Proposed relationship of TQM and organisational performance using structured equation modelling

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Proposed relationship of TQM andorganisational performance usingstructured equation modellingN. M. Zakuan a , S. M. Yusof b , T. Laosirihongthong c & A. M.Shaharoun ba Department of Manufacturing & Industrial Engineering, Facultyof Mechanical Engineering , Universiti Tun Hussein Onn Malaysia(UTHM) , Parit Raja, Batu Pahat, Johor, Malaysiab Department of Manufacturing & Industrial Engineering, Facultyof Mechanical Engineering , Universiti Teknologi Malaysia (UTM) ,Skudai, Johor, Malaysiac Department of Industrial Engineering, Faculty of Engineering ,Thammasat University , ThailandPublished 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

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Proposed relationship of TQM and organisational performanceusing structured equation modelling

N.M. Zakuana, S.M. Yusofb, T. Laosirihongthongc� and A.M. Shaharounb

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

Total quality management (TQM) has been considered as an infrastructural strategyin the operations management research field. It is one of the most recognised modelsfor operational excellence besides lean operation, supply chain management, andtechnology management. Both manufacturing and service organisations tend toimplement this strategy in order to maintain their competitive advantage. Thepurpose of this paper is to develop the conceptual model of TQM implementation inrelation to organisational performance. The authors have reviewed the literature onTQM and organised the paper along two main themes: the evolution of TQMconsidered as a set of practices, and its impacts on organisational performance. Tworesearch questions are proposed in order to re-validate TQM constructs: (1) Is the setof practices associated with TQM valid as a whole? (2) What performance measuresshould 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 achieve-

ment 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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DOI: 10.1080/14783360903550020

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�Corresponding author. Email: [email protected]

Total Quality Management

Vol. 21, No. 2, February 2010, 185–203

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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 man-

agement 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 inter-

national 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 nowa-

days 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) con-

ducted 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 manage-

ment 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 competi-

tive 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 man-

ufacturing 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

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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 man-

ufacturing small and medium enterprises (SMEs). They found that there is a reliance on

inspection and relatively low use of sophisticated statistical methods for quality improve-

ment 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 manage-

ment 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.

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Table 1. Countries investigated and the number of corresponding articles.

Country No Country No

Australia, New Zealand 7 Germany, UK 1USA, Canada 4 Spain, Netherlands, UK 1USA, UK, Middle East, Singapore/

Malaysia1 Asia/South Pacific, Europe, North America 1

India, China, Mexico 3 China, Norway 1Australia, Europe 3 Argentina, Brazil, Chile, Mexico 1USA, Japan 3 Twelve countries – Russia, USA, etc. 1USA, Canada, Germany, Japan 2 Eastern and Western Companies 1USA, Mexico 2 Nordic countries and East Asia 1Japan, UK 2 Japan, Korea 1USA, Spain, Europe 1 USA, UK, Japan 1USA, Spain 1 USA, Taiwan 1USA, Costa Rica 1 USA, Luxembourg 1USA, India, China, Mexico 2 USA, Mexico, Australia 1USA, Germany, Denmark, Canada 1 USA, Japan, Korea, EU, Mexico 1USA, India, China, Mexico, Taiwan 1 Australia, Japan 1An international survey of 45 major

corporations1 Australia, Singapore 1

USA, Germany, Japan 1 Australia, New Zealand, UK 1USA, Germany, UK 1 Australia, UK 1USA, UK, Canada 1 Brazil, UK 1USA, Korea, New Zealand 1 Denmark, East Germany, West Germany,

Finland, France, UK, Ireland, Italy,Netherlands, Norway, Sweden,Switzerland, Spain, Turkey

1

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

1 East (Japan, Korea and Taiwan) and West(Denmark, Finland, Sweden andAustralia)

1

Source: Sila and Ebrahimpour (2002).

Table 2. Research on comparative study in quality practices implementation between countries2000–2007.

