International Journal of Engineering & Technology IJET-IJENS Vol:10 No:04

TQM Practices & Organizational Performance:

Evidence From Pakistani SMEs
SHAHAB ALAM MALIK1*MUHAMMAD ZAHID IQBAL1, RAZIA SHAUKAT1
AND JIA YONG2
*E-mail: shahab@comsats.edu.pk
1
Department of Management Sciences, COMSAT S Institute of Information Technology, Park-road, Chak Shahzad, Islamabad, Pakistan
2
School of Economy & Management, Harbin Institute of Technology, P.R.China
GDP is 40% appro ximately
Abstract - The purpose of this study was to explore the [8]. Owing to the
impact of total quality management practices on non- tremendous contribution of
financial performance of S MEs. Six determinants of TQM SMEs can make in the
practices were identified and their impact was measured on industrial upbringing and
performance of S MEs. The investigated determinants overhauling of economic
included top management commitment, customer focus, condition, this sector has
supplier relationships, employee involvement and been chosen so that
empowerment, work environment and benchmarking. S plausible solutions could be
ample size was comprised of 60 S MEs (both IS O-9000
certified and non IS O certified S MEs) from three renowned suggested for the
industrial cities of Punjab province. The findings indicate improvement in
that TQM practices such as supplier relationship, performance measures.
benchmarking, top management commitment and customer According to SMEDA
focus are critical factors and have a positive impact on (Small and Mediu m
performance of S MEs. Besides in comparative analysis, Enterprise Deve lopment
performance of ISO-certified S MEs was found better than Authority, Pakistan), SM Es
non-IS O certified S MEs.
are defined as organizations
having up to 250 emp
Index Term-- TQM practices, ISO certification, non- loyees, paid up capital of Rs.
financial performance, S MEs
25 million and annual sales
of Rs. 250 million. Selection
9. INTRODUCTION of SMEs for the survey was
The objective of this study is to exp lore whether or not made on the basis of above
SMEs of Pakistan are fo llo wing the trends of the definit ion. A total of 60 SM
international standards of quality and if so, whether these Es were selected and studied
measures are contributing towards organizat ional using both descriptive and
performance or otherwise. quantitative analysis.
a positive correlation
between TQM practices and
organizational performance
of the SMEs, reiterating the
need for effective
implementation of the TQM
practices alongwith strategic
decision making which will
ultimately yield long -term
fruit ful results for SMEs.
Vincent K. Chong., Michael
J. Rundus [10] explored the
impact of TQM and market
co mpetition on organizat
ional performance by
studying filled acceptable
questionnaires fro m 89
managers fro m
manufacturing firms.
Results showed that there is
a positive correlat ion
between market competition
and TQM pract ices of
customer focus, product
design and organizational
performance.

TQM is an approach for continuously improving the 35. LITE Lee and Kelce [11]
quality of goods and services delivered through the RAT investigated the existing
participation of individuals at all levels and functions of URE status of TQM practices in
an organizat ion [ 1]. In the last two decades, large REV 112 SM Es (manufacturing
quantity of literature and academic journals have been IEW firms) of China and its
devoted to analyzing the essences of TQM and how it impact on their
should be implemented in organizations [2-7]. Especially The whole essence of this performance. It was found
research was to get an that manufacturing process
in the 1990s, a significant volume of research was perfor understanding of the impact of these small firms was not
med to investigate the relationship between practices of of TQM on the performance
TQM and organizat ional performance. an obstacle to the imp
of SMEs. In order to get
comp lete understanding of lementation of TQM,
instead it was the size of
This study will investigate the possible correlation and the theory and practice, firm which posed as a threat
causal relationship between TQM practices and various studies were
for imp lementation.
performance of organizations. Similar studies have been analyzed and reviewed.
Research showed that
undertaken abroad but in Pakistan there are only very
few studies available related to ISO certification and Anderson and Sohal [9] majority of the firms were
continuous improvement practices . But the impact of studied the impact of TQM new to TQM practices and
TQM on organizational performance has not been and related imp rovement that it was initiated by their
explored so far. top management. A positive
strategies on performance of
influence of TQM was
Australian SMEs by using
observed on performance as
Importance of SM E sector is v ital for the industrial Australian Quality Awards waste, inventory and costs
development of a country. SM Es constitute nearly 90% framework to determine the was reduced, and
o f all the enterprises in Pakistan; employ 80% o f the relationship between TQM
non-agricultural labor force; and their share in the annual pract ices and business
performance. They observed
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International Journal of Engineering & Technology IJET-IJENS Vol:10 No:04 21

