See

discussions, stats, and author profiles for this publication at: https://www.researchgate.net/publication/235266608

TQM and business performance in the service

sector: A Singapore study

Article in International Journal of Operations & Production Management November 2000

DOI: 10.1108/01443570010348262

CITATIONS READS

155 422

3 authors, including:

Shaukat Ali Brah B. M. Rao

45 PUBLICATIONS 1,013 CITATIONS Stetson University
24 PUBLICATIONS 667 CITATIONS
SEE PROFILE

SEE PROFILE

Some of the authors of this publication are also working on these related projects:

CPEC: Supply Chain Management challenges for research. View project

Transition Management of NASA View project

All content following this page was uploaded by Shaukat Ali Brah on 25 December 2015.

The user has requested enhancement of the downloaded file.

TQM and Business Performance in the Service Sector: A Singapore Study*
Shaukat A. Brah and Jen Li Wong
National University of Singapore, Singapore and
B. Madhu Rao
Bowling Green State University, Ohio, USA
Keywords: Total quality management, business performance, operations strategy, service operations
management, and service sector

Abstract This paper focuses on gaining insight into the impact of TQM on the business performance
of service sector of the economy. The study yields clear evidence that TQM implementation improved
business performance in the service sector of Singapore. Success of TQM implementations appears to
be attributable more to the rigor of its implementation rather than the duration. The study finds that
while accrued benefits can be attributed to some of the tools of TQM, such as, customer focus and
quality improvement rewards, the key to the success of TQM lies in its intangible and behavioral
features such as top management support, employee empowerment and employee involvement.

Introduction
The world-wide importance given to quality is evident from the many high profile awards such
Malcolm Baldrige National Quality Award of USA, Deming Prize in Japan, European Quality Prize
and the Singapore Quality Award. Total Quality Management or TQM for short, is both a philosophy
as well as a set of guiding principles and practices that address not only the management of quality
but also the quality of management. It is a different approach to management, pioneered by Crosby,
Deming, Ichikawa, Juran and others, and represents a challenge to conventional management practice
and the underlying assumptions. The past decade has witnessed a widespread acceptance of TQM as
a means of gaining and maintaining a competitive edge in the global marketplace.
Lately, some studies have documented the successes and failures of TQM practices in the
manufacturing and services. Also, some studies have shown both positive and negative, association
of TQM practices and business performance in the manufacturing sector. However, there is a
shortage of research in the service sector in general, and Singapore service sector, in particular.
Singapore consistently emphasizes quality as exemplified by the extraordinary success of the Port of
Singapore Authority and Singapore Airlines. Service sector represents about 69% of Singapore's
Gross Domestic Product and is a very important component of its economy. Therefore, our interest is
to find out the relationship between TQM practices and business performance in the service sector and
more accurately, Singapore service sector.
We examine the relationship between Total Quality Management and business performance
in the Singapore service sector in order to determine if firms that implement TQM have superior
business performance compared to firms without it. We identify factors that are critical to a TQM
implementation and study their relationship to a firm's business performance. Also, we study the
effect of rigor and length of TQM adoption on the performance of a firm.

Background
One of the fundamental precepts of TQM is that by concentrating on getting things right the first time,
other benefits such as lower costs, greater efficiencies, improved market share, increased employee
motivation and satisfaction, and better reputation will inevitably follow (Bricknell, 1996). Until
recently results of TQM implementations are fragmentary, ranging from unprecedented success to
bankruptcy and abandonment of TQM, coming mainly from isolated case histories, anecdotal remarks
and studies that lack rigorous testing and validation. Significant improvement in the performance of
organizations such as AT&T Transmission Systems Business Unit, Eastman Kodak, Ritz-Carlton
Hotels, and Texas Instruments Defense System and Electronics Group have been attributed to TQM
(Caudron, 1993). There are similar success stories from other sectors, such as, Banking (Dawson and
Patrickson, 1991) and health care.
 S.A. Brah, J.L. Wong, and B.M. Rao

Critics of TQM argue that it entails excessive retraining costs, demands unrealistic employee
commitment levels, consumes inordinate amounts of management time, increases paperwork and
formality, and emphasizes process over results. Some studies show that TQM does not result in a
significant improvement in the performance (Fisher, 1992), while others reveal that performance of
some organizations, in fact, deteriorated after the implementation of TQM (Eskildson, 1995).
Reasons offered for TQM's failure to improve performance include ineffective implementation
(Griffin, 1988), lack of suitable corporate climate (Longenecker, 1993), poorly defined performance
measurement (Brown, 1993) and lack of management support (Katz, 1993).
Ahire and Rana (1995) argue that TQM requires significant investment in terms of financial,
technical, and human resource over several years before achieving the desired results or real progress
towards these results. Sterman et al. (1997) suggest that in the long run, TQM increases productivity,
raises quality, and lower costs, while in the short run it can disrupt prevailing organizational routines
and accounting practices and creates operational and financial stresses that may undercut
organizational commitment to continuous improvement. Clearly, TQM presents firms with a trade-
off between short and long run performance. A short-term focus may lead to the conclusion that
TQM programs are ineffective or detrimental to business performance. Also, the success of TQM
programs appears to be determined more by intangible practices such as management commitment,
open organization, employee empowerment, rather than by features associated with TQM such as,
quality training, process improvement and benchmarking.
Ebrahimpour and Cullen (1993) investigate how company nationality influenced the
development and results of TQM. The findings suggest that the existence of major roles and
responsibilities of quality control department could be grouped into three styles: operations,
promotion, and inspection. The promotion style seems to reflect a Japanese approach while the
inspection style comes out to reflect a traditional American approach. The study concludes that US
firms could implement a promotion style of quality management in their organizations and gain the
same benefits from high-quality goods that now seem to go to the Japanese.
Other important concerns of TQM with respect to various organizational characteristics and
operating environment include people issues and application of tools and techniques. Wilkinson
(1992) finds that TQM might require changes in personnel practices, such as the reform of output-
related pay systems, the abandonment of crude performance targeting for managers, and a greater
emphasis on personal development and training. As such, TQM appears to be consistent with a move
toward human resource management in that both identify line managers as having a key role in the
management of people.

