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Total Quality Management & Business Excellence

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The power of TQM: analysis of its effects on profitability, productivity and customer satisfaction
Kati Tanninen , Kaisu Puumalainen & Jaana Sandstrm
a b a b b

Stora Enso Corp., Imatra, Finland

School of Business, Lappeenranta University of Technology, Lappeenranta, PO Box 20, FIN-53851, Finland Available online: 28 Jan 2010

To cite this article: Kati Tanninen, Kaisu Puumalainen & Jaana Sandstrm (2010): The power of TQM: analysis of its effects on profitability, productivity and customer satisfaction, Total Quality Management & Business Excellence, 21:2, 171-184 To link to this article: http://dx.doi.org/10.1080/14783360903549949

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Total Quality Management Vol. 21, No. 2, February 2010, 171 184

The power of TQM: analysis of its effects on protability, productivity and customer satisfaction
Kati Tanninena, Kaisu Puumalainenb and Jaana Sandstromb
a Stora Enso Corp., Imatra, Finland; bSchool of Business, Lappeenranta University of Technology, Lappeenranta, PO Box 20, FIN-53851, Finland

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This article analyses the effects of total quality management (TQM) in an organisational context. In our analysis we study how the experience (or age or application time) of TQM and the depth (level of self-assessing scores of the business unit) of TQM affect the performance of the unit measured with customer satisfaction, protability and productivity. Our unique research setting was based on longitudinal data from a global integrated process products company. The results of our analysis indicated that TQM does have an effect on all three types of performance measured. However, there was variation in whether the effects come from the experience of TQM or its implementation. As the results of this study are based on one Case Company, the utilisation of the results as such may be somewhat limited. Keywords: total quality management; TQM effectiveness; protability; productivity; customer satisfaction

Introduction

Companies implement numerous management, planning and controlling tools and hope that these implementations will have an effect on their performance. There are surprisingly few research results, however, on the effectiveness of these tools. The difculty of conducting this kind of research is to get access to the data that enables objective measurement of effectiveness as well as to provide reliable evidence on the causalities. Since we have unique prot unit level longitudinal data from a global industrial rm, we propose to show whether the total quality management (TQM) strategy has an effect on protability, productivity and customer satisfaction. TQM has been of interest to practitioners and academics, and according to Fisscher and Nijhof (2005), there is hardly any management philosophy that is as widely adopted by companies as quality management. Total quality practices are said to be such an attractive and demanding management concept and philosophy, that they have received great attention (Dale, 1999; Lakhe & Mohanty, 1994). The pioneering work of Terziovski and Samson (1999) on the effects of TQM encouraged a research stream which we try to follow. According to them, despite the extensive literature available on TQM and its long history, little research has been done to establish the link between TQM practices and organisational performance; moreover, the few available studies have been interesting but not conclusive. There is quite extensive quality management research that has concentrated on the status of TQM and the implementation of the relevant

Corresponding author. Email: kaisu.puumalainen@lut.

ISSN 1478-3363 print/ISSN 1478-3371 online # 2010 Taylor & Francis DOI: 10.1080/14783360903549949 http://www.informaworld.com

