Management

The relationships betweenorganizational culture, total

quality management practicesand operational performance

Kevin BairdDepartment of Accounting and Corporate Governance,

Macquarie University, Sydney, Australia

Kristal Jia HuErnst and Young Centre, Sydney, Australia, and

Robert ReeveDepartment of Accounting and Corporate Governance,

Macquarie University, Sydney, Australia

Abstract

Purpose – This study seeks to conduct an empirical analysis of the association between thedimensions of O’Reilly et al.’s organizational culture profile (OCP) measure with the extent of use of totalquality management (TQM) practices, measured using Kaynak’s four core TQM practices (quality dataand reporting, supplier quality management, product/service design, process management). In addition,the study examines both the direct and indirect association of Kaynak’s four core TQM practices withoperational (quality and inventory management) performance.

Design/methodology/approach – The study uses data obtained from a survey of 364 businessunits encompassing both the manufacturing and service industries in Australia.

Findings – The findings suggest that the cultural dimension teamwork/respect for people is the mostimportant factor in enhancing the use of TQM practices, while more outcome oriented and innovativebusiness units were also found to use TQM practices to a greater extent. While all four TQM practices werefound to be interrelated, only three of the factors (supplier quality management, process management, andquality data and reporting) were found to help to achieve the operational performance goals.

Practical implications – A major implication of this study is that managers need to recognize theinterdependencies between the core TQM practices and their relationships with operational (inventorymanagement and quality) performance. Furthermore, the findings assist organizations by providingguidance as to the organizational culture that is conducive to TQM, thereby contributing to theachievement of desired operational outcomes.

Originality/value – The paper uses O’Reilly et al.’s OCP to empirically examine the associationbetween organizational culture and TQM. In addition, the paper provides an insight into themultidimensionality of TQM practices and their effect on operational performance in Australia.

Keywords Total quality management, Performance, Organizational culture, Australia

Paper type Research paper

1. IntroductionTotal quality management (TQM) is an integrative organizational-wide philosophyaimed towards continuously improving the quality of products/services and processes in

The current issue and full text archive of this journal is available at

www.emeraldinsight.com/0144-3577.htm

The authors would like to thank Hale Kaynak for her assistance in carrying out this project.

Organizationalculture and TQM

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Received 10 March 2009Revised 18 December 2009,

7 September 2010,22 December 2010

Accepted 12 January 2011

International Journal of Operations &Production Management

Vol. 31 No. 7, 2011pp. 789-814

q Emerald Group Publishing Limited0144-3577

DOI 10.1108/01443571111144850

order to meet or exceed customer expectations (Prajogo and McDermott, 2005; Kiella andGolhar, 1997; US Department of Commerce, 1994). While many studies have shown thatfirms have succeeded by employing a quality strategy (Sim and Killough, 1998; Ittner andLarcker, 1995, 1997; Banker and Porter, 1993; Daniel and Reitsperger, 1992), the AmericanQuality Foundation and Ernst & Young (1992) found that almost two thirds of US firmssaw “zero competitive gain” from TQM, while Soltani et al. (2005) found that the majorityof UK organizations have not received any tangible results from TQM. Similarly, therehas been mixed findings in relation to the success of TQM in Australia (Taylor andWright, 2003; Sohal and Terziovski, 2000; Terziovski and Samson, 1999).

The mixed findings concerning the success of TQM practices poses the question as towhether or not organizations are engaging with TQM practices, and what factors cancontribute to TQM success. In particular, the importance of an organizational culturethat is conducive to TQM practices is frequently referred to in the literature (Prajogo andMcDermott, 2005; Sarros et al., 2005; Rahman and Sohal, 2002; Brown and van der Wiele,1996; Kim et al., 1995) with Kumar and Sankaran (2007, p. 177) describing a TQM cultureas one which “uses teams, promotes pride in workmanship, drives out fear, allowsparticipative management, promotes leadership in place of supervision and promoteslong-term orientation among the members of the organization”. Hence, it is argued thatthe successful implementation of TQM is reliant upon the prevailing organizationalculture (Chapman et al., 1991) with numerous authors referring to the “need to change theorganizational culture and attitudes of the workforce” for TQM to be effective (Sohal andTerziovski, 2000; Samson, 1997; Dawson, 1995; Sohal et al., 1991). However, despite thewidespread acknowledgement of the important role of organizational culture inensuring successful TQM implementation, there is a gap in the empirical literatureexamining the association between organizational culture and the adoption of TQMpractices. Accordingly, the first objective of this study is to examine the organizationalculture characteristics which are most conducive to TQM, with the study examining theassociation between the six cultural dimensions in O’ Reilly et al.’s (1991). Organizationalculture profile (OCP) (outcome orientation, attention to detail, teamwork/respect forpeople, innovation, stability, and aggressiveness) and the extent of use of TQM inAustralian manufacturing and service organizations.

The second objective of the study is to highlight the importance of organizationalculture, by focusing on the subsequent impact of the use of TQM practices onoperational performance (inventory management performance and qualityperformance). Specifically, the study examines the association between Kaynak’s(2003) four core TQM practices (quality data and reporting, supplier qualitymanagement, product/service design, and process management) with each other andwith operational performance in Australian manufacturing and service organizations.While many previous studies have examined the link between the use of TQM andperformance, Kaynak’s (2003) core practices model enables the identification of bothdirect and indirect associations between TQM and performance.

While previous studies have examined the association between TQM practices andoperational performance in Western developed countries, including that of Kaynak(2003) conducted in the USA, the current study surveyed 364 Australian manufacturingand service organizations. The cultural diversity within Australia is one factor believedto inhibit TQM practices (Sohal and Terziovski, 2000; Dawson, 1995). In addition,McDonnell (1994) argued that the short-term focus of Australians is detrimental to the

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adoption of the continuous improvement philosophy. Furthermore, while Australia andthe USA are typically assumed to be similar in respect to Hofstede et al.’s (1990) nationalculture dimensions, Australians are more individualistic (more concerned aboutthemselves than the collective good) and feminist (exhibit more care and concern forothers as demonstrated by a more egalitarian health care and welfare system) than theirAmerican counterparts. Similarly, Triandis (1995) contrasts the two countriesdescribing Australia as exhibiting horizontal individualism (egalitarianism andequality of people irrespective of status or wealth) and the USA as exhibiting verticalindividualism (equality of opportunity but less respect or tolerance for those who are lesssuccessful).