TQM and organizational performance

Many of the earlier studies indicate a definite positive association between the introduction of TQM
with both long-term and short-term business performances. Easton and Jarrell (1994) report evidence
of improved financial performance and associate it with the implementation of TQM programs.
Hendricks and Singhal (1997) conduct a longitudinal analysis comparing the performance of
companies before and after the adoption of TQM. They conclude that firms that have effectively
implemented TQM outperform a control sample based on measures like profitability, revenues, costs,
capital expenditure, total assets and number of employees. Samson and Terziovski (1999) state that
the relationship between TQM practice intensity explains a significant proportion of variance in their
study.
The US Government Accounting Office (GAO) in a 1991 study examines the impact of
formal TQM strategies on the performance of 20 US companies receiving high ratings in 1988/1989
Malcolm Baldrige National Quality Award. The study finds TQM factors such as strong customer
focus, senior management leadership, empowerment, commitment to employee training, involvement
and application of systematic fact finding and decision making processes, to be strongly related to
organizational performance measured by employee relations, quality, productivity, customer
satisfaction, and profitability. However, Garvin (1991) points out that the GAO study lacks scientific
evaluation through statistical methods and it did not control for industry factors, did not include firms

Page | 2
 S.A. Brah, J.L. Wong, and B.M. Rao

that did not apply for Baldrige, and did not report on the progress of non-TQM firms over the same
period.
Powell (1995) studies relationship between TQM and organizational performance of 54 firms.
The findings conclude that TQM could add economic value to the firm, but it had not done so for all
TQM firms. Success of TQM appear to rely more on executive commitment, open organization, and
employee empowerment, rather than on benchmarking, training, flexible manufacturing, process
improvement, and improved measurement. This is consistent with the resource-based notion of
complementary resources, suggesting that efforts should focus on building a culture within which
TQM could thrive. Powell concludes that these tacit resources, not TQM tools and techniques, drove
TQM success and those organizations that acquire them could create competitive advantage with or
without TQM ideology.
Terziovski and Samson (1999) ascertain that behavioral factors such as executive
commitment, employee empowerment, and an open culture could create competitive advantage more
strongly than TQM tools and techniques such as process improvement, benchmarking, and
information and analysis. This study uses a larger database of 1200 Australian and New Zealand
manufacturing companies.
Madu and Kuei (1995) perform a comparative analysis of quality practices in manufacturing
firms in the U.S. and Taiwan. Their findings show associations between the quality constructs and
organizational performance, but do not establish causal relationships. Furthermore, these
relationships are different for four types of firms based on age and size. Even within the same firm
types, there are differences among countries.

TQM in services
Even though TQM has its origins in manufacturing related organizations, it is widely believed that its
principles are equally relevant to service organizations as both use facilities as inputs to satisfy
customers needs. However, it is necessary to understand the unique characteristics of services for an
effective implementation of TQM in a service organization. Common management practices of
service organizations with successful quality programs include quality process structure, customer
involvement, continuous communication of the quality message, training managers to push down
decision-making, and integration of TQM with performance evaluation (Warihay, 1993). Though the
service sector lags behind manufacturing in the adoption of TQM, Troy and Schein (1995) notice that
this might be a boon since services now have the opportunity to learn from the mistakes of TQM
pioneers.
Ghosh and Mak (1994) survey the advertising industry of Singapore to identify the critical
success factors relevant for TQM and recommend TQM as an effective way to improve profitability
and competitiveness, organizational effectiveness, and customer satisfaction. Ghosh and Wee (1996)
survey the TQM practices and objectives of Singapore manufacturing companies. Their study
investigates the use of TQM practices to gain an edge in the marketplace in terms of quality, and it
attempts to establish how organizations feel their objectives are being met. However, neither study
makes any linkages to performance of the companies.

Hypotheses
The primary objective of the study is to establish the effect of TQM program implementations in the
service sector of Singapore. The literature review indicates a significant positive relationship between
TQM and business performance of an organization. This leads to the following hypotheses:

H1(a): There is a significant positive relationship between TQM and the operating performance
of a firm
H1(b): There is a significant positive relationship between TQM and the financial performance
of a firm.
Also, much of the literature highlights the fact that TQM is a long-term commitment and that the
benefit may not be evident in the short run. This lead to the following hypotheses:

Page | 3
 S.A. Brah, J.L. Wong, and B.M. Rao

H2(a): The operating performance of experienced TQM firms is better than less experienced
TQM firms.
H2(b): The financial performance of experienced TQM firms is better than less experienced
TQM firms.
Our secondary objective is to identify critical factors of TQM implementation in the service
sector of Singapore. Saraph et al. (1989) identify and empirically validate critical areas of quality
management based on the prescriptions of leaders in quality management. Their study covered
manufacturing and service organizations at the unit level. Flynn et al. (1994) conduct a similar study
at the plant level based on multiple responses from direct laborers, plant managers, quality managers,
production and inventory managers, supervisors, process engineers and human resource managers.
Both studies independently lead to a similar set of factors. Ahire et al. (1996) develop and empirically
test an instrument for measuring the various quality management constructs based on a review of the
prescriptive, conceptual, practitioner and empirical literature on quality management. Black and
Porter (1996) develop an empirical framework for TQM, using the criteria for the Malcolm Baldrige
Quality Award as well as the perceptions and experiences of a range of total quality practitioners as
the basis. Based upon the above studies, we select the following list of eleven constructs to represent
the critical factors of TQM implementation.

i) Top management support vii) Process improvement

ii) Customer focus viii) Service design
iii) Employee involvement ix) Quality improvement rewards
iv) Employee training x) Benchmarking, and
v) Employee empowerment xi) Cleanliness and organization.
vi) Supplier quality management

Furthermore, as TQM implementation encompasses all aspects of a firms operation, we can

expect the business performance of a firm to have a positive association with each of the above
constructs. This lead to the hypotheses that:

H3(a): There is a significant positive correlation between each of the eleven implementation
constructs and the operating performance of a firm.
H3(b): There is a significant positive correlation between each of the eleven implementation
constructs and the financial performance of a firm.