172 K. Tanninen et al. tools in organisations (Lagrosen & Lagrosen, 2005). The adoption and performance improvement have also been studied (Ehigie & McAndrew, 2005; Rungtusanatham et al., 2005). However, quite often the studies have concentrated on evaluating the TQM adoption practices against the present situation, and based on these analyses, recommendations or better models have been presented (Gunasekaran, 1999; Terziovski et al., 1999). Sun (1999) lled for his part this research gap with his empirical study (survey replication) on TQM in Norway, with results about indications that TQM has on performance. Nevertheless, almost 10 years later Ford and Evans (2006) comment that despite the potential benets, the extent to which self-assessments actually produce improvements is unclear. It can be concluded that (1) the earlier TQM studies have concentrated on studying the adoption rather than the whole implementation process; (2) they are also mainly cross-sectional studies rather than longitudinal ones; and (3) the studies on the effectiveness of TQM have focused on developing measures for effectiveness (Capon et al., 1995; Lee & Quazi, 2001). The problem with these studies is, however, the versatile subjective measures instead of objective ones. Also (4): the cases in the past studies have been based on a single country or a couple of countries instead of taking an international approach. Past research will be presented more extensively in Section 2. Our empirical study can be considered unique because of the research setting: it uses objective performance measures, the level of analysis is the business unit, the depth of TQM implementation is operationalised as the development of self-assessment scores, and the signicance of the age of TQM in various business units (experience of the management tool) is clearly noted. To put it more precisely, in our analysis we study how the experience of TQM and the depth of TQM implementation affect the performance of the unit measured with customer satisfaction, protability and productivity. Most of the previous studies have measured TQM in the organisation with rough measures: e.g. TQM is in use versus it is not in use. Consequently, our study aims at complementing existing research by the following means. First, the performance measures, namely, protability (return on capital employed), productivity (tons per person) and customer satisfaction (customer satisfaction measurement model) are objective. Second, TQM is examined both with experience of the tool as well as with the output that the organisational unit achieves with the tool (the self-assessment scores). Third, the longitudinal setting enables us to identify the evolvement of the effects that the administrative innovation has in the organisation. The results indicate that TQM has an effect on all three types of performance. There is, however, variation in whether the effect comes from the experience or depth of TQM. Our study proceeds as follows. In Section 2 the earlier research is briey discussed by covering rst a broader scope of TQM research and then focusing on the studies explaining the effects TQM has on rm performance. Section 3 presents the data and measures, and Section 4 introduces the models and results before Section 5 where the discussion and concluding remarks are given. 2 Literature review According to Hides et al. (2000), the experiences of adopting a TQM philosophy have been shown to be benecial to any business. Still, there are also many conicting results and opinions on the effects of TQM (Ford & Evans, 2006), and quite a lot of researchers submit that TQM alone cannot improve the results. For example, the study of Kannan et al. (1999) highlights the fact that quality initiatives alone cannot improve protability and the market share; on the contrary they write that the belief that TQM

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Total Quality Management 173 programmes automatically lead to improved nancial performance fails to recognise other essential elements (Kannan et al., 1999). Even though TQM can have a positive effect on operational and business results, there is no guarantee that it will denitely and alone directly produce superior protability, since other factors may be present (Montes et al., 2003; Terziovski & Samson, 1999; Zairi et al., 1994). It must be all the business excellence enablers together that contribute collectively to the improvements (Sun, 1999). According to Zairi et al. (1994), TQM is only a licence to practise, and Montes et al. (2003) conclude that TQM has an impact on the way organisation members apply their knowledge in the organisation, and therefore it affects organisational performance. Then on the other hand, advantages such as cost savings and improved productivity and protability produce the leading results for any rm that wants to succeed (Brah et al., 2002). Consequently, there exists research showing that quality activities, particularly TQM, have benecial effects on business performance (Joiner, 2007; Mann & Kehoe, 1994; Pegels, 1994; Terziovski et al., 1999). Handeld et al. (1998) nd that that the positive linkage between TQM and nancial performance occurs through two processes: rst, improved internal performance within the organisation leads to less waste, improved efciency, and ultimately higher return on assets, and second, improved customer satisfaction levels generate increased word of mouth, loyalty, brand value, and so on, leading to higher sales and market share (Handeld et al., 1998). Sun (2000) also points out the relevance of the customer satisfaction perspective in creating business performance. According to the study of Yang (2006), TQM along with human resource management signicantly affected quality performance, especially with regard to customer and employee satisfaction. According to Vora (2002), customer and employee satisfaction and streamlined processes together produce improved operational and nancial results which will eventually lead to business excellence. The results of Lakhal et al. (2006) reveal positive relationships between quality management practices and organisational performance. Furthermore, Mann and Kehoe (1994) have shown that all the quality activities investigated, particularly TQM, had a positive effect on business performance (Mann & Kehoe, 1994). In the same year Pegels (1994) also wrote that total quality management is not just concerned with quality, because productivity, timeliness, exibility and protability are also important performance measures in a TQM programme. Shenawy et al. (2007) used the random effect meta-analysis for studying the effects of TQM. Their results suggested a model for TQM that incorporated ve major components: top management commitment and leadership, teamwork, culture, training and education, and process efciency. According to their results, each of these components led to competitive advantage (Shenawy et al., 2007). When effectively implemented, TQM practices signicantly improve nancial performance (Hendricks & Singhal, 1997). As the advantage of using the quality award criteria and their systematic approaches has also been of interest to researchers, the success of the award winners has been the target of many studies. The research work of Jacob et al. (2004) examined how Baldrige Award winners perform with respect to several accounting and nancial metrics. Their results showed that the award winners performed signicantly better than the industry medians in terms of protability and assets utilisation, and the winning rms stand out as performance leaders in their industries (Jacob et al., 2004). They got the results by investigating several accounting performance metrics and the rm value of 18 Baldrige Award winners using both raw and industry adjusted measures. In contrast, Hansson and Eriksson (2002) argue that during the implementation period, the award recipients do not necessarily perform better than their competitors and the branch indices; but on