In summary, the two objectives of the study are:

(1) to examine the association between organizational cultural factors with theextent of use of TQM practices in Australian manufacturing and serviceorganizations; and

(2) to examine the association between the use of TQM practices and operationalperformance in Australian manufacturing and service organizations.

2. The association between organizational culture and TQMThe first objective of the study is to examine the association between organizationalculture and TQM. The analysis of this relationship is problematic with debate as towhether there is a distinction between these attributes and if there is, the nature of thecausal direction. However, Zeitz et al. (1997) maintain that while organizational cultureand TQM are closely related they are distinct. Furthermore, both Schein (1985) andPowell (1995) support a distinction between culture and TQM, arguing that whilepractices such as TQM may reflect the culture within an organization, organizationalculture itself is more embedded within the organization reflecting a “pattern of sharedand stable beliefs and values that are developed within a company (or business unit)over time” (Gordon and DiTomoso, 1992, p. 784). Given the embedded nature of culture,the difficulty in changing it (Hofstede et al., 1990) and the fact that an organizations’culture reflects the combination of the various organizational characteristics andpractices adopted, it is unlikely that the implementation of one specific managementpractice such as TQM would have a substantial impact on an organizations’ culture.Rather, it is asserted that the prevailing organizational culture can support TQM byproviding an environment that is conducive to successfully implementing TQM (Powell,1995). Accordingly, as was the case in Prajogo and McDermott (2005) organizationalculture is treated as an antecedent of TQM in this study.

The majority of research on business unit culture conceptualize and operationalize itin terms of sub-dimensions (O’Reilly et al., 1991; Hofstede et al., 1990). Hence, this studyexamines the specific dimensions of culture with the potential to separately affect theextent of adoption of TQM practices. Six dimensions of business unit, all drawn from theO’Reilly et al. (1991) OCP instrument, are examined: outcome orientation, attention todetail, teamwork/respect for people, innovation, stability, and aggressiveness. While thestability and aggressiveness[1] dimensions are included in the exploratory analysis,given that they are not anticipated to influence the extent of adoption of TQM,hypotheses are only developed in respect to the first four dimensions.

Outcome orientation refers to the extent to which business units emphasize actionand results, have high expectations for performance, and are competitive (O’Reilly et al.,


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1991, p. 505). Business units that are more outcome oriented will be expected to focus onimproving product/service quality as a means of enhancing their competitiveadvantage. Accordingly, such units are expected to be more likely to implement TQMpractices in order to enhance their quality performance:

H1a. The organizational cultural dimension outcome orientation will be positivelyrelated to the extent of use of TQM practices.

Attention to detail is defined in O’Reilly et al. (1991) with respect to “precision” and“accuracy”. TQM practices involve using statistical process control methods, evaluatingmeasures of non-conformance and the cost of quality, and conducting cause and effectanalysis. Therefore, organizations that have a greater focus on attention to detail areexpected to be better equipped to implement TQM:

H1b. The organizational cultural dimension attention to detail will be positivelyrelated to the extent of use of TQM practices.

Teamwork/respect for people refers to the collaboration between employees and/or workunits within an organization and the extent to which they focus on fairness, respect for therights of individuals, and tolerance (Windsor and Ashkanasy, 1996). Teamwork/respectfor people facilitates “ownership” of the production process (Forza, 1996) as employeesare given autonomy to make decisions, and encouraged to take responsibility for theirwork. The empowerment of teams enhances flexibility and shortens the time lag inresponding to variances and uncertainties in production or service processes (Flynn andSchroeder, 1994), thereby contributing to continuous improvements in the productionprocess. Accordingly, organizations that encourage teamwork/respect for people areexpected to use TQM practices to a greater extent, with Smith (1999, p. 130) maintainingthat team work is an integral part of the successful adoption and implementationof TQM:

H1c. The organizational cultural dimension teamwork/respect for people will bepositively related to the extent of use of TQM practices.

Innovation refers to a business unit’s receptivity and adaptability to change(O’Reilly et al., 1991, p. 505) and can be defined as the “willingness of the members ofan organization to consider the adoption” of new management techniques or initiatives(Hurley and Hult, 1998, p. 44). This cultural factor is expected to be associated with theadoption of TQM given that “resistance to change represents one of the most profoundsources of potential adoption and implementation problems for new managementaccounting techniques” (Parker, 1997, p. 120). TQM requires organizations tocontinuously seek ways of improving working processes so as to enhance theirability to deliver products/services of high quality. Innovative organizations will bemore willing to experiment with new practices such as TQM practices. They will becontinuously evaluating customer needs and market expectations in order to developnew products and services and improve current production processes ( Juran, 1988).Hence, organizations that are more innovative are more likely to adopt and makeextensive use of TQM practices:

H1d. The organizational cultural dimension innovation will be positively related tothe extent of use of TQM practices.

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3. The association between TQM practices and operational performanceThe following sections develop the relevant hypotheses in regard to the associationbetween each of Kaynak’s (2003) four core TQM practices with each other and with thetwo operational performance variables.

3.1 Quality data and reportingThe TQM practice, quality data and reporting, refers to the extent to which quality datais collected, monitored, and used for quality improvement purposes (Gotzamani andTsiotras, 2001). Supplier quality may be maintained by establishing a supplierperformance measurement database to keep a complete record of material quality, partsdefects rates, and supplier responsiveness (Forza and Filippini, 1998; Krause, 1998), withtools such as control charts often used in conjunction with the database. Such dataprovides information regarding supplier quality cost, and assists employees andmanagers in identifying and solving supplier problems more efficiently. Accordingly,supplier quality management is enhanced:

H2a. Quality data and reporting is positively related to supplier qualitymanagement.

