Total Quality Management in SMEs

Omega, Int J Mgmt Sci Vol 24, No 1, pp 83-106, 1996 Pergamon 0305-0483(95)00055-0 Copyright © 1996 Elsevier Science Ltd Printed in Great Britain All rights reserved 0305-0483/96 $15.00 + 0.00 Total Quality Management in SMEs A GHOBADIAN DN GALLEAR Middlesex University Business School, L o n d o n , U K (Received February 1995; accepted in revised form November 1995) Small and medium size enterprises (SMEs) are the life blood of modem economies That they should remain competitive and produce high quality outputs is of importance not only at the macro level hut also to larger organizations, because SMEs are often suppliers of goods and services to larger organizations and lack of product quality would adversely affect the competitive ability of the larger organizations Total Quality Management (TQM) is considered an important quality improvement tool Compared with large organizations, SMEs have been slow to adopt TQM This paper initially examines the differences between the characteristics of SMEs and large organizations; the relationship between the size of organization and inherent characteristics of TQM; and the effect of organization size on the implementation of TQM using deductive research These issues are further examined through inductive research For this purpose the development of TQM was studied in four small-medium size organizations Key words total quality management, implementation, SME, culture, organizational change and broader variations in the business environment In an increasingly competitive marketplace businesses with a strong continuous improvement culture and external focus are more likely to survive and prosper Total Quality Management (TQM) is considered an important catalyst in this context This is why the TQM concept has captured the attention of all sides of commerce and industry, as well as that of politicians and academics The large number of articles being published in this area is a testimony to the high level of interest in quality issues A recent search of the relevant databases showed that more than 900 articles dealing with a facet of TQM have been published in the last years The published empirical data supports the supposition that by focusing on quality, a business can substantially increase its market share and profitability Phillips et al [29] showed that perceived quality and profitability INTRODUCTION THE GLOBALIZATIONOF markets, growing interpenetration of economies, and increased interdependence of economic agents are reshaping the international and national competitive environment These fundamental changes are prompting the far sighted organizations to re-examine and modify their competitive strategies Small and medium sized enterprises (SMEs) are not exempt from these pressures Drihlon et al [10] argued that improving competitiveness is now an imperative for small and large businesses alike To survive and prosper in the 90s and beyond all businesses need to establish mechanisms enabling them to exert conscious and sustained effort to continuously improve all facets of their operations The continuous improvement effort needs to be coupled with an acute awareness of changes in customers' requirements; competitive factors; 83 84 Ghobadian, Gallear Total Quality Management were positively correlated This led them to conclude that in the long-run the relative perceived quality of an organizations' products or services relative to its competitors is the most important single factor affecting its performance A quality edge boosts performance in two ways In the short-term, superior quality yields increased profitability via premium pricing In the long-term, superior or improving quality should result in increased market share Higher volumes of output lead to improved scale economies that in turn should result in lower operating costs Thus, the investment required to improve quality is normally off-set over a relatively short period of time Gale et al [12] empirically showed that higher relative quality and market share lead to substantially higher return on sales Peters [27], using empirical evidence collected by Garvin, showed that improved quality reduced operational costs There is also empirical evidence clearly indicating that customers are willing to pay a premium price for better quality products [30] Peters and Austin [28] concluded that winning medium sized companies competed on the value of their products or services and usually enjoyed premium prices They achieved this position by consistently satisfying customers' needs and meeting or exceeding their perceived quality expectations Oakland [23] reported the results of a study that compared the performance of 29 companies practising TQM, along seven key financial indicators for a year period, with the corresponding industry medians This study showed that the performance of all the companies that had adopted TQM exceeded their respective industry's median performance Governments also recognize the link between relative superior quality and competitiveness For example, the UK Government in its consultative document entitled 'A National Strategy for Quality' [1] identified quality as the most important non-price determinants of competitiveness A DTI publication of the UK Government's Department of Trade and Industry [2] stated that the battle for survival is being waged and won by the companies wielding the quality weapon to the best effect To improve the quality and therefore the competitive performance of commerce and industry, the US Government through an act of Congress introduced the Baldrige Award Similarly, the European Quality Award (EQA) and the British Quality Award (BQA) were established with the help and assistance of the European Commission (EC) and the UK Government respectively The evidence presented above shows the competitive importance of relative superior quality Moreover, it was briefly argued that the TQM concept has been successfully used to achieve this end Now we turn our attention to examining the importance of SMEs (businesses employing fewer than 500 people) to the UK's and European Union's economy SMEs dominate the industrial and commercial infrastructure, e.g 93% of UK companies employ fewer than 500 people and 60% fewer than 100 people They are the major source of employment For example, SMEs employ 65% companies with less than 100 people employ 47% of the total workforce Micro (fewer than 10 employees) and small (10-99 employees) enterprises have an equal share with medium sized (100-499 employees) enterprises of the distribution of sales in all non-primary sectors Together they account for 60% of all sales in these sectors Figure shows the percentage of gross output of UK manufacturing firms by size for 1991 Significantly, 32% of the gross output is generated by firms with fewer than 500 employees In the European Union (EU) the number of enterprises (excluding the primary sector enterprises) is estimated to be around 13.4 million, employing some 92.4 million people Small and medium sized enterprises constituted 8.6 per cent of all enterprises In the manufacturing sector they constituted 16.9% of all manufacturing enterprises, while in the service sector they constituted 6.9% of all service enterprises NO.Employees I G r o s s Output % 1-99 100-499 500-4999 5000-19999 20000 & over q986 for twelve member states: Belgium, Denmark, West Germany, Greece, Spain, France, Ireland, Italy, Luxcmbourg, Netherlands, Portugal, United Kingdom 10 15 20 25 30 35 Source : The Gus.