.M. Zakuan et al. Naser et al. (2004) investigated ISO 9000 registered companies in Malaysia and found positive links between ISO 9000 registered companies and firm performance. This is similar to a study conducted in Greece by Dimara et al. (2004), who found a moderate relationship between ISO 9000 registered companies and firm performance. In a survey of the Spanish manufacturing industry, Sanchez-Rodriguez and Martinez-Lorente (2004) found that quality management practices are significantly correlated with several measures of performance outcomes. Hermann et al. (2006) found that Quality Function Deployment (QFD) has significant effect on company performance particularly in improvement of product quality, reduction in R&D cost, and shorter R&D time. In the UK, Soltani and Lai (2007) found that International Organization for Standardization (ISO) series and other total quality management (TQM) models were seen as helping organisations in the journey towards business excellence. In contrast, there are some researchers who found that the implementation of TQM did not improve performance. For example, Dow et al. (1999) showed that some TQM factors, such as employee commitment, shared vision and customer focus, contribute to superior quality outcome and factors such as benchmarking, work teams, advanced manufacturing technologies and closer supplier relationships do not contribute to superior quality outcomes. This is also supported by Beaumont and Sohal’s (1999) investigation which showed that the use of quality management practices was not correlated to profit levels. Terziovski and Samson (1999) investigated the relationship between TQM practice and organisational performance in Australia and New Zealand and obtained mixed results. Their results showed that a typical manufacturing organisation is more likely to achieve better performance with TQM than without TQM implementation. Singles et al. (2001) studied the effect of certification in the ISO 9000 series and found that ISO certification itself did not lead to an improvement in the performance of organisations. Aarts and Vos (2001) reported that ISO registration had no effect on the performance of New Zealand organisations. Samat et al. (2006) examined the relationship between TQM and market orientation and found that information and communication does not have significant effect on market orientation. Review of structural equation modelling in TQM research Substantive use of structural equation modelling (SEM) has been growing in business and technology including quality management. One reason for this is that these confirmatory methods (Anderson & Gerbing, 1988) provide researchers with a comprehensive means of assessing and modifying theoretical models. Its functions have been found better than other multivariate techniques such as multiple regression, path analysis and factor analysis. SEM is a method that can examine a series of both dependence and independence relationships simultaneously (Rohani et al., 2006). Prajogo and Sohal (2004) employed the SEM approach to examine the multidimensionality of TQM in association with organisational performance as shown in Figure 1. Using empirical data gathered from 194 Australian firms, the findings support the proposition in pairing the mechanistic elements of TQM with quality performance and the organic elements with innovation performance. Lin et al. (2005) conducted a comparative study between Taiwan and Hong Kong manufacturing companies to investigate supply chain quality management and organisational performance using SEM as shown in Figure 2. The results showed that quality management (QM) practices are significantly correlated with the supplier participation strategy and this influences tangible business results and customer satisfaction.

Total Quality Management 193


Figure 1. The model of the structural relationship between TQM and two organisational performances. Source: Prajogo and Sohal (2004).

Figure 2. Conceptual SEM for Taiwan and Hong Kong data. Source: Lin et al. (2005).

The same model was used to analyse the data collected from Taiwan and Hong Kong manufacturing companies. Another recent study by Sanchez-Rodriguez et al. (2006) used the SEM approach to provide insights into current information technology (IT) and total quality management (TQM) theory and practice on operational and quality performance. The results indicate that the sampled firms make considerable use of IT to support their TQM initiatives and that overall such efforts generate significant positive gains in operational and quality performance. The model proposed is shown in Figure 3. It is evidenced that the number of studies using SEM has been growing; Table 6 gives a summary of some related research using SEM studies. Based on the review, it can be clearly seen that the SEM approach can be used in determining those QM practices implementation and the relation to organisational performance. This research will use SEM tools and techniques to investigate relationship between TQM constructs and organisational performance measures constructs. A proposed conceptual model Based on a comprehensive review of previous studies, a conceptual model has been proposed to model the relationship between TQM practices and organisational performance



Figure 3. A proposed theoretical structural equation model. Source: Sanchez-Rodriguez et al. (2006).