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174 K. Tanninen et al. the other hand, the award recipients perform better during the post-implementation period (Hansson & Eriksson, 2002). Eriksson and Hansson (2003) made the same ndings which indicate that the nancial performance develops more advantageously for companies that have successfully implemented TQM, than their branch indices and stated competitors. Wisner and Eakins (1994) made a performance assessment of the US Baldrige Quality Award winners and paid special attention to nancial characteristics. While their study revealed a strong positive relationship between quality improvement programmes and the competitive attributes of the Baldrige Award winners, there is no guarantee that these improvements will result in continual nancial success (Wisner & Eakins, 1994). Quality improvement programmes should be viewed not as a trivial solution for companies, but rather as a means with which to build and maintain a strong competitive foundation that will ensure the opportunity for nancial success (Wisner & Eakins, 1994). So, generally speaking, the implementation of assessment criteria and quality management systems help organisations to keep up with the challenges they face (Da Rosa et al., 2001; Wisner & Eakins, 1994). Having started the implementation, the results do not, however, appear immediately. Firms wanting to implement TQM effectively must have patience. It may take a rather long time to implement TQM as it requires major organisational changes in the culture and employee mindset. That is why the benets will also be realised only in the long run (Hendricks & Singhal, 1997). The ndings of Agus and Abdullah (2000) also indicate that the length of TQM implementation has a signicant impact on the companies nancial performance, because the long-term TQM adopters are found to outperform shortterm adopters. The results of the study of Sun (1999) indicated that the number of years of practising quality management is signicantly related to both the implementation of TQM enablers and the results achieved from TQM as well as ISO certication. The longer a company has practised TQM, the better its results will be. The implementation of TQM must be seen as a long period of continuous improvement, and not as a fast turnkey project. The study of Sun (1999) also suggests that there is a learning effect in TQM implementation, and companies should not be frustrated at the slow showing of benets at the early stages of TQM implementation. The main conclusion of the study is that in order to be effective, the quality management programme must be total or complete (Sun, 1999). We have collected relevant research on the effects of TQM on performance as summarised in Table 1. As we can see from the earlier studies on TQM adoption and usefulness of the TQM procedures, there are opinions for and against its effects on the performance of the company. Based on these earlier writings, we propose that the length of the implementation time, e.g. the time of the adoption (experience) and the implementation of the TQM approach do have an effect on the performance of the company (Figure 1). Based on this argument, we propose two hypotheses as follows:
H1: Experience of the management tool has a positive effect on the performance measures. H2: The depth of the implemented management tool has a positive effect on the performance measures

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3 Data collection and measures 3.1 Case description The Case Company is an integrated process products company producing wood-based products sales totalling E14.6 billion in 2006. The Company has some 44,000 employees