~lian, MLy 1994 Fig I UK manufacturing gross output by size Omega, Vol 24, No Micro enterprises constituted 91.4% of all enterprises, 82.7% of manufacturing enterprises, and 93.8% of service enterprises [25] Perhaps more significantly, of the total number of employees in the EU 45% were employed by SMEs, 26.9% were employed by micro enterprises, with the remaining 28.1% employed by large organizations [25] These statistics are summarized in Table The economic importance of SMEs is not restricted to the UK or the EU The predominance of small businesses in the Japanese economy is well documented About 75% of manufacturing employment in Japan is in small and medium-sized companies, in contrast to about 35% in the United States [19] It was recently reported that roughly 355,000 US manufacturers with fewer than 500 employees are responsible for approx 46% of the value added by the US's manufacturing sector SMEs are considered to be the main source of new jobs Studies conducted in the US and other empirical data supports this proposition For example, between 1980 and 1986, manufacturing employment at companies with 500 or more employees declined by 10.8%, a loss of nearly 1.8 million jobs However, during the same period, manufacturers employing fewer than 100 workers recruited 326,000 additional people an increase of 7.5% [19] The vitality of SMEs has been a major factor in the creation of new jobs and the economic renewal of certain regions in Europe, such as the 'third' Italy (Emilia-Romagna, Tuscany, Venezia) or the Western region of Jutland in Denmark [10] In the UK private sector, even when employment was falling during the recent recession, small firms were still net creators of jobs employment in small firms grew by 350,000 between 1989 and 1991 [4] Table l Euro-12 Comparative distribution of enterprises and employment 1986 No of employees Micro (0-9) ENTERPRISES Total Manufacturing Construction Services EMPLOYMENT Total Manufacturing Construction Services SMEs (10-499) Large (+500) (%) 91.34 82.7 91,28 93.83 (%) 8.56 16.91 8,68 6.92 (%) 0.1 0.39 0.04 0.06 26.89 11.14 39.53 34.75 45.02 45.95 50.75 43.44 28.1 42,91 9.9 21.82 Source EC-Directorate General XXIII [25] OM E 24,1 ~ 85 Organizations competing in an increasingly global market, independent of size or industrial sector, are reliant on SMEs to provide sub-contracting facilities [25] In particular, large organizations tend to rely heavily on subcontractors, and the current trend of focusing on core activities is likely to further polarize the situation Therefore, large organizations are normally dependent on a network of suppliers, most of which will be small firms For example, in the UK 50% of sales in the manufacturing sector are generated through subcontracting In order to improve product quality and implement TQM programmes, the large organizations must be assured of obtaining high quality goods and services from small and medium sized suppliers Hence, there is a need for SMEs to meet the required quality standards Moreover, competition means that if a small firm wants to become a supplier to a large organization, the increasing demand for quality by the latter puts strong pressure on the former to consider the application of TQM Thus, it is logical for the large organizations to encourage the diffusion of TQM among their suppliers [22] Correspondingly, a small organization cannot produce or create high quality goods or services if the quality of its inputs is inadequate Establishing links with suppliers permits interchange of information and enables the vendors to meet the purchasers' required quality standards more readily and consistently The TQM concept can potentially play a significant role in this process It provides the basis for a systematic approach to establishing customers' needs and requirements Moreover, it will help to create an environment favourable to forging a strong cooperative link between vendors and purchasers; and to improve the effectiveness of communication between the two parties [4] Large organizations, so far, have been more active in embracing the TQM principles However, smaller organizations with limited resources can equally apply the TQM principles with measurable success, and without undue expense [36] Malcolm Baldrige Award winners Globe Metallurgical Inc., Marlow Industries, and Granite Rock Company, and European Quality Award recipient MiUiken, have been prominent in setting the standards for quality achievement in recent years If this is not a 86 Ghobadian, Gallear Total Quality Management powerful enough message to SMEs then it is important to note that according to the US Commerce Department, in 1991 out of a total of 106 Baldrige applicants, 47 were small businesses [26] Yet, despite the importance of TQM, SMEs in the UK have been slow to implement the concept For example, information from 115 manufacturing organizations showed that by comparison large organizations were three times more likely to implement TQM [16] To compete more effectively SMEs need to heed the quality message However, prevalence of TQM in SMEs has wider importance It will significantly help the quality improvement efforts of the larger organizations Five key propositions emerge from the arguments put forward so far One, a relatively high level of quality is a key factor in the attainment of a superior competitive position Two, TQM concepts facilitate the attainment of sustainable high goods or services quality Three, a buoyant SME sector is vital for economic prosperity Four, SMEs can improve their competitive position by embracing TQM concepts Five, the success of quality improvement efforts of larger organizations will crucially depend on the realization