as presented in Figure 4. This proposed model has adapted the conceptual model proposed by Lin et al. (2005), since their model was used to compare two countries. However, some modifications were made to simplify the process of finding the relationship between TQM constructs and organisational performance measures constructs. Two performance variables will be used to measure organisational performance, which are the satisfaction level and business results. The satisfaction level component items include employee satisfaction, customer satisfaction and supplier satisfaction. Yoo et al. (2006) indicate that higher levels of employee empowerment lead to higher level of organisational performance. A case study by McAdam and Bannister (2001) suggested that the implementation of TQM in a company contributed to a positive working environment and resulted in reductions in employee absenteeism. Jun et al. (2006) found that employee satisfaction has a positive influence on organisational performance. TQM practices have been shown to enhance organisational performance through customer satisfaction. Edvardsson et al. (2000) reported the importance of the relationship between organisational performance and external customer satisfaction. By gaining a better understanding of customer needs and the use of this knowledge to produce a better product, a customer satisfaction measure can have direct impact on organisational performance (Johnson & Gustafsson, 2000). The relationship between buyer and supplier is an important factor in organisational performance. The need to improve a supplier’s quality and delivery performance while at the same time reducing the costs of supplied materials and parts has motivated buyers to engage in supplier development activities which have impact on organisational performance (Krause et al., 1998). Empirical studies demonstrate that evaluating supplier performance and providing feedback results in improved buyer – supplier performance (Humpreys et al., 2004) and enhanced products/services quality of the buying firm (Krause et al., 2000). The business results component items for organisational effectiveness include productivity, number of successful new products, cost performance and profitability. TQM practices help reduce scrap, rework and to stabilise the production process. These in turn can minimise the production cost and increase productivity (Ahmad & Schoeder, 2002). Through continuous improvement, not only are errors and defects prevented, but the product cycle times can also be reduced, thereby improving productivity and organisational performance (Huang & Lin, 2002). According to Buzzell and Gale (1987), financial performance or profitability is an important measure of TQM outcomes. This is in accordance with Deming’s (1986) argument that quality improvement leads to elimination of waste, reduction of cost and

Total Quality Management 195 Table 6. Summary of past-related research using SEM approach. Author Kanji (1998)


Liker et al. (1998)

Ahire and Dreyfus (2000)

Narasimhan and Nair (2005) Hemsworth et al. (2005)

Rohani et al. (2006)

Grobler and Grubner (2006) Suradi et al. (2007)

Factor

Findings

Leadership Teamwork People make quality Continuous improvement † Prevention † Component characteristic † Supplier technical † Buyer–suppler relationship † Use of CAD † Design management † Quality training † Product design † process quality † External, internal quality † Quality expectations from supplier † Information sharing and trust with supplier † Supplier quality † Personnel management † Cross-functional coordination † Management commitment † Benchmarking † Commitment Management † System And Procedure † Culture † Training † Deployment † Recognition † Team † Quality † Delivery † Flexibility † Cost † Commitment from top † Customer focus † Campus facility † Communication † Course delivery † Learning environment † Continual assessment

A structural model has been used for the measurement of business excellence where 14 interrelated latent variables are introduced

† † † †

Focus area Business excellence

Involving supplier at early Automotive design design stage is associated with greater contributions of cost reduction and higher quality Design and process management TQM have positive impact on TQM

Quality expectations and Supply chain information sharing and trust between buyer and suppliers have a positive influence on supply chain Quality management has a direct Information impact on information system system in and purchasing performance purchasing

Propose theoretical model between SPC and improvement in quality performance

Statistical Process Control (SPC)

Finds mostly cumulative effects between the manufacturing capabilities

Manufacturing strategy

There is a direct effect between some of education services in quality technical education

Quality in education



Figure 4. A proposed conceptual model of TQM practices.

