Total Quality Management in SMEs

That they should remain competitive and produce high quality outputs is of importance not only at the macro level hut also to larger organizations, because SMEs are often suppliers of

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0305-0483/96 $15.00 + 0.00

Total Quality Management in SMEs

A G H O B A D I A N

D N G A L L E A R

Middlesex U n i v e r s i t y Business School, L o n d o n , U K

(Received February 1995; accepted in revised form November 1995)

Small and medium size enterprises (SMEs) are the life blood of modem economies That they should

remain competitive and produce high quality outputs is of importance not only at the macro level hut

also to larger organizations, because SMEs are often suppliers of goods and services to larger

organizations and lack of product quality would adversely affect the competitive ability of the larger

organizations Total Quality Management (TQM) is considered an important quality improvement

tool Compared with large organizations, SMEs have been slow to adopt TQM This paper initially

examines the differences between the characteristics of SMEs and large organizations; the relationship

between the size of organization and inherent characteristics of TQM; and the effect of organization

size on the implementation of TQM using deductive research These issues are further examined

through inductive research For this purpose the development of TQM was studied in four

small-medium size organizations

Key words total quality management, implementation, SME, culture, organizational change

I N T R O D U C T I O N

THE GLOBALIZATION OF markets, growing inter-

penetration of economies, and increased inter-

dependence of economic agents are reshaping

the international and national competitive

environment These fundamental changes are

prompting the far sighted organizations to

re-examine and modify their competitive strat-

egies Small and medium sized enterprises

(SMEs) are not exempt from these pressures

Drihlon et al [10] argued that improving

competitiveness is now an imperative for small

and large businesses alike To survive and

prosper in the 90s and beyond all businesses

need to establish mechanisms enabling them to

exert conscious and sustained effort to continu-

ously improve all facets of their operations The

continuous improvement effort needs to be

coupled with an acute awareness of changes in

customers' requirements; competitive factors;

and broader variations in the business environment In an increasingly competitive market- place businesses with a strong continuous improvement culture and external focus are more likely to survive and prosper Total Quality Management (TQM) is considered an important catalyst in this context This is why the TQM concept has captured the attention of all sides of commerce and industry, as well as that of politicians and academics The large number of articles being published in this area

is a testimony to the high level of interest in quality issues A recent search of the relevant databases showed that more than 900 articles dealing with a facet of TQM have been published in the last 3 years

The published empirical data supports the supposition that by focusing on quality, a business can substantially increase its market share and profitability Phillips et al [29] showed that perceived quality and profitability

83

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84 Ghobadian, Gallear Total Quality Management

were positively correlated This led them to

conclude that in the long-run the relative

perceived quality of an organizations' products

or services relative to its competitors is the most

important single factor affecting its perform-

ance A quality edge boosts performance in two

ways In the short-term, superior quality yields

increased profitability via premium pricing In

the long-term, superior or improving quality

should result in increased market share Higher

volumes of output lead to improved scale

economies that in turn should result in lower

operating costs Thus, the investment required

to improve quality is normally off-set over a

relatively short period of time Gale et al [12]