Year Author Focus area Sector Countries

2000 Aziz et al. Quality practices Manufacturing UK, Malaysia2002 Ahmad and

SchroederTQM Automotive US, Germany, Italy, Japan

2003 Noronha TQM Manufacturing China, Hong Kong, Taiwan2003 Khoo and Tan TQM Manufacturing US, Japan2005 Jabnoun TQM Manufacturing Saudi Arabia, Australia,

Canada2005 Rothenberg et al. Benchmarking Automotive US, Japan, Europe2006 Schnirderjans et al. MBNQA Manufacturing India, Mexico, US2006 Iwaarden et al. Quality practices Automotive European2006 Yoo et al. Quality practices Manufacturing Korea, USA, Mexico, Taiwan2006 Parast et al. Quality practices Manufacturing USA, Mexico2006 Hermann et al. Quality tools Automotive Germany, France, England,

Italy2006 Feng et al. TQM Manufacturing Australia, Singapore2007 Tari et al. TQM Manufacturing Spain, US, Korea

188 N.M. Zakuan et al.

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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).

Table 3. Constructs proposed by literature.

Constructs Related constructs

Quality leadership (QL) The role of top management leadership (Saraph et al., 1989), topmanagement support (Flynn et al., 1994), top managementcommitment (Ahire et al., 1996), management leadership (Yusof& Aspinwall, 2000), leadership (Sila, 2007)

Customer focus andsatisfaction (CFS)

The role of quality department (Saraph et al., 1989), customerinvolvement (Flynn et al., 1994), customer focus (Ahire et al.,1996), customer orientation (Rao et al., 1999)

Quality information andanalysis (QIA)

Quality data and reporting (Saraph et al., 1989), quality information(Flynn et al., 1994), quality information and availability (Ahireet al., 1996), information and analysis (Sila, 2007)

Human resource development(HRD)

Workforce management (Flynn et al., 1994), employee training(Ahire et al., 1996), education and training (Reed et al., 2000),support for human resource development (Sila, 2007), humanresource management (Parast et al., 2006)

Strategic planningmanagement (SPM)

Process design management (Saraph et al., 1989), processmanagement (Flynn et al., 1994), design quality management(Ahire et al., 1996), strategic planning process of qualitymanagement (Parast et al., 2006)

Supplier quality management(SQM)

Supplier involvement (Flynn et al., 1994), supplier qualitymanagement (Ahire et al., 1996), supplier quality (Parast et al.,2006; Rao et al., 1999), supplier quality assurance (Yusof &Aspinwall, 2000), supplier management (Sila, 2007)

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

No. Saraph et al. (1989)

Flynn et al.

(1994) Ahire et al. (1996) Rao et al. (1999)

Yusof and

Aspinwall (2000) Parast et al. (2006) Sila (2007) Proposed constructs

1 The role of top

management

leadership

Top

management

support

Top management

commitment

Top management

commitment

Quality citizenship

Management

leadership

Quality leadership Leadership Quality leadership

2 The role of the quality

department

Customer

involvement

Customer focus Customer orientation – Customer focus

and satisfaction

Customer focus Customer focus and

satisfaction

3 Quality data and

reporting

Quality

information

Internal quality

information usage

Benchmarking

Quality information

availability

Measurement and

feedback

Quality

information

and analysis

Information and

analysis

Quality information

and analysis

4 Training Workforce

management

Employee training Employee training Education and

training

Human resource

development

Support for human

resource

development

Human resource

management

Human resource

development

5 Employee relations – Employee

empowerment

Employee involvement Resources – – –

Employee

involvement

6 Product/service design

Process management

Product design

Process

management

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

involvement

Supplier quality

management

Supplier quality Supplier quality

assurance

Supplier quality Supplier

management

Supplier quality

management

8 – – Product quality Internal quality results – Quality results Organisational

effectiveness

Quality results

9 – – – – – Quality assurance

of products and

services

– Quality assurance

10 – – Supplier

performance

External quality results Continuous

improvement

process

– Financial and

market results

–

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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 perform-

ance comprised four items: productivity, number of successful new product, cost perform-

ance, 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 perform-

ance 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 prin-

ciples 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.