Table 1. The studies on the effects of TQM on performance. Authors (year) Target To describe the prime effects of TQM and other quality activities on business performance To explore the role of measurements in a TQM programme, how much the rate of success improves when the measures are used To clarify the relationship between technical practices and rhetoric of TQM To clarify the components of TQM and their impact on performance Test the strength of the relationships between TQM practice and organisational performance, to evaluate the results of three empirical studies conducted 1991, 1993, 1996 To study the impact of TQM on nancial performance (1) Questionnaires: random sample 142 responses (22%) and TQM sample 69 resp. (58%). Interviews with 21 org. One company (2) c (3) n (4) o&s Results TQM has benecial effects on business performance

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Mann and Kehoe (1994)

Capon et al. (1995)

o&s

Measuring and displaying results increases the chance of success in a TQM programme Managers use the TQM rhetoric to develop their TQM. This develops too optimistic view of TQM Some of the TQM practices contribute to the increase of customer satisfaction and business performance TQM tends to have mixed results when covaried for company size and industry type

Zbaracki (1998)

Interviews, documents and observations, 5 organisations Questionnaire survey, 316 comp. Manufacturing companies (n 1000, resp. rate 30%). Quantitative

Sun (1999)

o&s

Terziovski and Samson (1999)

o&s

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Hendricks and Singhal (1997)

Study of nearly 600 award winners, public companies

TQM improves nancial performance

(Continued)

176 K. Tanninen et al.

Table 1. Continued. Authors (year) Lee and Quazi (2001) Target To use the self-assessment tool to assess quality performance in various functions of the organisations To determine the success factors of a quality programme To provide a framework for studying the relationship between TQM and organisational performance To study the effects of the different models and tools of quality management To explore the relationship between quality management practices and their impact on performance To integrate the ndings of empirical studies on the effect of TQM on competitive advantage To explore the relationship between the extent of TQM implementation and organisation performance (1) Questionnaire, selfassessment tool used to assess quality performance Questionnaire, statistical, 185 responses Conceptual (2) c (3) n s (4) Results There is a signicant correlation between the assessment scores and actual scores received from SQA (Singapore Quality Award application) Results suggest the proposition that TQM implementation correlates with quality performance TQM content must t the busin ss strategy There is a statistical correlation between the adoption of the values of TQM and successful quality management There is a positive relationship between quality management practices and organisational performance The used components lead to competitive advantage There is a strong positive relationship between TQM practices and organisation performance

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Brah et al. (2002)

o&s

Montes et al. (2003)

Lagrosen and Lagrosen (2005) Lakhal et al. (2006)

Questionnaire: 265 respondents (resp. rate 53%) Questionnaire, stat. 133 comp. survey

o&s

Shenawy et al. (2007)

Meta-analysis of 51 studies

Joiner (2007)

Questionnaire, 84 responses (resp. rate 53%)

Note: (1) Sample and data collection; (2) Type of study: 1 longitudinal, c cross-sectional; (3) Scope: n national, i international; (4) Performance measure: o objective, s subjective.

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Figure 1. The hypothesised model of factors affecting the performance measures of the company.

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in more than 40 countries on ve continents, and its shares are listed on three stock exchanges. The Company serves mainly business-to-business customers through its own global sales and marketing network. Customers are mainly concentrated in Europe, North America and Asia. The Case Company has production facilities in Europe, North and Latin America, and Asia. The Case Companys focus is on productivity and asset evaluation. The Company is operated and managed as one industrial group, with a core product portfolio. Working closer with the customers continues to be one of the cornerstones of its strategy. The continual improvement activities have been of great interest in the Company, starting from the top management. They believe that success comes from improving faster than the competitors. Business excellence is the Case Companys management approach to business development and continuous improvement. The business excellence approach includes various business excellence models, systems for quality, environmental issues and occupational health and safety, productivity programmes, Six Sigma and other quality tools as well as customer satisfaction and other surveys under the same umbrella. Business excellence is veried with the annual self-assessment approach, which has been in use for years. During the self-assessment, units compare themselves with the selected common business excellence criteria (e.g. Malcolm Baldrige Quality Award Criteria, MB) or the Companys own self-assessment criteria. The ultimate target is to improve protability, competitiveness, productivity and shareholder value towards business excellence in the whole Company and to reach the corporate vision as being the leading company in the world in its own eld.