While in Australia there has been a reluctance to engage in quality cost reporting(Sower et al., 2007; Barad, 1995), there has been a tendency for organizations toconcentrate on meeting various quality standards, and to attempt to attain ISO(International Organization for Standardization) certification (Rahman and Sohal, 2002).Quality data and reporting facilitates product/service design by using control charts toconstruct systematic information regarding cost of poor quality such as rework, scrapand warranty costs. Quality data also assists by providing guidance on areas requiringcorrection (Ho et al., 1999; Choi and Eboch, 1998; Lockamy, 1998; Ashford and Tsui, 1991):

H2b. Quality data and reporting is positively related to product/service design.

It is argued that quality data and reporting directly affects process management byinforming workers about deficiencies in processes immediately so they can takecorrective actions before defective products are produced (Ahire and Dreyfus, 2000;Handfield et al., 1998; Flynn et al., 1995). The evaluation and feedback on materials andcomponents purchased will increase the quality of subsequent purchased products.Feedback on such quality ensures that purchasing functions understand the businessinternal production needs and external customer needs, and accordingly result in betterprocess management (Carter et al., 1998). However, as discussed above the focus ofAustralian organizations has been on meeting quality standards as opposed to themeans to the end. Furthermore, the fact that outcome orientation is reported as the mostprominent organizational characteristic in Australian organizations (Baird et al., 2007)suggests that the collection of quality data and reporting will not necessarily beassociated with process management in Australian organizations. Hence, given theuncertainty surrounding the exact nature of this association is stated in the null form:

H2c. There will be no association between quality data and reporting and processmanagement.


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3.2 Supplier quality managementSupplier quality management involves the “development of close partnerships, mutualtrust, and parallel growth with suppliers” (Gotzamani and Tsiotras, 2001, p. 1336).“Effective supplier quality management is facilitated by long-term, cooperativerelationships with as few suppliers as possible to obtain quality materials and/orservices” (Kaynak, 2003, p. 416). Maintaining a small supplier base improves productquality and productivity of buyers by encouraging enhanced supplier commitmentto product design and quality (Ansari and Modarress, 1990). Hence, it is anticipated thatthe focus on supplier quality will enhance product/service design:

H3a. Supplier quality management is positively related to product/service design.

The relationship with suppliers is also expected to be directly related to process flowmanagement, since purchased materials and parts are a dominant source of processvariability ( Juran, 1978). Supplier management can help producers to procure materialsand parts that can be used efficiently (Leonard, 1982), which in turn will enableorganizations to reduce waste, and create a leaner operation (Krajewski and Ritzman,2001; Choi and Eboch, 1998), thereby improving process management:

H3b. Supplier quality management is positively related to process management.

Furthermore, adoption of techniques such as just-in-time ( JIT) systems facilitatecommunication between manufacturers and suppliers to allow better conveyance ofproduct requirements and specifications, thereby enhancing the confidence thatquality goods will be delivered on time, and enabling the elimination of safety stock.Supplier management also helps producers to procure the materials and parts that canbe used most efficiently (Leonard, 1982). Dealing with a small number of suppliersfacilitates the solution of quality and delivery problems because buyers can pay closeattention to individual suppliers (Burt, 1989). Supplier certification or qualificationprograms provide assurance about the quality of incoming materials and parts bymeans of conveying manufacturer’s quality expectations to suppliers (Flynn et al.,1995). Hence, it is also expected that management of suppliers will lead to betterinventory management:

H3c. Supplier quality management is positively related to inventory managementperformance.

Finally, it is argued that the overall quality of products is influenced by effective supplierquality management. In particular, a reliable supply chain which provides material fromtechnically competent and flexible suppliers enhances the quality of the final product(Stamm and Golhar, 1993). For instance, Ahire and O’Shaughnessy (1998) found thatsupplier quality management was a statistically significant predictor of product quality:

H3d. Supplier quality management is positively related to quality performance.

3.3 Product/service designThe TQM practice, product/service design refers to the efforts to achieve clarity inrespect to product and process design specifications prior to the offering ofproducts/services to the market (Gotzamani and Tsiotras, 2001). Engaging customersin the product/service design process and incorporating customers’ expectations into

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new product development will enhance manufacturability, product features andserviceability. Engaging suppliers in the design process conveys product features andquality standards for incoming materials to suppliers thereby facilitatingmanufacturing component standardization. Engaging marketing managers in thedesign process will ensure the product or service has marketability.

Prior literature suggests that the product and service design process reducesprocess complexity and process variance, and improves manufacturing processes(Ahire and Dreyfus, 2000; Flynn et al., 1995). Consideration of design for manufacturabilitywill also lead to less manufacturing variances in the manufacturing process (Ittner andLarcker, 1995). Hence, it is anticipated that the focus on product/service design will resultin improved process management:

H4a. Product/service design is positively related to process management.

Effective product and service design has been used as an important differentiation toolby successful firms in competitive industries. A study carried out by The AmericanQuality Foundation and Ernst & Young (1992) revealed that firms that outperform onquality devote more effort to product design as opposed to product inspection.Therefore, designing product features, reliability, serviceability and manufacturabilityinto products should enhance quality performance:

H4b. Product/service design is positively related to quality performance.

3.4 Process managementProcess management involves the “systematic documentation and control of criticalprocesses and products’ quality” (Gotzamani and Tsiotras, 2001, p. 1334). Processmanagement takes a preventative approach to quality improvement, concentrating onthe design of processes that are near infallible and stabilizing production schedules andwork distribution (Flynn et al., 1995; Saraph et al., 1989). Process management attemptsto reduce variations in production processes (Ho et al., 1999; Flynn et al., 1995) byencasing quality features into the product during the production stage (Handfield et al.,1998). Reduced process variation results in better output uniformity as well asreduced rework and waste (Forza and Filippini, 1998) due to the timely identificationand rectification of quality problems in the production process (Ahire and Dreyfus,2000). Regular preventative equipment maintenance enhances product quality byimproving machine reliability and reducing interruptions in production (Ahire andDreyfus, 2000).