independent variables in Where

an increase in sales was observed. Impeding factors predicting non-financial
in TQM implementation were lack of top performance o f SM Es. The N.
P=
management co mmit ment and lack of knowledge following model is developed No
about TQM imp lementation, alongwith lack here for the study: n-
education and training and inadequate process fin
an
control techniques. N.P = cia
l
0+1TMC+2CF+3SR+4 per
In the same manner, performance of SM Es was for
EIE+5WE+6BE+ ma
observed in Malaysia by Sohail and Hoong [12], in nc
India by Mahadevappa, B. and Koreshwar, G. [13], e
in Po rtugal by Sousa, Aspinwall and Rodrigues [14], 0
in Spain by Bou , and Beltrain [15] and in Turkey by =
Co
Demirbag and Zaim [16]. All researchers were of the nst
v iew that ISO cert ification should be acquired by ant
the SM Es and ISO quality management systems of
pro
should be integrated with TQM for continuous por
improvement of the overall business performance. tio
nal
ity
In Pakistan, Alam and YeZhuang [17] studied the trend, TMC =
status and scope of ISO certificat ion in Pakistani industry Top
and made co mparative analyses with Spanish industry manag
[18-19] and Ch inese industry [20] to h ighlight the ement
commit
differences in approaches and the hurdles ment
encountered in implementation. Earlier, Kamran CF =
Moosa [21] observed that maximu m practice of Custo
quality management practices in ISO certified firms mer
focus
was in the production department, there was SR = Supplier relationship
unawareness from usage of different quality tools for
performance measurement and that TQM was EIE = Employee
involvement and
properly practiced in only 5% firms among total. empowerment
Jamshed H. Khan [22] proposed that for successful WE = Work
imp lementation of TQM in Pakistani organizations environment
commit ment of both top and middle level B
management is compulsory, that a right approach E
towards TQM implementation should be made, that
TQM tools should be used step by step and that =
workers fears should be removed and a reward
B
system should be introduced for better performance. e
Hayat M. Awan [23] studied the impact o f ISO n
registration in sports industry of Pakistan. He also c
recommended that most critical factor in successful h
imp lementation of TQM is top management commit m
ment and that necessary training of both upper and a
lower management is necessary along with workers r
k
through consultants. Benefits gained by these i
organizations were increase in sales (exports), n
increased customer satisfaction, better utilizat ion of g
hu man and material resources and reduction in costs
and wastage.
Most of the above-mentioned studies were carried
=
out in developed countries with few exceptions and
in Pakistan there is scarcity of research on TQM E
except few examples cited above. This research will r
therefore fill a gap in the existing literature by r
investigating plausible relationship between TQM p o
ractices and non-financial performance o f an r
organization. t
e
61. RESEARCH METHODOLOGY r
m
3.1 Research Objective and Hypotheses
The principal aim o f th is study is to determine the A total of six hypotheses
correlation and causal relationship between TQM were developed related to six
practices with non-financial organizational TQM p ractices and their
performance. A linear mu ltip le regression model impact was measured on non-
has been used here to assess the contribution of
financial performance. Furthermore, d ifference in 3.2 Research Design and fro m quality managers and
performance of ISO-certified and Non-ISO certified Analysis Techniques supervisors of the SM Es.
is also investigated (H-7). The study is a Response rate was 80% as 60
causal/correlational study SM Es in total responded fro
H-1 = There is positive relationship between topwhich has been carried out as m these three cities, 20 SM Es
management commit ment and non-financiala field study in a non fro m each city. Out of 60 SM
performance of an SME. -contrived environment. Es, 45 were ISO-cert ified
H-2 = There is positive relationship between was minimal.Interference of the researcher whereas 15 were non-ISO cert
customer focus and non-financial ified SMEs. Data collected fro
performance of an SME. A sample of 75 SM Es was m the non-certified SM Es
H-3 = There is positive relationship between selected fro m three categories provided an insight on how
supplier relationship and non-financial namely electrical, tools and they implement TQM
performance of an SME. machinery and surgical practices and to what extent.
H-4 = There is positive relationship between equipment fro m three
employee involvements and empowermentindustrial cities of Gu
and non-financial performance of an SME. jranwala, Gujrat and Sialkot. Out of 60 SM Es 45% were
Fan manufacturers, 18%
H-5 = There is positive relationship between workUnit of analysis are Small and dealing in tools and machinery
environment and non-financial perfo rmance Mediu m enterprises (SMEs) and remaining 37% were
of an SME. and convenience sampling surgical equipment
H-6 = There is positive relat ionship between technique has been used for manufacturers. Questionnaire
benchmarking and non-financial performance of the selection of sample.
an SME.
used in this study has been
Primary data was collected adapted from the one used in
H-7 = Non-financial perfo rmance of ISO-certified through self-administered the study of Yahaya Yusuf
SM Es is better than Non-ISO certified questionnaire and scale of [24]. Part A of questionnaire is
SMEs. measurement is Likert scale. related to general
Questionnaire was got filled
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International Journal of Engineering & Technology IJET-IJENS Vol:10 No:04 22