3.2

Used measures and data description

The used empirical data are both longitudinal and cross-sectional by nature (panel data). As the Case Company has been implementing the management tool in question, namely, the self-assessment approach TQM for many years all around the company, the rich and historical data enabled the analysis of the effectiveness of the tool. Data related to the management tool included years 1995 2006 collected from the Case Company. The self-assessment scores were collected from the continual improvement process material from the les of the Case Company. The scores were based on the national or international quality award criteria like the Finnish Quality Award Criteria,

178 K. Tanninen et al. the European Quality Award Criteria (EFQM) or the American Malcolm Baldrige National Quality Award Criteria (MB), or then the scores were based on the Case Companys own business excellence criteria. The content of all these criteria is almost the same, and they include similar categories. Whatever the used criteria, the percentages of the maximum scores available were calculated to enable the comparison between the different criteria and scores. In this study the used scores do not include the results category; only the received scores of the operational categories are included. The measures of the experience and implementation of the management tool were both based on the TQM approach scores. TQM experience was measured with the time of the adoption, i.e. the year when the unit in question utilised the TQM approach for the rst time. The implementation of the management tool was measured with the results of the operational scores of the TQM approach from each year. The performance measures consisted of three objective metrics used in the Case Company. (1) Protability was measured by return on capital employed (ROCE%), and the data were available for the period 1998 2006. Also, Wisner and Eakins (1994) and Jacob et al. (2004) utilised nancial performance measures in their studies when assessing the performance measures of Malcolm Baldrige Award winners. (2) Productivity was measured with two different kinds of productivity data, depending on the nature of the unit. Productivity of manufacturing units was measured as produced tons per person and productivity of sales units respectively as sold tons per person. Manufacturing productivity data were available for the period 1999 2006 and sales productivity for 2000 2006. Gunasekaran et al. (1998) highlighted the productivity issues when presenting a framework for developing a TQM system with a target to improve quality and productivity. (3) The third measure was customer satisfaction, which Sun (1999) has also used in earlier studies. Customer satisfaction was measured in this study with the data received from the Case Companys customer satisfaction measurement system that has been used in the company since 1996. The statement used here was Overall satisfaction with the unit and it was measured with the mean value calculated on a Likert scale 1 5 (1 very dissatised and 5 very satised). The customer satisfaction measurement system was changed in 2004 so that this statement was not included in the system; therefore the results from the years 2004 2006 used here are calculated as mean values from available questions in the system. These questions referred to product quality, delivery performance, technical customer satisfaction and satisfaction with sales. Furthermore, in 2004 2006 only upper organisational level results, i.e. division level results were measured in the company (not the separate unit levels), so we have used the division level results representing the units belonging to each division. Table 2 includes descriptive data on the above-mentioned objective measures. Customer satisfaction has increased from the mean value of 3.69 (year 1999) to 4.10 (year 2006) measured with overall satisfaction with the company. Protability was measured by ROCE, which varied a lot during the research period. Manufacturing productivity has increased when comparing the mean value of the year 1999 to 2006, but there is a lot of variability between the years. Sales productivity in contrast has increased more constantly, measured by the mean value during the research period. The adoption rate of the management tool was at its highest during the years 2001 2003. This is because just before this period, the Case Company merged with another company, and

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Table 2. Descriptive analysis of the objective data. 1999 Cs Cs Cs Roce Roce Roce Prod Prod Prod Sold Sold Sold SA SA SA Time Time Time N Mean s.d. N Mean s.d N Mean s.d. N Mean s.d. N Mean s.d. N Mean s.d. 37 3.69 0.27 39 14.64 10.90 18 758.27 238.57 2000 41 3.73 0.31 58 20.01 18.83 43 1087.98 711.60 26 12677.09 8173.41 55 47.57 11.52 80 2.40 1.76 2001 41 3.96 0.18 60 15.06 17.15 36 1154.08 704.69 32 11616.32 7432.26 115 40.75 11.76 133 2.05 2.16 2002 43 4.06 0.19 64 11.62 14.58 46 1050.36 698.91 32 12357.48 8727.69 126 44.33 9.99 156 2.60 2.27 2003 44 4.03 0.19 64 5.09 11.51 46 1066.98 657.06 32 12593.51 9858.93 122 47.42 9.64 160 3.51 2.31 2004 46 4.12 0.08 65 6.23 13.55 48 1234.70 790.13 32 13434.00 7866.63 83 49.68 8.07 162 4.45 2.35 2005 46 4.06 0.09 69 1.32 11.58 50 1088.31 631.22 30 13076.27 6123.38 57 53.28 10.42 163 5.42 2.38 2006 46 4.10 0.08 66 8.92 11.46 48 1211.15 694.32 30 16526.03 9483.68 37 53.43 9.68 163 6.42 2.38