Questionnaire design
We divide the questionnaire into five sections, each collecting a certain type of information.
Section A comprises of three general questions about the presence of, and experience with, a
quality program in a company. We measure the experience of a firm with TQM by the number of
years since the adoption of a TQM program and use a cut-off of three years to classify a firm as an
experienced TQM firm. We base this on studies by Dawson and Patrickson (1991), and Griffin
(1988), who suggest that it takes at least three years for TQM to produce consistent performance
advantages.
Section B gathers information on the quality management practices in a company. We
developed a total of fifty-five items covering the eleven critical factors in TQM implementation
identified in the hypotheses section. These fifty-five items represent a consolidation of such items
from published literature after evaluating their relevance to the study on hand.
Section C collects information about the structure of the industry of the respondent's
company. We consider this to be important because many external and internal factors influence the
effectiveness of TQM implementations. This list of items, adopted from Powell (1995), is divided
into two groups namely, entry barriers and rivalry. We use response to these questions as an index of
industry differences.

Page | 4
 S.A. Brah, J.L. Wong, and B.M. Rao

Section D aims at measuring the financial and operational aspects of the business performance
of the company. Since the pool of companies in the survey spanned across many industries in the
service sector, we choose to use subjective performance measures obtained from the company
executives rather than publicly available financial statements. We believe that this will eliminate the
effect of any significant differences in capital structure, depreciation accounting conventions etc.,
between companies. Further, many privately held firms in the pool may lack such public information,
or may be unwilling to provide such confidential financial information as a matter of policy.
The questions in Section D intend to gather information on the business performance of the
company. We categorize business performance into (a) strategic business performance, dealing with
major corporate goals such as profitability, market share, sales turnover and return of capital, and (b)
operational business performance, dealing with the day-to-day running of the organization. We
further group the operational performance indicators into five sub-categories, namely, supplier
relationship, process, policy deployment, personnel and customer relationship measures. In the
interests of brevity and to encourage a high response rate, we use a subset of 18 key items from a
comprehensive performance measurement system of 14 strategic business performance indicators, and
60 operational business performance indicators proposed by Maskell (1989). Finally, Section E
obtains a brief profile of the organization.
For consistency and ease of completion, we standardize most of the scales in this study to
five-point Likert scales, with 1=below industry average, 3= industry average, and 5=above industry
average or with 1=strongly agree, 3= Neutral, and 5=strongly disagree, depending on the question.
Also, we reverse score some of the measures to reduce possible bias in responses. The remaining
questions are in the form of multiple-choices.

Survey methodology
A simple random sample of 950 service companies is drawn from the Singapore Business Services
96/97 published by the Singapore Trade Development Board, and Singapore 1000 Services published
by Datapool (S) Pte Ltd. General Managers (or equivalent) are target respondents because we believe
that only they are in a position to answer all of the questions.

Analysis
With a total of 176 valid responses, our response rate came out to be 18.5%. 118 of these firms
(67.0%) claims to have made meaningful commitments to TQM indicating an apparent wide spread
use of TQM in the Singapore service sector. Logistics firms represent the single largest group, with
adequate representation from other sectors of the service industry in the sample. Large firms (with
more than 250 employees) comprise 56 of the responding companies and the rest are classified as
small. 41% of the large firms and 17% of the small firms are ISO certified. Table 1 provides a brief
profile of the responding companies.

Verification of scales
We use factor analysis to test construct validity, which is the degree to which a measure confirms a
network of related hypotheses generated from theory based on the concepts. This analysis verifies
that items that are supposed to measure a given factor actually load together. We extract factors by
the principal component analysis with varimax rotation. The purpose of rotation is to achieve a
structure that is simple and easy to interpret by transforming the factor matrix such that each variable
is highly loaded on only one factor and low on the others. Nunnally (1978) recommends a factor
loading of at least 0.30 as a guideline to determine whether a variable is part of a factor. We use a
minimum factor loading of 0.50 to ensure the quality of extracted factors.
Reliability is the degree to which measures are free from errors and thus yield consistent
results. We chose Cronbachs standardized because it is the most commonly used reliability test in
survey research. The recommended minimum acceptability value for is 0.70, although some studies
use as low as 0.60. In recent times, many survey research have successfully used this methodology.

Page | 5
 S.A. Brah, J.L. Wong, and B.M. Rao

Table 1. Demographics of Respondents.