empirically showed that higher relative quality

and market share lead to substantially higher

return on sales Peters [27], using empirical

evidence collected by Garvin, showed that

improved quality reduced operational costs

There is also empirical evidence clearly indicat-

ing that customers are willing to pay a premium

price for better quality products [30] Peters and

Austin [28] concluded that winning medium

sized companies competed on the value of their

products or services and usually enjoyed

premium prices They achieved this position by

consistently satisfying customers' needs and

meeting or exceeding their perceived quality

expectations Oakland [23] reported the results

of a study that compared the performance of 29

companies practising TQM, along seven key

financial indicators for a 5 year period, with the

corresponding industry medians This study

showed that the performance of all the

companies that had adopted TQM exceeded

their respective industry's median performance

Governments also recognize the link between

relative superior quality and competitiveness

For example, the UK Government in its

consultative document entitled 'A National

Strategy for Quality' [1] identified quality as the

most important non-price determinants of

competitiveness A DTI publication of the UK

Government's Department of Trade and Indus-

try [2] stated that the battle for survival is being

waged and won by the companies wielding the

quality weapon to the best effect To improve

the quality and therefore the competitive

q986 for twelve member states: Belgium, Denmark, West

Germany, Greece, Spain, France, Ireland, Italy,

Luxcmbourg, Netherlands, Portugal, United Kingdom

performance of commerce and industry, the US Government through an act of Congress introduced the Baldrige Award Similarly, the European Quality Award (EQA) and the British Quality Award (BQA) were established with the help and assistance of the European Commis- sion (EC) and the UK Government respectively The evidence presented above shows the competitive importance of relative superior quality Moreover, it was briefly argued that the TQM concept has been successfully used to achieve this end Now we turn our attention to examining the importance of SMEs (businesses employing fewer than 500 people) to the UK's and European Union's economy SMEs domi- nate the industrial and commercial infrastruc- ture, e.g 93% of UK companies employ fewer than 500 people and 60% fewer than 100 people They are the major source of employment For example, SMEs employ 65% companies with less than 100 people employ 47% of the total workforce Micro (fewer than

10 employees) and small (10-99 employees) enterprises have an equal share with medium sized (100-499 employees) enterprises of the distribution of sales in all non-primary sectors Together they account for 60% of all sales in these sectors Figure 1 shows the percentage of gross output of UK manufacturing firms by size for 1991 Significantly, 32% of the gross output

is generated by firms with fewer than 500 employees

In the European Union (EU) 1 the number of enterprises (excluding the primary sector enterprises) is estimated to be around 13.4 million, employing some 92.4 million people Small and medium sized enterprises constituted 8.6 per cent of all enterprises In the manufacturing sector they constituted 16.9% of all manufacturing enterprises, while in the service sector they constituted 6.9% of all service enterprises

Source : The Gus.~lian, M L y 3 1994

Fig I U K manufacturing gross output by size

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Micro enterprises constituted 91.4% of all

enterprises, 82.7% of manufacturing enter-

prises, and 93.8% of service enterprises [25]

Perhaps more significantly, of the total number

of employees in the EU 45% were employed by

SMEs, 26.9% were employed by micro enter-

prises, with the remaining 28.1% employed by

large organizations [25] These statistics are

summarized in Table 1

The economic importance of SMEs is not

restricted to the UK or the EU The

predominance of small businesses in the

Japanese economy is well documented About

75% of manufacturing employment in Japan is

in small and medium-sized companies, in

contrast to about 35% in the United States [19]

It was recently reported that roughly 355,000

US manufacturers with fewer than 500 em-

ployees are responsible for approx 46% of

the value added by the US's manufacturing

sector

SMEs are considered to be the main source of

new jobs Studies conducted in the US and other

empirical data supports this proposition For

example, between 1980 and 1986, manufactur-

ing employment at companies with 500 or more

employees declined by 10.8%, a loss of nearly

1.8 million jobs However, during the same

period, manufacturers employing fewer than

100 workers recruited 326,000 additional

people an increase of 7.5% [19] The vitality of

SMEs has been a major factor in the creation of

new jobs and the economic renewal of certain

regions in Europe, such as the 'third' Italy

(Emilia-Romagna, Tuscany, Venezia) or the

Western region of Jutland in Denmark [10] In

the UK private sector, even when employment

was falling during the recent recession, small

firms were still net creators of jobs employ-

ment in small firms grew by 350,000 between

Source EC-Directorate General XXIII [25]

Organizations competing in an increasingly global market, independent of size or industrial sector, are reliant on SMEs to provide sub-contracting facilities [25] In particular, large organizations tend to rely heavily on subcontractors, and the current trend of focusing on core activities is likely to further polarize the situation Therefore, large organizations are normally dependent on a network of suppliers, most of which will be small firms For example, in the UK 50% of sales in the manufacturing sector are generated through subcontracting In order to improve product quality and implement TQM programmes, the large organizations must be assured of obtain- ing high quality goods and services from small and medium sized suppliers Hence, there is a need for SMEs to meet the required quality standards Moreover, competition means that if

a small firm wants to become a supplier to a large organization, the increasing demand for quality by the latter puts strong pressure on the former to consider the application of TQM Thus, it is logical for the large organizations

to encourage the diffusion of TQM among their suppliers [22] Correspondingly, a small organization cannot produce or create high quality goods or services if the quality of its inputs is inadequate Establishing links with suppliers permits interchange of information and enables the vendors to meet the purchasers' required quality standards more readily and consistently

The TQM concept can potentially play a significant role in this process It provides the basis for a systematic approach to establishing customers' needs and requirements Moreover,

it will help to create an environment favourable

to forging a strong cooperative link between vendors and purchasers; and to improve the effectiveness of communication between the two parties [4]