Table 5. Performance measures proposed by different authors.

Author(s) Measure Variables

Lin et al. (2005) Organisational performance † 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

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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 multidimen-

sionality 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 organis-

ational performance using SEM as shown in Figure 2. The results showed that

quality management (QM) practices are significantly correlated with the supplier partici-

pation strategy and this influences tangible business results and customer satisfaction.

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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 pro-

posed to model the relationship between TQM practices and organisational performance

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).

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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 environ-

ment 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 pro-

ductivity, 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

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

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Table 6. Summary of past-related research using SEM approach.

Author Factor Findings Focus area

Kanji (1998) † Leadership† Teamwork† People make quality† Continuous

improvement† Prevention

A structural model has beenused for the measurement ofbusiness excellence where 14interrelated latent variablesare introduced

Businessexcellence

Liker et al.(1998)

† Componentcharacteristic

† Supplier technical† Buyer–suppler

relationship† Use of CAD

Involving supplier at earlydesign stage is associated withgreater contributions of costreduction and higher quality

Automotive design

Ahire andDreyfus(2000)

† Design management† Quality training† Product design† process quality† External, internal

quality

Design and process managementhave positive impact on TQM

TQM

Narasimhanand Nair(2005)

† Quality expectationsfrom supplier

† Information sharingand trust withsupplier

Quality expectations andinformation sharing and trustbetween buyer and suppliershave a positive influence onsupply chain

Supply chain

Hemsworthet al. (2005)

† Supplier quality† Personnel

management† Cross-functional

coordination† Management

commitment† Benchmarking

Quality management has a directimpact on information systemand purchasing performance

Informationsystem inpurchasing

Rohani et al.(2006)

† CommitmentManagement

† System AndProcedure

† Culture† Training† Deployment† Recognition† Team

Propose theoretical modelbetween SPC andimprovement in qualityperformance

Statistical ProcessControl (SPC)

Grobler andGrubner(2006)

† Quality† Delivery† Flexibility† Cost

Finds mostly cumulative effectsbetween the manufacturingcapabilities

Manufacturingstrategy

Suradi et al.(2007)

† Commitment fromtop

† Customer focus† Campus facility† Communication† Course delivery† Learning

environment† Continual assessment

There is a direct effect betweensome of education services inquality technical education

Quality ineducation

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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 improv-

ing quality management practices leads to improvement in business results (Evans & Jack,

2003). Kaynak (2003) reported that TQM leads to quality performance and has been sig-

nificantly 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 tobetter 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.

Figure 4. A proposed conceptual model of TQM practices.

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(1997) noted that leaders play an important role in how TQM is implemented in a consist-

ent 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 organisationalperformance.

(ii) Customer focus and satisfaction

Organisations must be knowledgeable in customer requirements and responsive to custo-

mer 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 organis-ational 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 hypoth-

esis attempts to find a relationship between quality information and analysis, and organis-

ational performance.

H4: Quality information and analysis for TQM practices is positively correlated with organ-isational 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 signifi-

cantly and positively correlated with purchasing operational performance (POP). Accord-

ingly, the next hypothesis relates to human resource development and organisational

performance.

H5: Human resource development for TQM practices is positively correlated with organis-ational 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.

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H6: Strategic planning management for TQM practices is positively correlated with organis-ational 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 pro-

grammes 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 sup-

plier 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 hypoth-

esis is as follows:

H7: Supplier quality management for TQM practices is positively correlated with organis-ational 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 perform-

ance, 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 organisationalperformance.

(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 statisti-

cal 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.

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H9: Quality assurance for TQM practices is positively correlated with organisationalperformance.

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.

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