Number of % of
Respondents Respondents
Ownership of Company
Local Company 109 61.9
Foreign Company 42 23.9
Joint Venture 25 14.2
Number of Employees
Less than 50 59 33.5
50-99 25 14.2
100-249 36 20.5
250-499 22 12.5
500 or more 34 19.3
ISO Certification
With ISO 44 25.0
Without ISO 132 75.0
Industry
Communications 6 3.4
Logistics 61 34.7
Finance 24 13.6
Hospitality 33 18.8
Retailing 25 14.2
Travel 12 6.8
Printing 8 4.5
Others 7 4.0

TQM Program
With TQM 118 67.0
Without TQM 58 33.0
Years of Implementing TQM
Less than 1 year 19 16.1
1 to 3 years 41 34.8
4 to 6 years 24 20.3
More than 6 years 34 28.8

Limitations of the survey

One of the limitations of this survey is the relatively small sample size. Therefore, we recommend
caution in the interpretation of factor analysis results. This is especially true in the factor analysis of
the fifty-five items that made up the TQM constructs. Moreover, there is a potential bias of sample
size towards smaller service companies in Singapore. Thus, use prudence in generalizing the analysis
on the associated hypothesis tests. Of course, a larger number of usable surveys would improve the
quality of the data and results. Another limitation to this study is self-reporting bias. This is a
common problem when one collects data from managers about their organizations, particularly about
the managerial issues that they are closely associated with. Perhaps, multiple responses from different
individuals in each company can reduce this bias. However, it is difficult to identify respondents with
appropriate functional background with knowledge about both the TQM practices and the business
performance of the company.

TQM constructs
We force the fifty-five TQM items into an 11-factor structure analysis via the varimax rotation in
order to identify the underlying structure. As a result, we discard three of the items with a factor
loading of less than 0.5. Table 2 shows the factor loading as well as Cronbach's of the remaining
items. The values ranged from 0.7153 to 0.8981, indicating a high level of internal consistency
among TQM items.

Page | 6
 S.A. Brah, J.L. Wong, and B.M. Rao

Table 2. Factor Loading of TQM Constructs.

FACTORS LOADING
Top Management Support ( = 0.8981)
Long-term plans focused on quality are developed 0.83582
There are clear quality goals identified by top-level managers 0.77935
At company meetings, top-level managers often discuss the importance of quality 0.74839
Top-level managers view quality as being more important than cost 0.67094
Top-level managers depend heavily on quality performance to evaluate employees 0.62038
CCustomer Focus (=0.8477)
A summary of customer complaints is given to floor managers 0.79817
Customers feedback is used to determine their requirements 0.75545
Customers requirement is used as the basis for measuring quality 0.74569
Floor managers are aware of the level of customer satisfaction 0.69125
We are frequently in close contact with our customers 0.57048
Employee Involvement (= 0.8609)
All employees suggestions are evaluated 0.81864
Most employees suggestions are implemented 0.75630
We often work in teams, with members from a variety of departments 0.64129
We use the ability to work in team as a criterion in employee selection 0.59321
Employee Training (=0.8509)
Employee training is provided in quality principles 0.81864
Resources are available for employee quality training 0.75630
There is almost always some kind of employee training going on in our company 0.74478
Top-level managers allocate adequate resources towards efforts to improve quality* 0.70208
Top management are often involved in quality training 0.64129
Employee Empowerment (=0.8405)
Employees are encouraged to take initiative when dealing with customers complaints 0.76473
Problem solving ability is a criterion in selecting employees 0.67671
Employees are given the resources necessary to deal with customer complaints 0.63157
Supplier Quality Management (=0.8940)
Suppliers have programs to assure quality of their products 0.80841
We are more interested in developing a long-term relationship with our suppliers than reducing 0.79472
prices.
Quality is a more important criterion than cost in selecting suppliers 0.76512
We have a small number of high quality suppliers 0.73924
Suppliers are given assistance in improving quality 0.66008
Process Improvement ( =0.8169)
We have a program to reduce overall time between order received and when order is satisfied 0.84640
We use inspection for quality control 0.84461
We have a program to find wasted time and costs in all internal processes 0.83452
We have standardized process instructions which are given to employees 0.76563
We use statistical control charts to control processes (e.g. charting of average delivery time) 0.72265
Service Design (=0.8672)
New service design are thoroughly reviewed before marketed 0.80166
Quality of new service is more important than reducing its costs 0.77261
There are employees from other functional department in the design team 0.67958
Employees not in the design team are also involved to a great extent in the design of new 0.62302
services to the market

Page | 7
 S.A. Brah, J.L. Wong, and B.M. Rao

Table 2. Factor Loading of TQM Constructs (continued).

FACTORS LOADING
Quality Improvement Rewards (=0.8142)
Supervisors are rewarded for quality improvements 0.82780
Workers are rewarded for quality improvements 0.81196
Rewards are given to the employees for good suggestions* 0.74478
Financial incentives are used to reward quality improvements 0.73822
Non-financial incentive are used to reward quality improvements 0.62817
The well-being of employees is considered when planning improvement activities 0.57598
Benchmarking (=0.7153)
We visit other organizations to investigate their practices 0.78172
We conduct research to find out the best practices of other organizations 0.72788
We monitor competitors to find out the best industry practices 0.58230
Cleanliness and Organization (=0.8959)
Overall layout and furnishing of the work area Is pleasant 0.90611
The work area is kept clean at all times 0.90339
Employees often have no trouble finding what they need in order to do their work 0.79950
We take pride in keeping our work area neat 0.73095
Customer-contact employees have to be well-dressed and neat 0.63579

Some of the fifty-five TQM related items do not load in their presumed factors. For example,
our intention is to measure top management support through the item Top-level managers allocate
adequate resources towards efforts to improve quality, but the item loads highly on the factor
employee training. Upon some reflection we realize that this is quite reasonable because a major
portion of the resources allocated to improve quality is usually devoted to employee quality training.
Similarly, we anticipated the item Rewards are given to the employees for good suggestions to
measure employee involvement, but it loads highly on quality improvement rewards. We placed
these items with the factor where they load highly and indicate them in Italics with an asterisk mark at
the end.

Industry constructs
We forced the five items measuring entry barriers and six items measuring rivalry into a 2-factor
structure. One item measuring entry barriers, To compete in our industry, the initial capital required
is high is dropped in the final model because it does not load high enough. This may be due to the
fact that the initial capital requirement in service industry is not high enough to deter new entrants.
Table 3 presents the resulting factors loading after dropping this item. The values of 0.6915 and
0.6869 for entry barriers and rivalry respectively, are high enough to conclude that the factor items
have high internal consistency. Powell (1995), however, points out that each of the constructs of
rivalry and entry barriers is somewhat broader than the TQM construct.