will increase profitability. A recent study by Hoang et al. (2006) suggested that TQM has a positive impact on a firm’s innovation performance. These findings have important implications for improving a company’s business performance. Research hypotheses Several studies show a relationship between TQM in each of its forms and organisational performance (Jun et al., 2006; Lin et al., 2005; Prajogo & Sohal, 2004; Sila, 2007). It has been argued that implementation of TQM practices will enhance business performance (Lin et al., 2005; McAdam & Bannister, 2001; Sila, 2007; Temtime & Solomon, 2002). In the Malcolm Baldrige National Quality Award criteria, it has been shown that improving quality management practices leads to improvement in business results (Evans & Jack, 2003). Kaynak (2003) reported that TQM leads to quality performance and has been significantly related to financial and market performance. Sousa and Voss (2002) in their study found two sets of results. The first is that QM practices have a significant and strong impact on quality (internal process and product) and operational performance. Second, the indirect impact of QM practices on business performance via a mediating effect of quality and operational performance, although significant, is weak, and still leaves a reasonable amount of business performance variance unexplained. Therefore, the following hypothesis will be tested in this research. H1: The TQM implementation as a set of practices has a direct, positive effect and leads to better organisational performance.

To understand the relationship of each TQM practice on organisational performance in Malaysian and Thailand automotive industries, the following hypotheses will be used and tested. Based on a culture free approach in cross-country comparative study, differences in cultural practices are assumed not to affect the practice of TQM in organisations. Thus, the following hypotheses have been developed based on the proposed conceptual model and previous research mainly from Parast et al. (2006). (i) Quality leadership Previous research in TQM practices emphasises the critical role of leadership in driving overall TQM implementation in organisations (Flynn et al., 1994). Raghunathan et al.

Total Quality Management 197 (1997) noted that leaders play an important role in how TQM is implemented in a consistent manner where it affects organisational performance and profitability. Kanji (2001) noted that leadership is the fundamental driver of business excellence. Accordingly, it is proposed that: H2: Quality leadership for TQM practices is positively correlated with organisational performance.


(ii) Customer focus and satisfaction Organisations must be knowledgeable in customer requirements and responsive to customer needs and measure customer satisfaction through TQM implementation (Raghunathan et al., 1997). Nilsson et al. (2001) indicate that customer satisfaction has a greater impact on business results through quality practices. This is supported by Lee et al.’s (2003) argument that customer satisfaction positively relates to process improvement. Therefore, the next hypothesis relates to customer focus and satisfaction, and organisational performance. H3: Customer focus and satisfaction for TQM practices is positively correlated with organisational performance.

(iii) Quality information and analysis The study conducted by Woon (2000) among Singapore companies has found that the service organisations generally showed a lower level of TQM implementation than the manufacturing organisations in the elements quality information and analysis. Prajogo (2005) in his study examined the significant impact of quality information and analysis of TQM on quality performance. Lee et al. (2003) also showed that quality information and analysis have a significant effect on process management. Therefore, the next hypothesis attempts to find a relationship between quality information and analysis, and organisational performance. H4: Quality information and analysis for TQM practices is positively correlated with organisational performance.

(iv) Human resource development Deros et al. (2006) noted that human resource development is one of the critical success factors in benchmarking practice, which helps in improving business and management processes. Sanchez-Rodriguez et al. (2006) noted that people management was significantly and positively correlated with purchasing operational performance (POP). Accordingly, the next hypothesis relates to human resource development and organisational performance. H5: Human resource development for TQM practices is positively correlated with organisational performance.

(v) Strategic planning management Curkovic et al. (2000) in their study show that there is indeed a strong relationship between strategic planning in TQM and environmentally responsible manufacturing. Feng et al. (2006) in their comparative study found that strategic planning in TQM practice does have significant impact on organisational performance; however, the impact is the same for both Singaporean and Australian firms. Therefore, the next hypothesis attempts to find a relationship between strategic planning management and organisational performance.

198 N.M. Zakuan et al. H6: Strategic planning management for TQM practices is positively correlated with organisational performance.