Forza and Filippini (1998) found that process management directly and positivelyaffects product quality. Similarly, Flynn et al. (1995) found that effective processmanagement results in increases in the percentage of goods passing final inspectionswith no rework required. Based on the above discussion, and in line with Kaynak’s(2003) findings, process management is hypothesised to be positively related to qualityperformance:

H5a. Process management is positively related to quality performance.

By focusing on the refinement of production processes to eliminate uncertainty andreduce wastage and reworking, process management can also assist with themanagement of inventory. Specifically, a clearer understanding of product requirementsand specifications assists organizations when dealing with suppliers by clarifying the


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quantity of materials required and ensuring on-time delivery. Hence, processmanagement can allow organizations to improve their management of inventory byenhancing the likelihood of on-time delivery of quality goods and enabling theelimination or reduction of safety stocks:

H5b. Process management is positively related to inventory managementperformance.

3.5 Inventory management performance and quality performanceCompanies implementing TQM experience high inventory turnover, a situation whichenables the identification of scheduling and production problems (Krajewski andRitzman, 2001). Manufacturers are under pressure to maintain low inventory levels dueto opportunity costs, storage and handling costs, taxes, insurances and shrinkage costs.At the same time, they are under pressure to maintain adequate inventory levels to meetcustomer service needs, minimize setup costs, and fully utilize labour and equipment.

Effective inventory management is vital for firms to balance the pressures of low orhigh inventory needs and to work out the appropriate level of inventory to hold(Balakrishnan et al., 1996). Adoption of advanced inventory management techniquessuch as JIT systems enable firms to maintain less inventory and achieve higher inventoryturnover, thereby substantially increasing the amount of labour and equipment resourcesthat can be devoted to productivity and quality improvement processes:

H6. Inventory management performance is positively related to qualityperformance.

4. Research methodA survey questionnaire was mailed to the managers of a random sample of364 Australian manufacturing and service business units chosen from the KompassAustralia (2006) directory[2]. The survey was administered using Dillman’s (2007)tailored design method which provides guidelines in relation to the style and format ofquestions, techniques to personalise surveys, and distribution procedures. Managerswere chosen because they were considered to be familiar with the implementation ofTQM and their business units’ quality performance. Business units were chosen as theunit of analysis because they are the most common unit of analysis in the TQM literature(Kaynak and Hartley, 2008; Feng, 2006; Maiga and Jacobs, 2005; Kaynak, 2003; Ho et al.,2001; Samson and Terziovski, 1999; Terziovski and Samson, 1999; Flynn et al., 1995).Additionally, business unit managers have better knowledge about their specificbusiness unit’s quality practices (Kaynak, 2003).

A stratified randomly selected sample was used, with emphasis placed on selectingorganizations that had adopted quality management practices. Since there is nocertification for TQM (Sila, 2007), there was no database available listing Australianorganizations that had adopted TQM practices. However, given Gotzamani andTsiotras’ (2001) findings concerning the improvement in companies performance inrespect to TQM elements following the adoption of ISO 9000, this study employedcertification of any ISO quality standard as a proxy for the adoption of TQM practices[3].The sample size of 364 was then randomly selected from those business units that metthis requirement.

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A total of 145 responses were received for a response rate of 40 percent[4]. Thesecomprised 108 completed questionnaires (30 percent response rate) following the firstmail-out, with a further 37 questionnaires (10 percent response rate) received after thesecond mail-out. The response rate was higher than that achieved by Kaynak(20.3 percent) and many other TQM studies (Das et al., 2000; Samson and Terziovski,1999; Terziovski and Samson, 1999; Choi and Eboch, 1998; Terziovski et al., 1997).Table I reveals that the majority of respondents were general managers (42 percent),operations managers (21.8 percent) and managing directors (20.2 percent),while business units from the manufacturing industry accounted for 79.7 percentof the participants in this study[5]. A large majority (91.3 percent) of the business unitshad 500 or less employees. The majority of the business units had been certified as ISO9001:2000 (55.8 percent).

Non-response bias was assessed by examining the difference between respondentsand non-respondents on the variables of interest (Wallace and Cookee, 1990).Specifically, a comparison of the values of the independent and dependent variables andthe demographic factor organizational size (as measured by number of employees) wasconducted between early and late responders. In addition, the results of the structuralequation model using the total 138 usable responses and the 106 usable responsesobtained from the initial mail-out were compared. No significant differences were foundin any of the comparisons indicating the absence of non-response bias.

4.1 Variable measurement4.1.1 Organizational culture. Organizational culture was measured using the 26-itemversion of the OCP instrument (O’Reilly et al., 1991) with respondents required to indicatethe extent to which each cultural item is valued in their business unit, using a five-pointLikert scales with anchors of 1 “not valued at all” and 5 “valued to a great extent”. Factoranalysis (principle components analysis with varimax rotation) produced six culturefactors accounting for 63 percent of the total variance. Five of the six factors (outcomeorientation, attention to detail, innovation, stability, and aggressiveness) correspondedto previous studies (Baird et al., 2004; McKinnon et al., 2003; Windsor and Ashkanasy,1996). The other two commonly identified cultural dimensions, teamwork and respectfor people, loaded onto the same factor. This is consistent with Su et al. (2009) and Bairdand Wang (2010) which were both conducted in Australia. Scores for each dimensionwere calculated as the sum of scores for the items loading cleanly on each dimension inthe factor analysis (see the Appendix).