Table 3. Factors Loading of Industry Constructs.

FACTORS LOADINGS
Entry Barriers (=0.6915)
In our business, existing firms have advantages over new entrants 0.82713
New firms may find difficulties entering our industry successfully 0.79486
Large firms enjoy cost advantages in our industry 0.62869
In our industry, customers are loyal they rarely switch to competitors 0.56851
Rivalry (=0.6869)
Most firms in our industry are operating below full capacity 0.73809
Compared to other industries, rivalry among firms in our industry is intense 0.70382
Firms in our industry advertise heavily compared to other industries 0.59922
In our industry, our equipment has no alternative uses 0.58458
Our industry is dominated by a few large competitors 0.58140
In our business, existing firms have advantages over new entrants 0.54547

Page | 8
 S.A. Brah, J.L. Wong, and B.M. Rao

Business performance constructs

Also, we force the eighteen items of business performance into a 2-factor structure. Two items order-
processing time, and costs of delivering the service have been discarded due to poor loading factor.
Table 4 presents resulting business performance constructs after discarding these two items from
operating performance. The relatively high values (above 0.8) indicate internal reliability.

Table 4. Factor Loading of Business Performance Constructs.

FACTORS LOADINGS
Operating Performance (=0.8141)
Percentage of suppliers on-time deliveries 0.83177
Reputation for providing quality service 0.80583
Overall level of customer satisfaction 0.80530
Skill level of employees 0.76310
Level of employee satisfaction 0.76054
Productivity of our employees 0.71862
Number of repeat customers 0.67751
Number of customer complaints 0.66658
Level of employee absenteeism 0.65700
Percentage of on-time deliveries 0.58883
Level of employee turnover 0.58150
Financial Performance (=0.8018)
Overall financial performance 0.88241
Net profit as a percentage of net assets (return on asset) 0.84887
Revenue growth 0.83235
Our gross profit as a percentage of sales (return on sales) 0.81095
Market share 0.78570

TQM and business performance

We use three measures of TQM in the analysis. A binary variable TQM1 measures whether TQM is
implemented or not. TQM2 measures on a 6-point scale the answer to the question "How advanced is
the implementation of the program compared to programs of other organizations you are familiar
with"? Finally, TQM3 is the mean response to the fifty-five TQM related items in the questionnaire.
Table 5 shows the zero-order correlation among the variables involved in testing H1 (a) and
H1 (b). The zero-order correlation between two variables is the relationship between them without
controlling for the effects of other variables on the relationship of interest. The directions of
correlation are in agreement with the competitive strategy framework of Michael Porter, who predicts
a significant positive correlation between entry barriers and firm performance, and a significant
negative correlation between rivalry and firm performance. Financial performance, however,
correlates significantly with entry barriers, but not with rivalry. This could be because service sector
is a large and growing part of the Singapore economy with the strong and increasing demand during
the survey period cushioning the effects of rivalry. Also, the table shows that there is a significant
correlation between operating performance and rivalry, but not with entry barriers.

Table 5. Correlation of Variables in Testing H1 (a) and H1 (b).

1 2 3 4 5 6 7 8
1. Entry Barriers 1.00
2. Rivalry -0.01 1.00
3. Firm Size 0.09 0.03 1.00
4. TQM1 - 0.09 0.17 0.37** 1.00
5. TQM2 - 0.21 0.04 0.25 NA 1.00
6. TQM3 - 0.09 0.06 0.12 NA 0.05 1.00
7. Financial Performance 0.23* -0.03 0.30** 0.39** 0.11 0.27* 1.00
8. Operating Performance 0.02 -0.23* -0.23* 0.33** 0.14 0.32** 0.39** 1.00
* Correlation significant at significance level of 0.05;
** Correlation significant at significance level of 0.01
NA Not applicable

Page | 9
 S.A. Brah, J.L. Wong, and B.M. Rao

These results suggest that industry differences due to entry barriers and rivalry, although
important, do not completely explain the variability in business performance among firms. Only entry
barriers associate with financial performance and only rivalry associates with operating performance
significantly. Other firm-specific factors, such as size and the adoption of TQM could explain
variations in performance beyond those attributable to industry factors.
Table 5 also reveals significant negative correlation between firm size and business
performance. This confirms the findings of Manoochehri (1988), who compares the relative strengths
and weaknesses of large and small firms. Also, Manoochehri reports that some TQM principles such
as employee participation can be more successfully applied in smaller firms leading to higher
employee satisfaction. Ahire and Golhar (1996) found statistical evidence to indicate that small firms
are more customers focused than large firms. They attribute this to the greater flexibility of small
firms, allowing management to align operations management with TQM elements more easily.
Further, our interest is in finding out if the adoption of TQM (another firm specific factor) can
explain the differences in business performance. A proper test of H1 (a) and H1 (b) requires
controlling for industry factors and firm size from the analysis. This will remove variations in
business performance attributable to entry barriers, rivalry and firm size. Table 6 shows the resulting
partial correlation after eliminating the effects of the three control variables. The partial correlations
are positive ranging from 0.13 to 0.40 and are larger than their corresponding zero-order correlations.
This indicates that one or more of the three partial variables suppress the zero-order correlation
through its joint correlations with TQM and performance. A closer look suggests that perhaps only
the firm size produce a suppression effect on the relationship between TQM and operating
performance. Also, there is no such effect on financial performance because large firm size is
associated with both higher levels of TQM implementation and better performance.

Table 6. Partial Correlation between TQM and Performance.