(vi) Supplier quality management


Effective supplier quality management is facilitated by a cooperative relationship with suppliers. Lee (2004) suggested that adoption of supplier management in TQM programmes can help Chinese small manufacturers to achieve competitive advantage in both domestic and international markets. This argument is also supported by Temtine and Solomon (2002), who found that SMEs should be assisted in the use of systematic supplier management programmes as this will consequently lead to the consideration of TQM as a means of achieving competitive advantage in the long run. Accordingly, the hypothesis is as follows: H7: Supplier quality management for TQM practices is positively correlated with organisational performance.

(vii) Quality results In the MBNQA, it has been shown that improving internal quality management practices leads to improvement in internal and external quality results (Evans & Jack, 2003). Adam et al. (1997) noted that quality improvement positively correlates with financial performance, which is significantly related to business performance. Therefore, a hypothesis to test this relationship is as follows: H8: A quality result for TQM practices is positively correlated with organisational performance.

(viii) Quality assurance Lin et al. (2005) noted that quality assurance is significantly related with supplier selection strategy where it could improve the management supply chain networks performance. Lakhal et al. (2006) reported that there is a significant relationship between use of statistical quality techniques and organisational performance. Therefore, the next hypothesis attempts to find a relationship between quality assurance and organisational performance.

Figure 5. A proposed conceptual model with hypothesis development.

Total Quality Management 199 H9: Quality assurance for TQM practices is positively correlated with organisational performance.

All the above hypotheses to be tested are summarised in Figure 5 using the proposed structural equation modelling (SEM) method.


Conclusions and future research The primary objective of this paper is to study the relationship between total quality management and organisational performance in automotive industries in Malaysia and Thailand. Even though previous studies have been undertaken to identify successful implementation of TQM practices, it was found that few had tried to investigate the relationship between TQM practices and organisational performance, in particular among South East Asian (ASEAN) countries. Thus, this research attempts to fill that gap and contribute to the development of quality management theory particularly in ASEAN countries. To carry out this research, the TQM constructs and organisational performance measures constructs have been extensively investigated as presented earlier. Based on this review, a conceptual model that links TQM constructs and organisational performance measures constructs which are satisfaction level and business results has been proposed. Nine hypotheses regarding the relation between the elements of the model have been specified. Future research involves data collection and analysis where the hypotheses about the relationships will be tested on Malaysian and Thailand automotive companies. The results will hopefully determine those significant differences in the various TQM practices and their impact on organisational performance of automotive companies in both countries. References Aarts, F.M., & Vos, E. (2001). The impact of ISO registration on New Zealand firms performance: A financial perspective. The TQM Magazine, 13, 180–192. Adam, J.E.E., Corbett, L.M., Flores, B.E., Harrison, N.J., Lee, T.S., Rho, B.H., & Westbrook, R. (1997). An international study of quality improvement approach and firm performance. International Journal of Operations & Production Management, 17, 842–873. Ahire, S.L., & Dreyfus, P. (2000). The impact of design management and process management on quality: An empirical investigation. Journal of Operations Management, 18, 549–575. Ahire, S.L., Golhar, D.Y., & Waller, M.A. (1996). Development and validation of TQM implementation constructs. Decision Sciences, 27, 23–56. Ahmad, S., & Schroeder, R.G. (2002). The importance of recruitment and selection process for sustainability of total quality management. International Journal of Quality & Reliability Management, 19, 540–550. Anderson, J.C., & Gerbing, D.W. (1988). Structural equation modelling in practice: A review and recommended two-step approach. Psychological Bulletin, 103, 411–423. Aziz, Z.A., Chan, J.F.L., & Metcalfe, A.V. (2000). Quality practices in the manufacturing industry in the UK and Malaysia. Total Quality Management, 11, 1053–1064. Benito, J.G., & Dale, B. (2001). Supplier quality and reliability assurance practices in the Spanish auto components industry: A study of implementation issues. European Journal of Purchasing & Supply Management, 7, 187–196. Beaumont, N., & Sohal, A. (1999). Quality management in Australian service industries. Benchmarking, 6, 107–127. Benson, P.G., Saraph, J.V., & Schroeder, R.G. (1991). The effects of organizational context on quality management: An empirical investigation. Management Science, 17, 1107–1124. Blackiston, G.H. (1996). A barometer of trends in quality management. National Productivity Review, 16(1), 15–23.


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