4.1.2 TQM practices. The extent to which TQM practices were used was assessed inrespect to the extent to which the practices in Kaynak’s core TQM practices model wereused. Hence, this section describes the measurement of each of these core practices priorto the discussion of the measurement of the extent to which TQM practices are used.Each of the measures use the same questions (see the Appendix) that had significantfactor loadings in Kaynak (2003). Some minor changes to the wording of the questionswere made to suit the design of the questionnaire while a small number of additionalquestions were added for some variables. In addition, for the purposes of simplifying thecompletion of the questionnaire, all of the variables were measured using five-pointLikert scales (with anchors of 1 “not valued at all” and 5 “valued to a great extent”) asopposed to the continuous 100-mm long scale used by Kaynak (2003).


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4.1.2.1 Quality data and reporting. Quality data and reporting was measured using afour-item measure. The first three items had significant factor loadings in Kaynak (2003)and required respondents to indicate the extent to which quality data are available,timely, and used to manage quality. An additional item was adopted from Kaynak andHartley (2008) and required respondents to indicate the extent to which quality data isaccurate and reliable. Quality data and reporting was scored as the sum of the four items(ranging from four to 20) with higher (lower) scores indicating that the practice was usedto a greater (lesser) extent.

4.1.2.2 Supplier quality management. Kaynak (2003) measured supplier qualitymanagement using eleven items adapted from prior literature (Kaynak, 1997;Ettlie and Reza, 1992; Saraph et al., 1989). The items measured the selection criteria forsuppliers and the involvement of suppliers in product/service development. This studyadopted five of the six items with significant factor loadings in Kaynak (2003).Specifically, respondents were required to indicate the extent to which: suppliers areoffered long-term relationships; the number of suppliers has been reduced sinceimplementation of quality management; suppliers are selected based on their qualityrather than the price or delivery schedule; the supplier rating system is thorough; andsuppliers are integrated into the product/service development process. The sixth itemwhich loaded significantly in Kaynak (2003) required respondents to indicate theextent to which suppliers are evaluated according to quality, delivery performance andprice, in that order. This item was excluded because its content was incorporated in thequestions regarding the supplier selection priority and supplier rating system.Supplier quality management was scored as the sum of the five items (ranging fromfive to 25) with higher (lower) scores indicating that the practice was used to a greater(lesser) extent.

4.1.2.3 Product/service design. Product/service design was measured using the fouritems with significant factor loadings in Kaynak (2003). Specifically, respondents wereasked to indicate the extent to which product/service design reviews are carried outbefore the product/service is produced or marketed; departments involved in theproduct/service design are coordinated; the quality of new products/services areemphasized in relation to cost or schedule objects; and ease of production/implementationis considered in the product/service design process. Product/service design was scored asthe sum of the four items (ranging from four to 20) with higher (lower) scores indicatingthat the practice was used to a greater (lesser) extent.

4.1.2.4 Process management. Process management was measured using the fouritems with significant factor loadings in Kaynak (2003). Specifically, respondents wererequired to indicate the extent to which inspection reviews, or checking of work,is automated; production schedule/work distribution is stable; the production process isautomated; and production processes are designed to minimize the chances of employeeerrors. Process management was scored as the sum of the four items (ranging from fourto 20) with higher (lower) scores indicating that the practice was used to a greater (lesser)extent.

4.1.2.5 The extent of use of TQM. The extent of use of TQM practices was measuredusing the 17 items used to examine the extent of use of the four core TQM practices.Factor analysis of the 17 items provided support for the four dimensions with the sameitems loading onto the four dimensions as discussed in Sections 4.1.2.1-4.1.2.4. Hence, theextent of use of TQM practices was evaluated in respect to the extent to which the four


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dimensions of TQM (quality data and reporting, supplier management, product/servicedesign and process management) were used with higher (lower) scores indicating thatTQM practices were used to a greater (lesser) extent.

4.1.3 Operational performance. Operational performance was measured based on thelevel of inventory management performance and the level of quality performance.

4.1.3.1 Inventory management performance. Inventory management performancewas measured using the two items with significant loadings in Kaynak (2003)with respondents required to rate the extent to which their business unit achievedimproved purchased material inventory turnover, and total inventory turnover.These two items were adopted from prior literature (Deming, 1993; Freeland, 1991;Ansari and Modarress, 1990; Chapman and Carter, 1990; Engelkemeyer, 1990). A thirditem was adapted from Schonberger (1982) and required respondents to rate the extent towhich their business unit achieved reduced inventory obsolescence costs. Inventorymanagement performance was scored as the sum of the three items (ranging from threeto 15) with higher (lower) scores indicating that the inventory management performanceoutcome was achieved to a greater (lesser) extent.

4.1.3.2 Quality performance. Quality performance was measured using the four itemswith significant factor loadings in Kaynak (2003). Specifically, respondents wererequired to evaluate the extent to which their business units achieved improvedproduct/service quality; increased productivity; reduced cost of defects and reworks; andreduced delivery lead-time of finished products/services to customers. An additional,two items were adopted from Ahire and Dreyfus (2000) and required respondents to ratethe extent to which they achieved reductions in customer complaints, and a decline in thenumber of warranty claims. Quality performance was scored as the sum of the six items(ranging from six to 30) with higher (lower) scores indicating that the qualityperformance outcome was achieved to a greater (lesser) extent.

5. Results5.1 Descriptive statisticsTable II shows the descriptive statistics for all the variables measured using multi-itemscales. All of the Cronbach (1951) alpha coefficients (except for aggressiveness) exceededthe 0.70 threshold considered acceptable for internal scale reliability (Nunnally, 1978,p. 245). The actual range of values obtained for the variables provided sufficientvariation for statistical analysis.