intermediate. A ll the ISO- QM successful

informat ion about SME, part B enco mpasses cert ified SM Es have having implementation
general demographics of the SM E, part C is related a separate quality assurance
to TQM practices in wh ich Likert scale is used system.
Part F of the questionnaire
having range 1-5, in which 1 means strongly was related to tools used for
disagree and to 5 showing strongly agree. Likewise, Part D of the questionnaire performance appraisal (Fig.2).
part D, E and F are concerned with problems faced was related to problems Out of 60 SM Es, 54 (90%)
in TQM imp lementation, usage of tools and its faced in TQM termed FM EA (Failure mode
outcomes respectively. Part G is related to non- implementation (Fig-1). It and effect analysis) as most
certified SMEs only. was found that 82% SM Es important tool in TQM imp
reported insufficient train ing lementation, fo llo wed by
Data analysis has been done in three stages. SPSS facilit ies as the main hurdle other tools, QFD (Quality
has been used to analyze the data. In the first stage, in TQM implementation Function Deploy ment) and
reliab ility of the data has been checked by applying follo wed by insufficient SPC (Statistical process
Cronbachs A lpha which measures internal knowledge informat ion, control). Check sheets and 5S
consistency or average correlat ion of items in a insufficient performance were considered least
survey instrument to gauge its reliability. measures and insufficient important tools by these
workers commitment. SMEs.
In second stage Pearson correlation analysis has TA
been applied to assess the strength of relationship BLE
between dependant and independent variables. II
PROFILE OF RESP
ONDENT
In third stage multip le regression analysis is applied
COMPANIES
to check association of variab les with each other
and also the extent of variance, which is determined
by co -efficient of determination (R-square) in Which production system is used by your business
Continuous
dependent variable. Finally ANOVA has been used
Maximum days an average
to test the mean difference between two groups (H- employee spends in training per
7). season
Less than 3 days
3-5 days
IV. RESEARCH FINDINGS 6-10 days
4.1 Reliability analysis Above 10 days
Percentage of employees involved in T QM implementation
The scale was tested for reliability by using Less than 10%
Cronbachs 10-49%
Alpha. Table-I illustrates test results. 50-90%
100%
TABLE I Average qualification of employees
RELIABILITY ANALYSIS Primary
Matriculation
No. of Alpha Reliability
Variable Intermediate
items Coefficient Bachelors
Top management commitment 3 0.8725 Presence of a separate quality assurance system
Customer focus 3 0.8620 Yes
Supplier relationship 3 0.8497 No
Employee involvement &
3 0.9097 60

empowerment
49
Work environment 3 0.8556 50

Benchmarking 3 0.8311 40
40
Performance (dependant variable) 17 0.8241 33
30

The overall values of Cronbachs alpha for 20

independent variables is above 0.8 wh ich means 10

that the constructs were reliable to measure the non-
financial perfo rmance. Whereas alpha value of 0

dependent variable Performance is 0.8421 which is

in acceptable range and means that individual Insufficient
trianing
Insufficient
knowledge
Insufficient
performance
constructs were reliable to measure the parameters facilities information measures