Large organizations, so far, have been more active in embracing the TQM principles However, smaller organizations with limited resources can equally apply the TQM principles with measurable success, and without undue expense [36] Malcolm Baldrige Award winners Globe Metallurgical Inc., Marlow Industries, and Granite Rock Company, and European Quality Award recipient MiUiken, have been prominent in setting the standards for quality achievement in recent years If this is not a

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powerful enough message to SMEs then it is

important to note that according to the US

Commerce Department, in 1991 out of a total

of 106 Baldrige applicants, 47 were small

businesses [26]

Yet, despite the importance of TQM, SMEs

in the UK have been slow to implement the

concept For example, information from 115

manufacturing organizations showed that by

comparison large organizations were three times

more likely to implement TQM [16] To

compete more effectively SMEs need to heed the

quality message However, prevalence of TQM

in SMEs has wider importance It will

significantly help the quality improvement

efforts of the larger organizations

Five key propositions emerge from the

arguments put forward so far One, a relatively

high level of quality is a key factor in the

attainment of a superior competitive position

Two, TQM concepts facilitate the attainment of

sustainable high goods or services quality

Three, a buoyant SME sector is vital for

economic prosperity Four, SMEs can improve

their competitive position by embracing TQM

concepts Five, the success of quality improve-

ment efforts of larger organizations will

crucially depend on the realization of the quality

improvement of their suppliers which are often

SMEs The stance of this paper is, broadly, to

accept the truth of these propositions

The objectives of this paper are 2-fold: first,

to establish a conceptual framework f o r

examining the link between the inherent

characteristics of TQM and SMEs, and the

effect of size on the implementation process; and

second, through field research to examine the

relevance of the issues identified in the first part

of the paper Therefore, the paper is divided into

two distinct but interrelated parts In the first

part, through deductive research, the differences

between the characteristics of SMEs and large

organizations are examined This provides the

foundation to examine the impact of size on the

implementation process and to identify the size

dependent inherent characteristics of TQM The

likelihood of the success of a TQM programme

is significantly affected by the implementation

process Therefore, the identification of differ-

ences is of practical importance Moreover, by

identifying the key priorities, the identification

of size dependent characteristics will benefit the

planning process

In the second part, with the help of four case studies, the validity of the issues highlighted in the first part of the paper is examined In view

of the complexity of the issues involved, a case based qualitative approach appeared to provide the most logical research methodology There- fore, caution must be exercised in reaching generalized conclusions However, this does not diminish the value of the research, insofar as it establishes a conceptual framework and vali- dates the framework through studies of two small and two medium size manufacturing organizations Furthermore, this study lays the foundation for further empirical research in this important area

DIFFERENCES BETWEEN SMEs A N D LARGE

ORGANIZATIONS

Most of the published literature describes and discusses the application of TQM concepts in large organizations [22] Ideas expounded by the quality gurus are primarily designed to meet the needs of large organizations and multinationals [15] Furthermore, the concepts of TQM presented in numerous videos, seminars, and books are more in tune with the needs of large organizations than those of SMEs [17] The attention paid to the development of TQM in large organizations is understandable as these organizations traditionally have been responsible for propagating the virtues of TQM and championing the concept The environment in which TQM is developed would not be an issue

if SMEs and large organizations possessed similar characteristics In practice, however, there are significant structural differences between SMEs and large organizations These differences are likely to influence the relevance, planning and implementation of the TQM concept Welsh and White [35] succinctly summed up these points They suggest that a small business is not a 'little' large business Differences exist in structure, policy making procedures, and utilizations of resources to the extent that the application of large business concepts directly to small businesses may border

on the ridiculous Table 2 depicts the main differences to be expected between SMEs and large organizations in areas relevant to the design and actuation of TQM We briefly discuss some of the differences

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Large organizations are usually bureaucratic,

that is to say, they rely on the formalization of

behaviour to achieve co-ordination Thus, in

bureaucratic organizations, the levels of special-

ization, standardization, and formalization are

likely to be high SMEs, on the other hand, are

more likely to be organic A salient feature of an

organic organization is the absence of standard-

ization and the prevalence of loose and informal

working relationships Burns and Stalker [8]

found that bureaucratic structures worked well

for organizations operating in a stable condition

but not so well in a turbulent environment

where the key to survival is innovation or

flexibility to adapt to the new situation

SMEs can normally operate with a single

manager at the strategic apex In large

organizations, the division of functions and

labour, and 'span of control' considerations

result in the creation of a hierarchy of authority

Thus, there are several layers of management

between the manager at the strategic apex and

operatives This means that top managers, in

large organizations, are far removed from the

point of delivery Thus, they are likely to

lack deep understanding of operational issues, processes, customers' needs, and quality difficulties, unless they make a point to observe and experience the situation at the point of delivery Moreover, they will lack visibility and face difficulties in organizing effective communications and providing leadership by example The flat structure of SMEs and fewer departmental interfaces normally result in a more flexible work environment [38] Lack of an extended hierarchy offers the top management the opportunity to build a strong personal relationship with employees, but it also in- creases the potential for interpersonal conflict