5.2 The association between organizational culture and the extent of use of TQMThe association between business unit culture with the extent of use of TQM practiceswas assessed using multiple regression analysis with the results presented in Table III.All four models were significant (F sig. ¼ 0.00) with R 2 values of 0.09 to 0.18 reported.The models reveal that three cultural dimensions exhibited a significant associationwith the extent of use of TQM. Specifically, the teamwork/respect for people culturaldimension exhibited a significant association with three of the four TQM dimensions: –quality data and reporting ( p ¼ 0.04), supplier quality and management ( p ¼ 0.05), andproduct/service design ( p ¼ 0.01). In addition, the cultural dimension innovation wassignificantly associated with the level of supplier quality management ( p ¼ 0.04) whilea third cultural dimension, outcome orientation was significantly associated with

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quality data and reporting ( p ¼ 0.02). The findings provide support for three of the four(H1a, H1c, and H1d ) with only H1b (attention to detail) not supported.

5.3 The association between TQM practices and operational performanceFigure 1 shows the results of the structural equation modelling using the data obtainedfrom Australian manufacturing and service organizations. Table IV reveals that themodel gives a CMIN/DF value of 1.86 which is better than the satisfactory benchmark of3.0. The RMSEA of 0.08 for the model exceeds the good fit benchmark of 0.05, but is stillbelow the upper benchmark of 0.1, while the NFI of 0.97 meets the good fit benchmark of0.9. The path coefficients (standardized regression weights) and p-values for the paths inthe model are summarised in Table V.

Table V reveals that a significant positive association exists between qualitydata and reporting with both supplier quality management (path coefficient 0.50,p ¼ 0.00), and product/service design (path coefficient 0.19, p ¼ 0.02) providingsupport for H2a and H2b. These findings indicate that better supplier qualitymanagement and product/services design eventuate in Australian manufacturing andservice organizations when there is a higher level of quality data and reporting.However, as hypothesised (H2c), the relationship between quality data and reportingand process management was not significant (path coefficient 0.12, p ¼ 0.13).

In respect to supplier quality management three of the four hypotheses weresupported (H3a-c) with Table V revealing that a positive association exists betweensupplier quality management and product/service design (path coefficient 0.35, p ¼ 0.00),process management (path coefficient 0.37, p ¼ 0.00) and inventory managementperformance (path coefficient 0.17, p ¼ 0.01) in Australian organizations. However,supplier quality management was not found to be associated with quality performance(path coefficient 0.11, p ¼ 0.19), resulting in the rejection of H3d.

H4a and H4b stated that product/service design would be positively related toprocess management and quality performance, respectively. However, Table V reveals

Variables Mean SDMinimum actual/

(theoretical)Maximum actual/

(theoretical)Cronbach’s

a

Quality data and reporting 16.20 3.23 4 (4) 20 (20) 0.90Supplier qualitymanagement 16.20 3.61 5 (5) 24 (25) 0.73Product/service design 15.26 2.94 6 (4) 20 (20) 0.81Process management 12.23 3.11 5 (4) 19 (20) 0.71Outcome orientation 25.30 3.06 17 (6) 30 (30) 0.81Attention to detail 8.14 1.44 4 (3) 10 (15) 0.73Teamwork/respect forpeople 29.30 3.91 19 (7) 35 (35) 0.87Innovation 17.75 3.58 8 (5) 25 (25) 0.82Stability 7.99 1.45 4 (2) 10 (10) 0.81Aggressiveness 6.48 1.50 2 (2) 10 (10) 0.47Inventory managementperformance 10.06 2.57 3 (3) 15 (15) 0.91Quality performance 22.93 3.27 14 (6) 30 (30) 0.79

Note: Number of cases ¼ 138Table II.

Descriptive statistics


801

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Table III.Results of simultaneousmultiple regressionanalysis: the relationshipbetween organizationalculture and the extentof use of TQM

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802

Figure 1.Core TQM practices model

using Australian data

Quality performance

Process management

Product/service design

Supplier qualitymanagement

Quality data andreporting

Inventory managementperformance

H4a

H3a

H2c

H4b

H3cH6

H2a

0.12NS

0.19**

0.37***

0.1NS

0.35*** 0.24***

0.14NS

0.11NS 0.46***

H5a

H2b

H3b

Notes: Coefficient is significant at the *0.1 level (2 tailed); **0.05 level (2 tailed); ***0.01 level (2 tailed)

0.50***

0.11NS

0.15**H3d

H5b

Measures Model 1 Benchmark

CMIN/DF 1.86 ,3.00RMSEA 0.08 ,0.05NFI 0.97 .0.90

Notes: CMIN/DF – ratio of minimum sample discrepancy divided by degrees of freedom; RMSEA –root mean square error of approximation; NFI – normed fit index

Table IV.Goodness-of-fit measures

Pathways Coefficients p-value

Quality data and reporting ! supplier quality management 0.50 0.00 * * *

Quality data and reporting ! product/service design 0.19 0.02 * *

Quality data and reporting ! process management 0.12 0.13NS

Supplier quality management ! product/service design 0.35 0.00 * * *

Supplier quality management ! process management 0.37 0.00 * * *

Supplier quality management ! inventory management performance 0.17 0.01 * * *

Supplier quality management ! quality performance 0.11 0.19NS

Product/service design ! process management 0.10 0.28NS

Product/service design ! quality performance 0.11 0.25NS

Process management ! quality performance 0.14 0.13NS

Process management ! inventory management performance 0.15 0.05 * *

Inventory management performance ! quality performance 0.46 0.00 * * *

Note: Significance at: *p , 0.1, * *p , 0.05 and * * *p , 0.01

Table V.Path coefficients

(standardized regressionweights)


803

that product/service design was not significantly associated with either processmanagement (path coefficient 0.10, p ¼ 0.28) or quality performance (path coefficient0.11, p ¼ 0.25) and hence both hypotheses were not supported.

H5a and H5b stated that process management would be positively related to qualityperformance and inventory management performance. However, while processmanagement was positively related to inventory management performance (pathcoefficient 0.15, p ¼ 0.05) the association between process management and qualityperformance was not significant (path coefficient 0.14 and p ¼ 0.13).