Financial Performance Operating Performance
Zero-order r Partial r Zero-order r Partial r
TQM 1 0.39** 0.40** 0.33** 0.36**
TQM 2 0.11 0.15 0.14 0.16
TQM 3 0.27* 0.28* 0.32** 0.34**
* Correlation significant at significance level of 0.05
** Correlation significant at significance level of 0.01

Moreover, Table 6 shows a relationship between the adoption of a TQM program (TQM1)
and higher financial and operating performance. Hendricks and Singhal (1997) and Elmuti et al.
(1996), among others, report similar findings about a positive relationship between TQM and business
performance. The results suggest that an organization would benefit in terms of improved financial
and operating performance from the adoption of a TQM program. However, there is no significant
relationship between how advance the TQM program of a company is to both financial and operating
performance. This result is in contrast to the findings of Powell (1995), where all three measures of
TQM correlate significantly with the performance of an organization. Perhaps, TQM is a relatively
new concept to service companies and they lack benchmarks to compare their TQM programs. We
can, however, conclude that on the whole, TQM does show a significant positive correlation with both
financial and operating performance.

Years of TQM adoption and business performance

Hypothesis H2 (a) postulates that experienced TQM adopters would have better financial performance
than less experienced TQM adopters. Similarly, H2 (b) expects better operating performance from
more experienced TQM firms. Table 7 shows the mean score, standard deviation, and the p-values of
the t-tests. The p-values in the table are larger than the significance level of 0.05 indicating that there
is no statistically significant difference in the performance measures of experienced and less
experienced firms. However, a close p-value of 0.062 for the hypothesis H2 (b), regarding the
operating performance, implies that we do have statistical evidence of significant differences at a level
of 0.10.

Page | 10
 S.A. Brah, J.L. Wong, and B.M. Rao

Table 7. Performance of Experienced Vs. Less Experienced TQM Firms.

More Experienced Less Experienced
p-value
TQM Firms TQM Firms
Mean S.D. Mean S.D.
H2 (a) Financial Performance 3.5357 0.785 3.2444 0.886 0.202
H2 (b) Operating Performance 3.4983 0.643 3.2208 0.539 0.062

Generally, we think of TQM as a campaign for the long run. Therefore, firms with more
experience in TQM should be able to implement the elements of TQM more effectively than less
experienced firms. Perhaps, firms with established quality programs are more likely to have the
necessary infrastructure for TQM in place that puts them at an advantage over firms with relatively
new TQM programs. However, we do not find any significant difference between the rigor of
implementation of experienced TQM firms relative to less experienced firms. Thus, more
experienced TQM firms do not necessarily perform better than less experienced ones.
As stated earlier, there is a significant correlation between the rigor of TQM implementation
(TQM3) with both financial and operating performances. This suggests that the financial and
operating performances improve with the rigor of TQM implementation in an organization. Also, this
indicates that rigor of TQM implementation is a better predictor of business performance than how
long it has been adapted.

Years of TQM adoption and TQM implementation

One would expect that more experienced TQM firms would implement each element of TQM more
rigorously than less experienced ones. As discussed earlier, more experienced TQM firms are those
firms, which have implemented TQM for more than 3 years. Table 8 presents the results of the t-test
for the difference in the performance measures of experienced TQM firms and less experienced ones.
For each attribute, the table provides the mean score, standard deviation, and the p-value. With the
exception of process improvement, the p-values indicate that there is no statistically significant
difference, at 0.05 significance level. It appears that firms that have implemented TQM for a longer
period of time do not implement it any more rigorously than firms that have implemented TQM for a
shorter period of time do. This finding is similar to that of Ahire (1996). Also, our study finds that
experienced TQM firms do not implement TQM more rigorously than less experienced firms.

Table 8. Difference Between Experienced & Less Experienced TQM firms.

More Experienced Less Experienced
TQM Management Practices p-value
TQM Firms TQM Firms
Mean S.D. Mean S.D.
Top Management Support 3.9524 0.871 3.8929 0.674 0.777
Customer Focus 4.2519 0.651 4.2214 0.717 0.870
Employee Involvement 4.0815 0.623 3.6786 0.898 0.06
Employee Training 4.0370 0.929 4.2143 0.470 0.380
Employee Empowerment 3.7654 0.816 3.6786 0.788 0.690
Supplier Quality Management 3.6444 0.890 3.3143 0.878 0.172
Process Improvement 3.6543 0.534 3.0298 0.439 0.01**
Service Design 3.8148 0.868 3.4375 0.961 0.133
Quality Improvement Rewards 3.8667 0.936 3.4357 1.087 0.122
Benchmarking 3.7654 0.800 3.6667 0.811 0.651
Cleanliness and Organization 4.3111 0.765 4.3429 0.560 0.861
** Correlation significant at significance level of 0.01

TQM management practices and business performance

H3 (a) and H3 (b) for each of the eleven constructs (i) to (xi) suggest a positive correlation between
each individual TQM management practice and business performance. Table 9 summarizes the
results. Removing the effects of rivalry, entry barriers and firm size yields the partial correlations in
Table 9. The significant partial correlation between top management support and both measures of

Page | 11
 S.A. Brah, J.L. Wong, and B.M. Rao

performance provides statistical evidence of quality experts opinion that top management dedication
is crucial to the success of a quality program. Also, there is a significant partial correlation between
customer focus with both financial and operating performances. Voss (1992) emphasizes the point by
suggesting that an organization's long-term success depends upon its customer retention efforts.
Table 9 also shows significant partial correlation between employee involvement as well as
employee empowerment and both performance measures. Similar to this study, Bowen and Lawler
(1995) show evidence that empowerment can have positive returns for employee, customers, and the
bottom-line. Also, they argue that for empowerment programs to work, service firms should allocate
rewards based on how effectively employees use information, knowledge, and power to improve
service quality. Walker (1992) suggests that level of employee involvement depend on individual or
group rewards. Involvement leads to more satisfied employees that are able to produce satisfied, and
even delighted customers, hence better business performance. Also, Table 9 shows that quality
improvement rewards correlate significantly with performance. Finally, even though the other partial
correlations are not significant, it is encouraging to see that there are no negative correlations. For a
fully integrated approach in implementing TQM, these other tools, which do not produce significant
correlations, would also be indispensable.