At SMEs, managers and operatives are more likely to be directly involved with the customers Two way, face to face communication is the norm in SMEs

The prevailing cultures in SMEs and in large organizations also differ because of the span of activities, geographical dispersion, the background and range of employees, the age of the organization, and the existing precedences Culture may be defined as norms, values, and informal beliefs held by people in an organiz-

Table 2 A comparison between the characteristics of large, medium and small organizations

Hierarchical with several layers of management

Clear and extensive functional division of activities High degree

of specialization

Strong departmental/functional mind set

Activities and operations governed by formal rules and procedures

High degree of standardization and formalization

Mostly bureaucratic

Extended decision-making chain

Top management a long distance away from the point of delivery

Top management's visibility limited

Wide span of activities

Multi-sited and possibly multinational

Cultural diversity

System dominated

Cultural inertia

Rigid organization and flows

Many interest groups

Incidence of fact-based decision-making more prevalent

Dominated by professionals and technocrats

Range of management styles: directive; participative; paternal; etc

Meritocratic

Individuals normally cannot see the results of their endeavours

Ample human capital, financial resources and know-how

Training and staff development is more likely to be planned and

large scale

Specified training budget

Extensive external contacts

High incidence of unionization

Normally slow response to environmental changes

High degree of resistance to change

Potentially many internal change catalysts

Low incidence of innovativeness

Formal evaluation, control and reporting procedures

Control oriented

Rigid corporate culture dominating operations and behaviours

Flat with very few layers of management Division of activities limited and unclear Low degree of specialization Absence of departmental/functional mind set Corporate mind-set Activities and operations not governed by formal rules and procedures Low degree of standardization and formalization

Mostly organic Short decision-making chain Top management close to the point of delivery Top management highly visible

Span of activities narrow Single-sited

Unified culture People dominated Fluid culture Flexible organization and flows Very few interest groups Incidence of 'gut feefing" decisions more prevalent Dominated by pioneers and entrepreneurs Range of management styles: directive; paternal Patronage

Individuals normally can see the results of their endeavours Modest human capital, financial resources and know-how Training and staff development is more likely to be ad hoc and small scale

No specified training budget Limited external contacts Low incidence of unionization Normally rapid response to environmental changes Negligible resistance to change

Very few internal change catalysts High incidence of innovativeness Informal evaluation, control and reporting procedures Result oriented

Operations and behaviour of employees influenced by owners'/managers" ethos and outlook

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ation The prevailing culture gives rise to

specific decisions, policies and activities Culture

is highly informal and perceptual, but usually

dictates what activities or behaviours are

necessary to become successful in a particular

organization Education and training, employee

participation programmes, enhanced communi-

cation programmes, revision of procedures and

policies, modification of evaluation and reward

system, and behaviour of top managers can all

influence the culture of an organization

The evaluation, reward and reporting pro-

cedures are simpler in SMEs Moreover, it is

simpler to establish a clear link between reward

and behaviour On the other hand, managers in

SMEs are responsible for many facets of the

business and many decisions The planning

process is not formal and multi-functional

planning takes place within individual minds

The extent of training and staff development

in SMEs is limited and informal This is due to

fewer and more broadened human resources,

lack of qualified specialist personnel, and

financial constraints

On the other hand, SMEs are more likely to

be 'people oriented' rather than 'system

oriented', and flexible In fact, research in both

Europe and America [32, 20, 6], shows that

SMEs are more responsive to market needs,

more adaptable to change, and more innovative

in their ability to meet customers' demand

ORGANIZATION SIZE A N D

IMPLEMENTATION OF TQM

The adoption of TQM is a radical and

fundamental change in every aspect of business

Such a radical change requires careful planning

if it is to succeed TQM practitioners have

proposed a number of different implementation

models Deming proposed an implementation

plan consisting of 14 steps, Juran put forward a ten step plan, and Crosby suggested a 14 step programme for the implementation of TQM [15] Oakland [24] proposed an eleven step process, but he also identified two preliminary stages: understanding the need for quality, and commitment to quality These TQM implementation models are sequential and prescriptive Ghobadian [13] proposed an integrative model where only the key elements of TQM are predefined Figure 2 depicts this model Management process (i.e management practices and attitudes) is the key element in the implementation of TQM, hence its position at the spine of the fishbone diagram The other elements are:

(a) the direction of the organization focus: this should be external aiming to meet the needs of the customer;

(b) process focus around the outcome requirements rather than the tasks;

(c) people focus; and

(d) communications and measurements

The main elements can be subdivided into a number of sub-elements In this model, the responsibility for the identification of the sub-elements (improvement projects) underpinning the implementation of TQM rests with the organization This is because particulars within any approach are more likely to be contingency dependent than the broad approach

One such contingency is the size of the organization, and it is reasonable to assume that implementation is size dependent In other words size is likely to influence the broad steps necessary to implement TQM Furthermore,

MARKET, STAKEHOLDER FOCUS PROCESS

I PEOPLE FOCUS

I[ PROCESS

FOCUS

) Fig 2 The salient elements of TQM implementation

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there is a high probability that size will influence

the implementation detail in terms of specifics

within each broad step A proper examination

of these hypotheses required a careful consider-

ation of salient key steps and particulars of

TQM implementation Therefore, the common

steps and elements proposed by the above

models were identified Using a deductive

approach, the nature of the impact of organiz-

ation size on the salient common elements were

considered SMEs are likely to encounter

advantages and disadvantages relative to large

organizations with respect to these elements

The advantages and disadvantages are high-

lighted below

ADVANTAGES There is unanimous agreement that

visible leadership from the top is

important to the successful implemen-

tation of TQM SMEs have a distinctive

advantage in this respect because nor-

mally without much effort the CEO of an

SME enjoys a high degree of visibility

and can readily emphasize the import-

ance of quality In a large organization

this may not be readily possible

Improvement teams, a cornerstone of

TQM introduction, have a better vertical

and horizontal visibility at SMEs There-

fore, the level of commitment and

support generated by a quality improve-

ment team can directly and indirectly

influence the change in corporate culture,

a key factor in the successful implemen-

tation of TQM

External focus means that, in a TQM

environment, every employee needs to be

aware of customers' needs and be a

marketer In SMEs employees tend to be

closer to the firms' products and cus-

tomers, creating an increased sense of

responsibility

Smaller companies have a natural ten-

dency for cross-functional training be-

cause they have fewer layers of

management and staff With fewer

people to mobilize, change can come

quickly because the effort required

to gather diverse groups of people

together to initiate change is normally

modest [5]

- - I t is easier for small companies to create the kind of atmosphere that fosters personal growth, shows workers how their jobs fit into the overall organizational goals and encourages them to come up with ideas for improving or expanding the business [26]

- - I n a small firm, employees usually have

a very good sense of the overall profitability of the company, and they are committed to trying to improve the business because they know it will directly affect them [26] Individuals can more readily see their efforts translated into tangible results in SMEs

Decision making processes are simpler in SMEs because there are fewer layers of management Communications and co- ordination between staff is easier and less bureaucratic than in large organizations [5] Line and staff managers have better access to each other and to the CEO Thus, cross-functional activities are easier to organize

The resistance to change is likely to be greater and more significant in larger organizations than SMEs There are a number of factors that contribute to this phenomenon: the existence of a large number of different interest groups in big organizations; the prevalence of a strong departmental and functional mind set; the presence of a significant degree of cultural diversity and inertia; the existence of a high degree of standardization and formalization; the sheer number of employees involved; communication difficulties; and, potentially, a high degree of unionization Moreover, multi- plicity of sites can increase the implementation complexities SMEs normally operate on a single site and, therefore, it

is simpler to launch a TQM programme

is necessary in an SME Thus, once

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recognition has taken place, there is little

conflict in communicating the vision to

the whole organization This should

make it easier to raise quality awareness

in SMEs

Functional integration is easier to attain

DISADVANTAGES

- - I n very small companies, the owner's or

chief executive's personality may domi-

nate the culture [38] Many owners have

little formal management training This

may result in inflexibility and rigidity of

outlook

The limited size of the management team

means that individuals are often respon-

sible for a number of different functions

with little backup [38] Frequently, they

are busy with managing the day-to-day

activities of the business and have little time

left for activities perceived as adjunct In

general, a short rather than long range

management perspective dominates

- - A small number of de-motivated or

uncommitted staff can disproportion-

ately affect the quality outcome This is

because most SME employees have at

least some contact with external cus-

tomers Therefore, the health of the

business depends on all employees being

motivated to provide the best service

available [26]