Finally, Table V supports H6 with a positive association between inventorymanagement performance and quality performance (path coefficient 0.46, p ¼ 0.00). Thus,it can be concluded that stronger inventory management performance leads to improvedquality of products/services for Australian manufacturing and service organizations.

6. Conclusion6.1 DiscussionThis study had two objectives. The first objective was to examine the associationbetween organizational culture factors with the extent of use of TQM practices inAustralian manufacturing and service organizations. Specifically, the study examinedthe association between six organizational cultural factors (outcome orientation,attention to detail, teamwork/respect for people, innovation, stability, andaggressiveness) and the extent of adoption of TQM practices. The results revealedthree cultural factors, outcome orientation, teamwork/respect, and innovation exhibiteda significant positive association with the extent of use of TQM practices. Specifically,the extent of quality data and reporting was associated with both the outcomeorientation and teamwork/respect for people cultural dimensions, the extent of supplierquality management was associated with the innovation and teamwork/respect forpeople dimensions, and the focus on product/service design was associated with theteamwork/respect for people cultural dimension.

These findings highlight the importance of the prevailing organizational culture inproviding an environment that is conducive to the implementation of TQM practices.Accordingly, management needs to be aware of such associations and attempt to changethe prevailing organizational culture to support TQM practices. In particular, it isapparent that managers should concentrate on enhancing the level of teamwork/respectwithin their organization, with this cultural dimension found to be associated with threeof the four core TQM practices. Hence, organizations promoting collaborations betweenwork units and divisions, and which value the rights of individual employees are morelikely to use TQM practices to a greater extent. A possible explanation for this can bethat TQM can be more easily implemented in working environments that encouragecollaborative and cooperative behaviour. The findings highlight that employees are aninfluential group of people affecting the implementation of TQM (Motwani et al., 1994).Managers should fully recognize the tremendous effect that can be brought byemployees, the most valuable asset in the quality management program. They shouldestablish an organizational atmosphere that facilitates the extensive use of TQMpractices by motivating their employees to actively contribute their skills and wisdomcollectively in the business process, thereby enhancing the organizations’ ability tosucceed in the quality battle.

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In addition, the findings suggest that organizations should emphasise the outcomeorientation and innovation cultural dimensions more given their association with thelevel of quality data and reporting and supplier quality management, respectively.Hence, quality data and reporting is associated with organizations that promote aculture which emphasizes action, achievements and results, and which encouragehaving high expectations for performance. Similarly, the development of a moreinnovative culture is conducive to TQM, with the development of new productsnecessitating closer relationships with suppliers. These findings further reinforce theimportance role that organizational culture has to play in supporting TQM practices andhence indirectly contributing to operational performance.

The second objective of the study was to examine the association between the coreTQM practices (quality data and reporting, supplier quality management,product/service design and process management) and operational performance(inventory management performance and quality performance). The results revealedthat quality data and reporting was positively associated with supplier qualitymanagement and product/service design. These findings support Kaynak’s (2003)findings in the USA. Accordingly, organizations should devote more effort to collectingand disseminating quality-related data. However, while Kaynak (2003) reported asignificant association between quality data and reporting and process management,the current study found that no such association existed in Australian organizations.This finding supports the hypotheses and the suggestion that the outcome-orientedfocus of Australian organizations results in greater emphasis being placed on the finalresults as opposed to the processes used to achieve such results.

The findings indicated that supplier quality management was positively associatedwith two of the other core TQM practices (product/service design and processmanagement), and inventory management performance. These findings suggest that itis important for organizations to concentrate on improving their supplier qualitymanagement. These findings are consistent with those found in the USA (Kaynak, 2003).

Surprisingly, product/service design was not associated with either processmanagement or quality performance. This is inconsistent with Kaynak’s (2003) findingsin the USA and suggests that product/service design is the least important of the fourcore TQM practices in enhancing operational outcomes in Australia. The insignificantassociation between product/service design and process management may again beattributed to the focus on outcomes as opposed to processes in Australia. A furtherpossible explanation for this could be that as organizations devote extra resources toproduct/service design the complexity of processes is reduced, thereby enabling lessemphasis to be placed on process management.

Consistent with Kaynak’s (2003) findings the analysis revealed a positive associationbetween process management and inventory management performance. This indicatesthat success in managing inventory is positively associated with an organizations’performance in process management. Accordingly, organizations should concentrate onmonitoring activities and taking corrective actions to reduce scrap, rework andvariations during the production/service delivery stage in order to provide high-qualitygoods and services.

Finally, a significant positive association was found between inventory managementperformance and quality performance. Specifically, better inventory managementperformance will assist organizations in producing products or providing services of better


805

quality in Australian organizations. Given that inventory management performance isdependent on the effectiveness of supplier quality management, organizations shoulddevote effort to enhancing the effectiveness of their purchasing function. By doing this, thequality of input material can be improved, which will lead to better quality performance.This finding is consistent with the Kaynak’s (2003) findings in the USA.

The findings have some important implications for managers in Australianmanufacturing and service organizations regarding the design of their qualitymanagement programs. Specifically, managers need to recognize the interdependenciesbetween the core TQM practices and their relationships with quality performance in orderto achieve desired outcomes. Organizations that adopt TQM with the aim of improvingproduct/service quality need to recognize that TQM is not a one-dimensional qualityimprovement concept. Instead, it is a multidimensional technique where the success ofinventory management and quality performance are dependent on the successful use ofantecedent core TQM practices and the relationships between these practices.Hence, managers should not treat each functional area of the core TQM practices as anisolated objective, but rather should promote continuous improvement in all of therelevant core TQM practices in their organization in order to achieve quality outcomes.Importantly, while these relationships have been stressed in previous studies, mostnotably Kaynak (2003) in a US context, the findings indicate that the nature of theinterrelationships between these core TQM practices is unique to Australia.

