Term Paper: Total Quality Management (TQM)

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¶ … Total Quality Management (TQM) on Performance of an organization. The paper looks at concept, or practices that are applicable as resolutions to a management situation in aviation management. It features a review of Kevin Hendricks and Vinod R. Singhals article, The Impact of Total Quality Management (TQM) on Financial Performance: Evidence from Quality Award Winners. It concludes with recommendations on the implementation and way forward

In the recent past, organizations have experienced drastic changes in business environment occasioned by increased consumer awareness of quality, technological advancement, globalization. With challenges such as the global economic downturn, many organizations are cautiously joining quality movements and have adopted quality improvement measures in order to improve on competitiveness. The aviation sector has been one of the worst hit by the global economic downturn and s rapidly undertaking steps in recovery. In addition, with a diverse customer environment, it is most likely to gain from the benefits of Total Quality Management (TQM). Cioana (2009), advises that the complexities of modern business environment require sophisticated approach. TQM is a revolutionary management theory that needs radical and pervasive change within aviation sector.

Literature Review

Kevin Hendricks and Vinod R. Singhal in this article, The Impact of Total Quality Management (TQM) on Financial Performance: Evidence from Quality Award Winners presents objective evidence on the lack of justification of the criticism of this theory. The author bases evidence on a study of those who have used the theory and succeeded financially. Here three key issues are critically examined, first, the debate on the theory's inability to significantly improve financial performance. Second, the author presents financial reports of publicly traded firms, which have successfully employed TQM. Thirdly, the article examines the financial results in regard to individual characteristics of these firms. The evidence presented here is set as a realistic outcome of the firms that employ this theory.

The value of TQM

Total Quality Management (TQM) has lately been disregarded as inefficient in enhancing financial productivity. This theory integrates principles of customer orientation, employee engagement, continuous improvement and long and effective partnership with stakeholders. It is ironic that those who praised the theory earlier in the 80s are the same business writers demystifying it giving it negative publicity (Hendricks & Singhal, 2000 ). This negative publicity has made many companies question the effectiveness of the theory focusing on the financial performance.

Controversy about TQM

The article examines the sources from where much of the controversy originate. According to Hendricks and Singhal (2000 ), the criticism are based on a series of surveys carried out in 1990 that did not favor TQM, including those conducted by Arthur D. Little, A.T. Kearney as well as McKinsey & Co. In line with this, it appears that many organizations that adopted TQM wanted a quick fix and when this did not happen, they considered it a failure.

Resolving the Controversy

The author claims that the controversy is as a result of anecdotes, impressions, and opinions and not based on scientific evidence. Most of the arguments cannot stand and pass scientific standards. The only way of resolving this issue is by using objective and verifiable data to investigate the association between the theory and financial performance.

Methodology

The study included four steps

Selection of the appropriate performance measures

The primary focus of the study was to investigate the stock price performance of these organizations. Stock price is the most reported and understood performance. It attracts great interest among employees, management and other stakeholders. The goal of an organization is usually to maximize share values at the stock exchange.

Collecting sample of organizations that have effectively employed the theory

The study used the achievement of quality awards as an indication of effective implementation of TQM. Key concepts and values emphasized in these awards are important components of TQM implementation. These awards are given after an organization goes through evaluation at different levels. The stringent evaluation process ensures that the winners successfully implement TQM.

The final sample comprised of 3000 publicly traded organizations that have won quality awards. This gave the flexibility to check past financial information and define performance measures uniformly. These information is in the public domain and could easily be collected from commercially available databases.

Choosing a time period for measuring productivity

The study investigated performance over two five-year periods

The first period was before the implementation

The second was implementation period

Choosing appropriate benchmarks for comparing the financial productivity of sample organizations

Stock market portfolios such as the S&P 500

Results

Implementation period

The study showed that there was no significant difference the productivity of the winners and the set benchmarks.

Stock price performance of award winners during the post -implementation period

Quality award winners performed better than benchmarks on most performance measure.

Profit, growth, and efficiency performance of award winners during the post -implementation period

The study revealed that award winners operating income increased by an average of 91% after the implementation period as opposed to 43% increase over the same time period for the benchmark firms.

The Value of TQM

This study reveals that contrary to the anecdotal and perceptual evidence used by many experts to criticize TQM, t is evident that when the theory is implemented effectively, financial performance improves dramatically. These results support the fact that TQM requires organizational changes that take time to implement. Therefore, patience is the key to successful implementation of the theory.

Shekhar Jha and Joshi (2012), in their study Relevance of Total Quality Management (TQM) or Business Excellence Strategy Implementation for Enterprise Resource Planning (ERP) exposit that not much study has been done on the implementation of TQM as a theory that intergrates enterprice resource planning. In their study they expose the importance of Total Quality Management (TQM) implementation in organizations. In the process, they attempt to integrate the theory as a corporate strategy in organizations. In order for TQM to be effectively implemented, all the units within the firm must be involved. The implementation of TQM incorporates factors such as management commitment, rewards and recognition, leadership among others. These are the base on which to set transformational orientation in development of a sustainable improvement culture.

The study relies on other studies carried out on the TQM theory, which is also referred to as Business Excellence. In a study carried out by Lu & Sohal (1993), list factors that lead to succesful implementation of TQM, the most critical being, awareness of an organization's strategic direction. For succesful implementtion of TQM, the top management must have a clear understanding of the organization's mission, vision and policies. The organization must identify customer expectations and communicate it throughout the organization. Moreover, the organization must have a well defined implementation strategy including, time-frame, resources as well as supportive organizational structure (Lu & Sohal, 1993). The most critical facet of TQM is customer orientation. The theory in a broad sense is concern with people empowerment to take charge the quality they produce. In addition, the theory points to the fact that business does not buy from business, but from people (Shekhar Jha & Joshi, 2012). Therefore, decision to buy is based on quality of the products, sales as well as the support. The aviation sector can discover the benefits of TQM by fully integrating several improvement activities that each addresses the theory. The organization must develop common management elements to enable it realize the true effect of TQM over time.

Conclusion

Quality is a key factor in positioning in the current marketplace. It helps protect the firm as well as the customer from annoyances. It is therefore advantageous for an organization to compete on the dimensions of quality (Kumar, Choisne, Grosbois, & Kumar, 2009). It is common knowledge that achieving zero defect services leads to customer satisfaction and improves internal efficiency thereby reducing cost. The long-term success of an organization depends on how it effects customer orientation. According to Madu and Kuei as quoted in (Sila, 2007) the success of TQM is dependent on whether the organization is willing to change and whether customer satisfaction is a measure of success.

Kumar, Choisne, Grosbois, and Kumar (2009) assert that there is a correlation between quality management and performance defined by employee relations, customer satisfaction, productivity and profitability. The results of this include, improved employee relations where the employees experience improved satisfaction, better operating procedures where companies increase service and product delivery. In addition, the company experience increased customer satisfaction with fewer customer complaints and greater retention, the company also increase financial performance with improved market share and profitability.

In the aviation sector, the theory can lead to performance of processes in a standardized fashion, especially in processing customer related functions such as credit card transactions.

It is important to assess the organization's set and status before the implementation of TQM.

This will include the organizations current needs, history and the events leading to TQM as well as the quality of the staff working experience. TQM is easier to implement in cases where the organization can effectively respond to… [END OF PREVIEW]

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