of performance. Fig. 1. Problems faced in T

60
All the SM Es were percentage of 54

4.2 Descriptive analysis using continuous involvement of emp 50

0
FMEA Others QFD

loyees in TQM
In demographic analysis of theproduction system.
44

implementation is 40

data it was found that ISO-cert 100% claimed by

ified SM Es imp lemented TQM inTraining per season 30 Fig. 2. Tools
67% SM Es. used for
all the departments whereas focusfor an average Average 20
performance
of non-ISO certified SM Es wasemployee is said to qualification of appraisal/meas
only on production department.be 6-10 days by 77% employee is
10
urement
72% SM Es and
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International Journal of Engineering & Technology IJET-IJENS Vol:10 No:04 23

tolerance and VIF (variance Results of mu ltiple regression

inflat ion factor) is calculated. equation have been tabulated
4.3 Correlation analysis If VIF values are large and in tab. III and V.
Correlation provides answer to three basic questions indiv idual VIF is greater than
about two variab les or two sets of data in a research. 10, there exits mult
First it tells whether there is any relationshipicollinearity. Likewise, if TABL
E III
between two variables and if so, what is the direction tolerance values are very s
T OLERANCE AND VIF
of relationship and subsequently, the magnitude of mall, close to zero and DIAGNOSTIC FOR
the relationship [25]. tolerance is less than 0.1, same MULTICOLLINEARITY
problem may arise. To lerance Variable
Value of the correlation coefficient (r) of dependent is the reciprocal of VIF [27]. Tolerance VIF
variable i.e., perfo rmance (PRF) with independent In table IV, the values of
variable top management co mmit ment (TM C) istolerance are greater than 0.1
0.619 wh ich means that both are positivelyfor each variable and VIF
correlated. In the same manner a strong relationship values are less than 10,
has been found between performance and customershowing that there is no
focus and benchmarking in which value o fmulticollinearity exists.
correlation coefficient is

TABLE variables. The Top management which means 72%

commitment of supplier
III fitted model may Customer focus variance in relationship and
CORRELA then be used performance
Supplier relationship is benchmarking are
TION either to merely explained
Employee involvement & by significant which
Variable describe the empowerment these six substantiate our
TMCCF SR
Title relationship Work environmentindependent hypothesis
TM C 1 .529 .482 between the two Benchmarking variables and regarding these
CF .529 1 groups of variab
.524 -0.40 substantiates our two variables
SR .482 .524 1 les, or to predict T hypothesis and whereas the
EIE .000 -.040 .070 new values. Mmodel.
WE .390 .547 .625 L values of beta-
S coefficients of top
BE .545 .610 .705 ARY
In regression In present study, management co
PRF .619 .675 .809
analysis, the M odel R six hypotheses mmit ment,
relationship were developed customer focus
Regression standardized predicted value

between 1 0.854 regarding the and work environ

independent and positive relat ment also show
dependent The model ionship between
variables should significant results
summary table TQM practices
and we can infer
be linear. It shows the results and non-financial
means that the that the estimates
of entering six performance of
of colu mn B can
mean response SM Es. Tab.V
independent be considered as
scores at each shows the value
variables true except one
value of the of the best-
predictor variab (predictors) coefficients of variab le i.e .,
le should fall on against these predictor employee
a straight performance and variables.
involvement and
Regression standardized residualsFigure-
line[26]. R (0.854) is the
empowerment
3 shows scatter correlation o f
the six The where values of
Fig. 3. Scatter-plot of residuals
plot of residuals estimated beta-coefficient
and linear independent
relationship. variable with the regression are not significant
0.809 and 0.840 respectively. There equation is as proving this
dependent under:
correlation between employee variable, after N.P=1.027+0 estimate
empowerment. When there is high taking into .143TMC+0. unreliable and
correlat ion among consideration all 143CF+0.333 less contributable
variables, there towards
may be problem of the inter- SR+0.072EI
4.4 Multiple regression analysis Mult icollinearity. correlations E+ measurement of
among the six 0.139WE+0. non-financial
Regression is a generic term for To detect
independent 342BE+ performance as
all methods attempting to fit a Multicollinearity,
variables. The compared to other
model to observed data in order
to quantify the relationship above model The values of independent
between two groups of shows value of R variables .
beta-coefficients
-square as 0.729
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International Journal of Engineering & Technology IJET-IJENS Vol:10 No:04 24

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