Table 9. Relationship Between TQM Practices and Business Performance.

Financial Performance Operating Performance
TQM Management Practices
Zero-order r Partial r Zero-order r Partial r
i) Top Management Support 0.2454* 0.2613** 0.3011** 0.2784**
ii) Customer Focus 0.0631 0.1932* 0.2425* 0.2276*
iii) Employee Involvement 0.2129* 0.2185* 0.2533** 0.2675*
iv) Employee Training 0.1536 0.1196 0.2138* 0.1957
v) Employee Empowerment 0.2724* 0.2624** 0.2065* 0.2268**
vi) Supplier Quality Management 0.1424 0.1265 0.1100 0.1459
vii) Process Improvement 0.1604 0.1243 0.2090* 0.1675
viii) Service Design 0.2479* 0.1585 0.1662 0.1729
ix) Quality Improvement Rewards 0.2329* 0.2298* 0.2539** 0.2367**
x) Benchmarking 0.1297 0.1564 0.1931 0.1690
xi) Cleanliness and Organization 0.0815 0.1175 0.1297 0.1482
* Correlation significant at significance level of 0.05
** Correlation significant at significance level of 0.01

We can see that more intangible, behavioral factors like management commitment, employee
involvement and empowerment produce significant partial correlations with both performance
measures. However, other TQM tools and techniques like customer focus and quality improvement
rewards have significant correlations with performance. This suggests that TQM relies on the softer
concepts duly complemented with some essential TQM tools and techniques.

Limitations of the study

Here, we should recognize that significant correlation between TQM and business performance does
not imply causation, but only an association. TQM practices could cause high performance, or high
performance could give rise to TQM practices, or TQM and performance could be both caused by a
third factor. Even though we include other known explanatory variables of business performance
from past literature (entry barriers, rivalry and firm size), we need more rigorous statistical tests to
show that the adoption of TQM causes high business performance.

Summary
This study finds support for the proposition that TQM implementation leads to better business
performance in the service sector of Singapore. However, we do not find any evidence that the length
of adoption of TQM program affects the business performance. Analysis shows that this may be
because there is no significant difference between more experienced TQM and less experienced TQM
firms in terms of the rigor of their TQM implementation. The adoption of a TQM program and the
rigor of its implementation are the only factors we find to correlate significantly with business

Page | 12
 S.A. Brah, J.L. Wong, and B.M. Rao

performance in this study. We observe that the key to TQM success lies in the more intangible,
behavioral factors of top management support, employee empowerment and employee involvement.
Also, some of the more crucial TQM tools and techniques like customer focus and quality
improvement rewards contribute to the successful implementation of TQM. Table 10 provides a
summary of the results of the hypotheses.
The results of this study suggest that TQM is applicable to the service sector of the economy.
Its implementation is associated with better business performance and the more rigorously it is being
implemented, the better the business performance. We have identified critical aspects of TQM that
can determine the success of a TQM program in a service environment. These factors include top
management commitment, customer focus, employee empowerment, employee involvement, and
quality improvement rewards.

Table 10. Summary of Results of Hypotheses.

Support for
Study
Hypothesis Hypothesis
Objective
at p<0.05
TQM and H1 (a) There is a significantly positive relationship between
Business TQM and the financial performance of a firm.
Performance H1 (b) There is a significantly positive relationship between
TQM and the operating performance of a firm.
Years of TQM H2 (a) The financial performance of experienced TQM
Adoption and firms is better than less experienced TQM firms.
Business H2 (b) The operating performance of experienced TQM
Performance p-value = 0.06
firms is better than less experienced TQM firms.
TQM H3 (a) There is a significant positive correlation between
Management Financial Performance and
Practices and i) Top Management Support
Business ii) Customer Focus
performance iii) Employee Involvement
iv) Employee Training
v) Employee Empowerment
vi) Supplier Quality Management
vii) Process Improvement
viii) Service Design
ix) Quality Improvement Rewards
x) Benchmarking
xi) Cleanliness and Organization
H3 (b) There is a significant positive correlation between
Operating Performance and
i) Top Management Support
ii) Customer Focus
iii) Employee Involvement
iv) Employee Training
v) Employee Empowerment
vi) Supplier Quality Management
vii) Process Improvement
viii) Service Design
ix) Quality Improvement Rewards
x) Benchmarking
xi) Cleanliness and Organization