Given the objective of implementing TQM practices is to enhance operationalperformance, the findings can be summarised in regard to their implications in enhancingthe two operational outcomes, inventory management performance and qualityperformance. In respect to inventory management performance, the results indicate thatorganizations should concentrate on supplier quality management and processmanagement. The extent of use of quality data and reporting is also important given itsassociation with supplier quality management. Alternatively, while three of the four TQMpractices were hypothesised to be related to quality performance, none of these relationshipswere significant with the only factor found to be positively associated with qualityperformance being the other operational outcome, inventory management performance.These findings suggest that the core TQM practices indirectly affect quality performancethrough their impact on inventory management performance. Accordingly, the three coreTQM practices found to influence inventory management performance (supplier qualitymanagement, process management, and quality data and reporting) should be emphasised.

6.2 Limitations and suggestions for future researchThe study has certain limitations. First, as the data was gathered via a mail surveyquestionnaire, the usual limitations associated with this research approach applyincluding a lack of control over who actually completes the survey and the inability toascertain causality. While low response rates are also a potential problem, the use ofDillman’s (2007) tailored design method has alleviated this concern. Future researchcould extend this study using different methodologies including interviews, fieldstudies, or longitudinal case studies.

Second, this study was conducted using business units’ self-reported data, which maybe subject to response bias. However, as the respondents were guaranteed anonymity inthe survey process, the problem of social desirability bias is likely to have beenminimised. Common method bias may also be a potential problem, although we rely on

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Crampton and Wagner (1994) and Spector (1987) who maintain that common method biasis not as significant a problem when dealing with self-reported perceptual data.

Future studies could be undertaken in developing nations to further examine thegeneralizability of Kaynak’s model. The national culture and business conditions ofdeveloping nations are different from developed countries such as the USA andAustralia and such studies could examine how this influences the use of qualitymanagement practices and quality performance. Future researchers may also extend thecurrent analysis by investigating the association between cultural dimensions and thesuccess of TQM practices.

Notes

1. Stability is the extent to which an organization and its employees value stability, includingsecurity of employment. Aggressiveness refers to the extent to which an organization isaggressive and predictable.

2. The Kompass Australia (2006) business directory lists all businesses in Australia, with arandom sample from this directory representative of the Australian context. Business unitswith less than 50 employees were excluded as such companies would rarely have theresources available to implement formal quality techniques such as TQM (van der Wiele andBrown, 1998; Ghobadian and Gallear, 1997).

3. ISO accreditation is a quality appraisal system for providing assurance of quality standardsin design, development, production, installation and servicing. ISO accreditation is regardedas the first step in implementation of TQM by some researchers (Tummala and Tang, 1996;Taylor, 1995). Therefore, it is likely that organizations that have been certified by ISOstandards will have reasonable quality management practices in place.

4. Seven responses were identified as unsuitable for use and were not included in the dataanalysis, leaving 138 usable responses. Three of the responses were excluded due to the lackof an ISO certification number while another four responses were omitted because they hadless than 50 employees.

5. Service organizations comprised 20.3 percent of the sample. Given there were no significantdifferences in respect to any of the variables between manufacturing and service firms theentire sample was included in the analysis.

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Appendix. Variable measurementQuality data and reporting

. Quality data are available (on error rates, defects, defect rates, scrap, etc.).

. Quality data are timely.

. Quality data are accurate and reliable.

. Quality data are used to manage quality.

Supplier quality management. Suppliers are offered long-term relationships.. The number of suppliers has reduced since implementation of quality management.. Suppliers are selected based on their quality rather than their price or delivery schedules.. The supplier rating system is thorough.. Supplier are integrated into the product/service development process.

Product/service design. Product/service design reviews are carried out before the product/service is produced and

marketed.. Departments involved in the product/service development process are coordinated.. Quality of new products/services is emphasized in relation to cost or schedule objectives.. Ease of production/implementation is considered in the product/service design process.

Process management. Inspection, review, or checking of work is automated.. Production schedule/work distribution is stable.. The production process is automated.. Production processes are designed to minimise the chances of employee errors.

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Inventory management performance. Purchase material turnover.. Total inventory turnover.. Reduced inventory obsolescence costs.

Quality performance. Improved product/service quality.. Increased productivity.. Reduced costs of defects and rework.. Reduced delivery lead time of finished products/services to customers.. Reduced customer complaints.. A decline in the number of warranty claims.

Business unit culture

(1) Outcome orientation:. being competitive;. being achievement oriented;. being analytical;. having high expectations for performance;. being results oriented; and. being action oriented.

(2) Attention to detail:. paying attention to detail;. being precise; and. being rule oriented.

(3) Stability:. stability; and. security of employment.

(4) Teamwork/respect for people:. fairness;. respect for the rights of the individual;. tolerance;. being socially responsible;. being people oriented;. being team oriented; and. working in collaboration with others.

(5) Innovation:. a willingness to experiment;. not being constrained by many rules;. being quick to take advantage of opportunities;. being innovative; and. risk taking.


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(6) Aggressiveness:. being aggressive; and. predictability.

About the authorsKevin Baird is an Associate Professor in the Department of Accounting and Finance, MacquarieUniversity, Australia. Kevin Baird has taught both undergraduate and postgraduate subjects inthe management accounting area for 16 years. He has also supervised Honours and PhD studentsacross many different topic areas within the management accounting discipline including:activity based management practices; total quality management; performance measurementsystems; management control systems; outsourcing; employee organizational commitment; andemployee empowerment. Kevin Baird is the corresponding author and can be contacted at:[email protected]

Kristal Jia Hu is an Research Associate in the Department of Accounting and Finance,Macquarie University, Australia. Ms Kristal Jia Hu completed her Honours degree within theDepartment of Accounting and Finance, Macquarie University and is currently employed as aConsultant at Ernst & Young.

Robert Reeve is an Associate Professor in the Department of Accounting and Finance,Macquarie University, Australia. Robert Reeve has taught and researched in managementaccounting in universities in South Africa, England and Australia for over 30 years. Prior to hisrecent retirement he was Head of Department at the Department of Accounting and Finance,Macquarie University, Australia.

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