Retraining employees when jobs become

superfluous rather than laying them off is

difficult to justify The flat structure of

SMEs can leave employees frustrated

because they are often unable to realize

their short and mid-term career goals

This is why SMEs may find it difficult to

employ high calibre staff and even harder

to retain them

SMEs are often under pressure to gain

registration to a standard quality man-

agement system [3] Meeting the require-

ments of these standards can be a

formidable obstacle to a small company

It requires motivation by the manage-

ment to appreciate, achieve and im-

plement the necessary measures to meet

the standards ' criteria Moreover, the

organization needs to possess or be able

to purchase the necessary technical and

human resources [9] It has been deter- mined that the total average cost to an SME of designing and installing a QA system and gaining certification is around £25,000 [31] Furthermore, the total average costs of maintaining certification is put at around £14,700 per annum [31]

Resource paucity is arguably the most serious disadvantage faced by SMEs The term resource is used in its broadest sense SMEs suffer from lack of specialist knowledge and technical expertise [33], insufficient external information on which to base decisions, and lack of capital However, the most scarce resource is arguably management time To successfully implement a quality improvement programme, it is necessary for the management and staff to devote quality time to this task This require- ment can cause considerable difficulties

in an SME, because it lacks the economies of scale enjoyed by large organizations [22]

Time and staffing constraints often preclude the administration of compli- cated incentive and reward programmes [26] Similarly, it may be difficult to design and operate an effective performance measurement system and move towards fact based management Finally, SMEs are usually sceptical

of outside help Moreover, there is generally less interaction and sharing of information among SMEs Coupled with an unsystematic management style, and the fact that market research is usually incidental, potentially valuable knowledge from external sources is often neglected

The identification of the strengths and weaknesses of SMEs in terms of implementation

of TQM facilitates the design of a more effective approach This is of considerable importance as the implementation process is a key determinant

of successful introduction of TQM

INHERENT CHARACTERISTICS OF TQM AND SIZE OF THE ORGANIZATION

An important point to consider is the relationship between the inherent characteristics

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of TQM and organization size The issue is

whether the size of an organization significantly

affects the appropriateness of TQM, or whether

other contingencies play a more important role

To examine this point it is necessary to first

examine the inherent characteristics of TQM

TQM is a management philosophy that

expounds values and principles largely at odds

with values and principles propagated by Taylor

[34] and Fayol [11] Broadly, both Taylor and

Fayol directed their attention to tasks, working

systems, and numbers The principles propa-

gated by them dominated Western management

thinking for most of this century The economic

success of Japan attracted the attention of

Western managers to an alternative manage-

ment philosophy and concept, namely TQM

Here management focuses its attention on the

market, the people who carry out the tasks,

processes, and outcomes

Like most significant new and abstract

philosophies, TQM is interpreted and defined in

different ways These span a broad continuum

At one extreme of this continuum stands the

'system dominated rational analytical ap-

proach', and at the other extreme the 'imprecise

behavioral approach' However, the examin-

ation of secondary source data suggests a broad

agreement on the shape of a TQM managed

company A TQM environment is reliant on

team work, participation, open culture, effective

all round communications, empowerment and

devolution of decision making, effective

measurement and fact based decision making,

motivated and trained staff, eradication of fear,

removal of sources of problem and error, and

continuous search for improvement regardless

of its magnitude Deductive research led

Ghobadian [13] to propose the following

definition:

~TQM is a structured attempt to re-focus the organization's

behaviour, planning and working practices towards a

culture which is employee driven, problem solving, customer

oriented, and open and fear-free Furthermore, the

organization's business practices are based on seeking

continuous improvement, devolution of decision making,

removal of functional barriers, eradication of sources of

error, team working, and fact-based decision making"

From the above definition it is clear that

TQM is likely to involve cultural change at all

levels of an organization Once the top

management recognizes the need for change,

then it is easier to attain cultural change in

SMEs than in large organizations However, it

is probably more difficult for SMEs' management to recognize the need for change This is because of limited resources and external contacts, pressures on top management's time, and the style of management