Page | 13
 S.A. Brah, J.L. Wong, and B.M. Rao

References
Ahire, S. L., (1996) "TQM Age Versus Quality: An Empirical Investigation", Production and
Inventory Management Journal, Vol. 37 No. 1, pp 18-23.
Ahire, L. S., Golhar, D. Y., and Waller, M. A., (1996) Development and Validation of TQM
Implementation Constructs, Decision Sciences, Vol. 27 No. 1, pp 23-56.
Ahire, S. L., and Golhar, D. Y., (1996) Quality Management in Large Versus Small Firms: An
Empirical Investigation, Journal of Small Business Management, Vol. 34 No. 2, pp 1-13.
Ahire, S. L., and Rana, D. S., (1995) TQM Pilot Projects Selection Using an MCDM Approach,
International Journal of Quality and Reliability Management, Vol. 12 No. 1, pp 61-81.
Black, S. A., and Porter, L. J., (1996) Identification of the Critical Factors of TQM, Decision
Sciences Vol. 27 No. 1, pp 1-21.
Bowen, D. E., and Lawler, E. E. III, (1995) Empowering Service Employees, Sloan Management
Review, Vol. 36 No. 4, pp 73-83.
Bricknell, G., (1996) Total Quality Revisited, Management Services, Vol. 40 No. 1, pp 18-20.
Brown, M. G., (1993) Why does Total Quality Fail in Two out of Three Tries? Journal for Quality
and Participation, Vol. 16 No. 2, pp 80-89.
Caudron, S., (1993) "Keys to Starting a TQM Program", Personnel Journal, Vol. 72 No. 2, pp 28-33.
Dawson, P., and Patrickson, M., (1991) Total Quality Management in Australian Banking Industry,
International Journal of Quality and Reliability Management, Vol. 8 No. 5, pp 66-76.
Easton, G.S., and Jarrell, S. L., (1994) The Effects of Total Quality Management on Corporate
Performance: AN Empirical Investigation, Working Paper, School of Business, Indiana
University, Bloomington, IN.
Ebrahimpour, M. and Cullen, J. B., (1993) TQM in Japanese and American Firms Operating in the
United States: A Comparative Study of Styles and Motivational Beliefs, Management
International Review, Vol. 33 No. 1, pp 23-39.
Elmuti, D., Kathawala, Y., and Manippallil, M., (1996) Are Total Quality Management Programmes
in Higher Education Worth the Effort?, International Journal of Quality and Reliability
Management, Vol. 13 No. 6, pp 29-44.
Eskildson, l., (1995) TQMs Role in Corporate Success: Analyzing the Evidence, National
Productivity Review, Vol. 14 No. 4, pp 25-38.
Fisher, T. J., (1992) The Impact of Quality Management on Productivity, International Journal of
Quality & Reliability Management, Vol. 9 No. 3, pp 44-52.
Flynn, B. B., Schroeder R. G., and Sakakibara, S., (1994) A Framework for Quality Research and an
associated measurement Instrument, Journal of Operations Management, Vol. 9 No. 4, pp 339-
366.
Garvin, D.A., (1991) How the Baldrige Award Really Works, Harvard Business Review, Vol. 69
No. 6, pp 80-93.
Ghosh, B. C., and Mak T. L., (1994) Total Quality Management in Services: The Case of
Singapores Advertising Industry, The TQM Magazine, Vol. 6 No. 4, pp 34-41.
Ghosh, B. C., and Wee, H. H., (1996) TQM in Practice: A Survey of Singapore's Manufacturing
Companies on their TQM Practices and Objectives, The TQM Magazine, Vol. 8 No. 2, pp 52-54.
Griffin, R., (1988) Consequences of Quality Circles in an Industrial Setting: A Longitudinal
Assessment, Academy of Management Journal, Vol. 31 No. 2 pp 338-358.
Hendricks, K. B., and Singhal, V. R., (1997) Does Implementing an Effective TQM Program
actually Improve Operating Performance? Empirical Evidence from firms that have won Quality
Awards, Management Science, Vol. 43 No. 9, pp 1258-1274.

Page | 14
 S.A. Brah, J.L. Wong, and B.M. Rao

Katz, A. (1993), Eight TQM Pitfalls, Journal for Quality and Participation, Vol. 16 No. 4, pp 24-
27.
Longenecker, C. O., (1993) Total Quality Management from Theory to Practice: A Case Study,
International Journal of Quality and Reliability Management, Vol. 10 No. 5, pp 24-31.
Madu, C.N. and Kuei, C.H., (1995) A comparative Analysis of Quality Practices in Manufacturing
Firms in the U.S. and Taiwan, Decision Sciences, Vol. 26 No. 5, pp 621-632.
Manoochehri, G., (1988) JIT for Small Manufacturers, Journal of Small Business Management,
Vol. 26 No. 4, pp 22-30.
Maskell, B., (1988) Performance Measurement for World Class Manufacturing - 1, Management
Accounting, Vol. 67 No. 5, pp 32-33.
Nunnally, J. C., (1978) Psychometric Theory, 2nd Edition, New York: McGraw-Hill Book Company.
Powell, T. C., (1995) Total Quality Management as Competitive Advantage: A Review and
Empirical Study, Strategic Management Journal, Vol. 16 No. 1, pp 15-37.
Samson, D. and Terziovski, M., (1999) The Relationship Between Total Quality Management
Practices and Operational Performance, Journal of Operations Management, Vol. 17, pp 393-
409.
Saraph, J. V., Benson, P. G., and Schroeder, R. G., (1989) An Instrument for Measuring the Critical
Factors of Quality Management, Decision Sciences, Vol. 20 No. 4, pp 810-829.
Sterman, J. D., Repenning, N. P., and Kofman, F., (1997) Unanticipated Side Effects of Successful
Quality Programs: Exploring a Paradox of Organizational Improvement, Management Science,
Vol. 43 No. 4, pp 503-521.
Troy, K. and Schein, L., (1995) The Quality Culture: Manufacturing Versus Services, Managing
Service Quality, Vol. 5 No. 3, pp 45-47.
Terziovski, M. and Samson, D., (1999) The link between Total Quality Management Practice and
Organizational Performance, International Journal of Quality and Reliability Management, Vol.
16 No. 3, pp 226-237.
Voss, C., (1992) Applying Service Concepts in Manufacturing, International Journal of Operations
and Production Management, Vol. 12 No. 4, pp 93-99.
Walker, T., (1992) Creating Total Quality Improvement that Lasts, National Productivity Review,
Vol. 11 No. 4, pp 473-478.
Warihay, F. D., (1993) "Total Quality in Service Organizations", Journal for Quality and
Participation, Vol. 16 No. 3, pp 6-8.
Wilkinson, A., (1992) The Other Side of Quality: Soft Issues and the Human Resource Dimension,
Total Quality Management, Vol. 3 No. 3, pp 323-329.

Page | 15

View publication stats