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37 50.88 8.10 62 2.10 1.35

180 K. Tanninen et al. with the merger the size of the company was doubled. This increase in the number of units within the company was also visible when measured with activity in implementing the management tool. The mean value of the scores has slightly increased and is 53.43 of the maximum 100 in 2006. However, the scores were at their lowest during the same time period when the number of units increased signicantly. 4 Analysis and results The effect of TQM on performance was examined in a linear regression analysis for panel data which consisted of eight years of annual time series from up to 163 cross-sections (i.e. organisational units). The panel was unbalanced, as there were some missing observations. The analyses were conducted with the Intercooled Stata 8.0 software. The four dependent variables customer satisfaction, protability, manufacturing productivity, and sales productivity were analysed separately, and several different model specications and estimation methods were tested for each of them. As all the dependent variables exhibited some trend over time, year dummies were included as independent variables in all the models along with the hypothesised independents (the length of TQM experience and self-assessment scores of the previous year). The Hausman (1978) specication test was performed to assess whether the xed or the random effects model would be more appropriate (Wooldridge, 2006). Autocorrelation and heteroskedasticity tests were also conducted, and robust estimation methods were used when necessary. All the models had heteroskedasticity in error terms across organisational units, and thus feasible GLS estimation was selected instead of OLS in cases where the Hausman test implied a random effect model. Customer satisfaction had no autocorrelation in errors, and thus it was estimated with least squares including cross-sectional dummies and robust standard errors, which yields the same estimates as the xed effect model. The results are shown in Tables 3 and 4. The number of organisational units with at least two years of data varied from 28 to 49. The productivity values had fewer observations due to their applicability to only certain types of units. The sales productivity values also started one year later than the other dependent variables. The number of years per unit varied from two to eight with an average of about four or ve years of data. All the models were statistically signicant at the 1% level. The results for customer satisfaction are shown in the rst columns of Table 4. The coefcient of self-assessment scores in the previous year is negative, but not signicant.
Table 3. Model tting information. CS N of observations N of units Obs per unit avg Heteroskedasticity Autocorrelation Estimation method Model signicance Value (d.f.) p Fit statistic Value 202 42 4.81 Yes No LSDV with robust s.e. F ratio 11.15 (8,152) 0.000 R2 0.62 ROCE 229 49 4.67 Yes AR(1) 0.50 FGLS Wald chi2 124.50 (8) 0.000 Log likelihood 807.83 Prod_tons 155 37 4.19 Yes AR(1) 0.77 FGLS Wald chi2 55.87 (8) 0.000 Log likelihood 1014.06 Sold_tons 101 28 3.61 Yes AR(1) 0.83 FGLS Wald chi2 41.16 (7) 0.000 Log likelihood 883.98