We have so far examined three broad and interrelated areas using a deductive approach First, the differences between large organizations and SMEs were highlighted Second, the impact of size on the implementation process was explored Third, the inherent salient features of TQM were identified The information was brought together to examine the relationship between the salient characteristics

of TQM and the size of organization, using the profile analysis technique This analysis facili- tated the formation of a series of conceptual propositions The result of this analysis is depicted in Fig 3

For the most part, organization size and the inherent characteristics of TQM appear to be independent of each other Therefore, one may conclude that other contingency factors are more significant in determining the appropriateness of TQM than organization size Among the most important factors are management style, achievement style, self-actualization, and affilia- tive style That is to say, soft contingency issues connected with management approach and culture of the organization

Some TQM characteristics, on the other hand, appear to be size dependent Broadly, there is greater correspondence between the inherent characteristics of TQM and those of SMEs than between those of TQM and large organizations Thus, on the surface SMEs appear to be better placed to introduce TQM Probably the biggest obstacle to the introduction of TQM in SMEs is the 'management realization' and the ability of owner managers

to modify their behaviour and management style These are major obstacles and not easy to overcome There is also the issue of resources Arguably, there is a greater degree of divergence between the inherent characteristics of large organizations and requirements of TQM, but, because of abundance of resources and wide range of external contacts, realization is likely to occur quicker and more frequently Moreover,

in larger organizations there is professional management with a tradition of hierarchy of authority, so that it might be easier for

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TQM Requirements / Characteristics

Top management believes that quality is even/ones

responsibility and that quality leadership starts at the top

SMEs I

i

Plans and manager's quality chain

Explicit and disciplined about goals, roles, and standards at

ell levels

Decision-making devolved to the lowest possible level

Empowerment

Effective and open communication channels

Continuous improvement culture

Cultural change

Resistance to change

Values people

Focuses on preventing problems

Runs by people working with other people

Open culture - Invites and encourages participation

Availability of company related information

Mistakes are not punished, rather they are considered as a

part of the learning process

Employees know that positive efforts to improve quality will

be recognised

Drive out fears in dealings with the organisation

Team working encouraged and fostered

S ~ e ~ Large independent I organisetions

High spending on training

Attainment of corporate objectives flows from customer

satisfaction

Treats complaints as an opportunity to learn

Cost containment through disciplined approach to own

operations and to supply chain

,,,,,

Company-wide awareness

Functional integration

Continuous search for the improvement of the business

with quality, productivity and cost redu~on as indivisible

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management in larger organizations to accept

the type of behaviour imposed by TQM

philosophy

PRIMARY RESEARCH

The primary data were collected through in

depth case analysis The variables being

investigated were subtle and intangible They

could sensibly be examined only through an in

depth study Therefore, a survey approach was

deemed inappropriate On the other hand

caution must be exercised in extrapolating and

generalizing the findings of this research

Homans [18], in discussing research methods,

suggested that there are neither good nor bad

methods, but only methods that are effective

under particular circumstances in reaching

objectives on the way to a distant goal Case

methodology provided the most effective route

to the attainment of our research objectives

Four manufacturing organizations were stud-

ied Two were small organizations and two

medium size organizations The concepts put

forward in the previous sections did not readily

lend themselves to direct examination There-

fore, they were studied as a part of broad

examination of: (a) the TQM implementation

process; (b) the impact of TQM and the

resulting organizational change; and (c)

difficulties encountered in implementing and

operating TQM The four cases are presented in

this section

CASE STUDY I DUTTON ENGINEERING

(WOODSIDE)

Brief background

Dutton Engineering (Woodside) is a subcon-

tract precision engineering fabricator The

company manufactures prototype or small

batches of stainless steel enclosures and

fabrications for the electronics industry Its

turnover, last year, was of £1.3M Dutton

2BS5750 is a series of national standards which promulgate,

for use by UK suppliers and purchasers, the ISO 9000

series international standards and the EN 29000 series

European standards for quality systems respectively

BS5750 sets out how an organization can establish,

document and maintain an effective quality system

which will demonstrate to the organization's customers

that the organization is committed to quality and are

able to supply their quality needs [3]

employs 27 people 21 direct employees and 6 indirect employees

Why TQM and the main steps involved in its implementation

In 1984 Dutton faced a number of problems Chief among these were poor delivery performance, quality problems caused by a functional approach to quality, and poor financial returns

To counter these problems, Dutton introduced BS57502 and obtained accreditation in 1984 However, soon the realization dawned that BS5750 was not going to make a significant impression on these problems Internal problems were the catalyst for recognizing that change was required Internal resources, however, were incapable of specifying the nature and the direction of change Therefore, management looked outside, but was unable to find the appropriate help and advice in the UK Consequently, the Managing Director under- took an exploratory visit to Japan in 1984 The key lesson of the visit was the importance of building trust within the supply chain and among employees

Dutton became acquainted with the TQM concept in 1988, when a customer presented the principles of its Company Wide Quality Improvement Programme (CWQI) to its suppliers In addition, the company offered to help the interested suppliers to implement TQM in their organizations Following further discussions Dutton's Managing Director became a convert

to the TQM cause The customer helped Dutton

to design and deliver CWQI awareness training

to all its employees Dutton's experience highlights some of the conceptual points raised previously: the importance of recognizing the need for change; limitations of internal know- how; the key role of external sources as the catalyst for new ideas; and the relative ease of training all employees once resources are available Dutton was fortunate in that it had a progressive customer that offered help and support Other SMEs may not be as fortunate The visit to Japan and introduction to the principles of TQM raised the management's awareness However, they had the foresight to recognize that their understanding was superfi- cial and they required a deep understanding of issues prior to embarking on the TQM journey Therefore, the Managing Director spent a year examining and identifying the potential sources

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of poor and high product quality and

delivery performance as well as the principles of

TQM

A comprehensive implementation plan was

not developed The implementation priorities

were generated organically These were guided

by the following five principles:

simplify the manufacturing process;

reduce the working inventory;

increase employees' skill flexibility;

maintain and improve product quality, and

remain highly customer focused; and

strive towards zero defects

To launch the CWQI the following six

initiatives were introduced initially and in quick

succession

Educating all employees The vehicle used for

this purpose was the Awareness Day Its aims

were 2-fold: first, to ensure that everybody

understood the need for change; and second, to

ensure that everybody was familiar with the

principles underpinning the CWQI programme

and understood how it would help the firm to

change All new employees received this

education to ensure constancy of purpose To

reinforce the message all employees were

furnished with a pocket size CWQI guide that

highlighted the salient features of the pro-

gramme

Annual hour scheme This was construed

by the workforce as a sign of trust, and it

enhanced operational work flexibility, thus

facilitating a more effective management of the

workflow Now if there is no order to fulfill the

workers can go home rather than make for

stock

Change in the status of blue colour workers and

the reward system By harmonizing the payment

method the distinctions between the white and

blue colour workers were removed Overtime

payments were eliminated However, the man-

agement introduced a profit sharing scheme

This heightened employees interest in issues

such as the operating costs, profitability, and

customer satisfaction

The introduction and reinforcement of the

'internal customer' concept This helped to build

and cement strong trust between employees

Moreover, it helped to heighten individual's

awareness of needs and requirements of

colleagues

Elimination of mangers' resistant to change

The initiative was not welcomed by all middle

managers Those who reacted negatively were

identified and dismissed Dutton's experience shows that SMEs are also susceptible to resistance, but the scope of resistance is limited and it is relatively easy to overcome resistance High visibility made it easy to convey that obstacles on the path of quality improvement effort would not be tolerated

Elimination o f quality inspectors from the

company This transferred the responsibility and authority for conformance to and improvement

in quality to the shopfloor employees It made

no sense to spend £50,000 to train an apprentice and then turn around and tell him that he was not responsible for the quality of his output This conveyed a lack of trust The transfer would have been more difficult and certainly much slower if the direct employees were more numerous

The above six initiatives gave the CWQI programme some quick wins and, therefore, momentum Furthermore, these initiatives spurred the culture change

The initiatives discussed below formed the second stage of the CWQI programme

Team work For the achievement of everyday tasks, employees were organized into multi- skilled teams with responsibility for specific products and customers In addition, each team was responsible for recruitment, planning, purchasing, and skill development Further- more, teams were responsible for the continuous improvement activities Team leaders were trained for their role, and they were encouraged

to keep up to date by attending training courses outside the company Teams were encouraged to learn from customers and suppliers by visiting them or working at their premises on an ex- change basis They were also encouraged to benchmark against other companies Teams met formally once a week to discuss production issues and conduct skill training At Dutton teams were given significant authority The small numbers of employees and teams made this readily possible Their high degree of visibility across the company enabled them to influence key business issues The development of effective team work required careful planning However, the fact that everybody knew everybody else and people worked closely with each other meant that teams jelled together very quickly

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