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Table 4. Estimated model coefcients. CS Coeff. SA_lag TQM time Year 2000 Year 2001 Year 2002 Year 2003 Year 2004 Year 2005 Constant 0.00 0.04 0.13 0.04 0.10 0.06 0.11 0.03 3.93 s.e. 0.00 0.01 0.06 0.04 0.04 0.04 0.03 0.03 0.11 P 0.184 0.000 0.049 0.308 0.029 0.149 0.000 0.356 0.000 Coeff. 0.33 0.52 12.69 6.11 2.20 3.10 2.55 4.12 6.19 ROCE s.e. 0.07 0.29 2.12 2.08 1.74 1.55 1.34 0.85 3.71 p 0.000 0.077 0.000 0.003 0.206 0.046 0.057 0.000 0.095 Coeff. 2.49 103.15 448.15 289.19 260.76 189.10 175.11 85.57 136.79 Prod_tons s.e. 2.39 18.03 102.73 94.88 80.39 66.35 54.02 41.10 139.39 p 0.298 0.000 0.000 0.002 0.001 0.004 0.001 0.040 0.326 Coeff. 29.72 689.73 n.a. 896.07 21.72 1094.45 783.79 1931.90 8980.90 Sold_tons s.e. 22.99 211.2 n.a. 941.87 841.43 730.64 678.19 652.50 1394.08 p 0.196 0.001 n.a. 0.341 0.979 0.134 0.248 0.003 0.000

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182 K. Tanninen et al. The time of applying TQM has a positive and signicant effect, implying that despite some overall annual variation in customer satisfaction, those units that have started to apply TQM earlier have a higher level of customer satisfaction than their less experienced counterparts. The results for protability (ROCE) have a very clear overall downward trend over the years. Taking this into account, the length of TQM experience still seems to have a marginally signicant negative effect, whereas the self-assessment scores are signicantly and positively related to ROCE. This implies that the longer a unit has applied TQM, the poorer its protability, but those units that have succeeded better in implementing TQM are clearly more protable. The productivity results are basically the same in terms of manufacturing and sales productivity: the longer the experience of TQM, the better the productivity. The coefcients for self-assessment scores are also positive, but the effects are not statistically signicant. In sum, our rst hypothesis stating that the length of experience of TQM has a positive effect on performance is supported for customer satisfaction and productivity measures, but rejected for protability. The second hypothesis predicting that the depth of TQM implementation has a positive effect on performance is supported for protability but rejected for customer satisfaction and productivity. 5 Conclusions Our study was empirical by nature and concentrated on studying how the experience (length of implementing) and the implementation (level of self-assessing scores) of TQM affect the performance of the unit. We had a possibility to utilise objective performance measures: customer satisfaction, protability and productivity. The research setting was also interesting, and we used the organisational unit as the unit of analysis and operationalised TQM with the development of self-assessment scores (implementation of the management tool) and the age of TQM in various business units (experience of the management tool). The results indicated that TQM does have an effect on all three types of performance measured here. However, there was variation in whether the effects come from the experience of TQM or its implementation. The experience with the TQM approach affected the customer satisfaction results positively, so the units that had started to apply TQM earlier had more satised customers than their less experienced counterparts. However, when measured with protability, the longer a unit had applied TQM, the poorer its protability was, but then on the other hand, the units that have succeeded better in implementing TQM are clearly more protable. Productivity also increased as the experience of the TQM approach increased. The results support e.g. the study of Sun (1999), where he found that all the TQM practices contributed to the increase of customer satisfaction and business performance to a certain extent; human resource development, quality strategy and quality leadership were at the top in terms of contribution. It is good to remember, however, that none of the measures can guarantee improvement alone and there may also be other factors inuencing the business environment. Our study complemented existing research, and its main contributions were the following. First, the performance measures of explainable factors were objective, including protability (return on capital employed), manufacturing productivity (tons per person), sales productivity (sold tons per person) and customer satisfaction (customer satisfaction measurement model). Second, TQM (the explaining factor) was examined

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Total Quality Management 183 both with experience of the tool as well as with the output that the organisational unit achieves with the deployment of the tool (the self-assessment scores), and third, the longitudinal setting enabled us to identify the evolvement of the effects that the TQM approach had in the organisation. With this study we also had the possibility to follow the impacts of the whole TQM approach implementation process through to its effects and the real bottom-line results. Also, the Case Company with its international business environment provided a perfect ground for our study. As the results of this study are based on one Case Company, the utilisation of the results as such may be somewhat limited. This study also raised some interest for further studies, such as, what the role of human resources development issues (based on the TQM approach) are in performance measurement, and how the so-called soft issues inuence the companies performance.
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