of the quality improvement of their suppliers which are often SMEs The stance of this paper is, broadly, to accept the truth of these propositions The objectives of this paper are 2-fold: first, to establish a conceptual framework f o r examining the link between the inherent characteristics of TQM and SMEs, and the effect of size on the implementation process; and second, through field research to examine the relevance of the issues identified in the first part of the paper Therefore, the paper is divided into two distinct but interrelated parts In the first part, through deductive research, the differences between the characteristics of SMEs and large organizations are examined This provides the foundation to examine the impact of size on the implementation process and to identify the size dependent inherent characteristics of TQM The likelihood of the success of a TQM programme is significantly affected by the implementation process Therefore, the identification of differences is of practical importance Moreover, by identifying the key priorities, the identification of size dependent characteristics will benefit the planning process In the second part, with the help of four case studies, the validity of the issues highlighted in the first part of the paper is examined In view of the complexity of the issues involved, a case based qualitative approach appeared to provide the most logical research methodology Therefore, caution must be exercised in reaching generalized conclusions However, this does not diminish the value of the research, insofar as it establishes a conceptual framework and validates the framework through studies of two small and two medium size manufacturing organizations Furthermore, this study lays the foundation for further empirical research in this important area DIFFERENCES BETWEEN SMEs A N D LARGE ORGANIZATIONS Most of the published literature describes and discusses the application of TQM concepts in large organizations [22] Ideas expounded by the quality gurus are primarily designed to meet the needs of large organizations and multinationals [15] Furthermore, the concepts of TQM presented in numerous videos, seminars, and books are more in tune with the needs of large organizations than those of SMEs [17] The attention paid to the development of TQM in large organizations is understandable as these organizations traditionally have been responsible for propagating the virtues of TQM and championing the concept The environment in which TQM is developed would not be an issue if SMEs and large organizations possessed similar characteristics In practice, however, there are significant structural differences between SMEs and large organizations These differences are likely to influence the relevance, planning and implementation of the TQM concept Welsh and White [35] succinctly summed up these points They suggest that a small business is not a 'little' large business Differences exist in structure, policy making procedures, and utilizations of resources to the extent that the application of large business concepts directly to small businesses may border on the ridiculous Table depicts the main differences to be expected between SMEs and large organizations in areas relevant to the design and actuation of TQM We briefly discuss some of the differences Omega, Vol 24, No Large organizations are usually bureaucratic, that is to say, they rely on the formalization of behaviour to achieve co-ordination Thus, in bureaucratic organizations, the levels of specialization, standardization, and formalization are likely to be high SMEs, on the other hand, are more likely to be organic A salient feature of an organic organization is the absence of standardization and the prevalence of loose and informal working relationships Burns and Stalker [8] found that bureaucratic structures worked well for organizations operating in a stable condition but not so well in a turbulent environment where the key to survival is innovation or flexibility to adapt to the new situation SMEs can normally operate with a single manager at the strategic apex In large organizations, the division of functions and labour, and 'span of control' considerations result in the creation of a hierarchy of authority Thus, there are several layers of management between the manager at the strategic apex and operatives This means that top managers, in large organizations, are far removed from the point of delivery Thus, they are likely to 87 lack deep understanding of operational issues, processes, customers' needs, and quality difficulties, unless they make a point to observe and experience the situation at the point of delivery Moreover, they will lack visibility and face difficulties in organizing effective communications and providing leadership by example The flat structure of SMEs and fewer departmental interfaces normally result in a more flexible work environment [38] Lack of an extended hierarchy offers the top management the opportunity to build a strong personal relationship with employees, but it also increases the potential for interpersonal conflict At SMEs, managers and operatives are more likely to be directly involved with the customers Two way, face to face communication is the norm in SMEs The prevailing cultures in SMEs and in large organizations also differ because of the span of activities, geographical dispersion, the background and range of employees, the age of the organization, and the existing precedences Culture may be defined as norms, values, and informal beliefs held by people in an organiz- Table A comparison between the characteristics of large, medium and small organizations Large organizations Hierarchical with several layers of management Clear and extensive functional division of activities High degree of specialization Strong departmental/functional mind set Activities and operations governed by formal rules and procedures High degree of standardization and formalization Mostly bureaucratic Extended decision-making chain Top management a long distance away from the point of delivery Top management's visibility limited Wide span of activities Multi-sited and possibly multinational Cultural diversity System dominated Cultural inertia Rigid organization and flows Many interest groups Incidence of fact-based decision-making more prevalent Dominated by professionals and technocrats Range of management styles: directive; participative; paternal; etc Meritocratic Individuals normally cannot see the results of their endeavours Ample human capital, financial resources and know-how Training and staff development is more likely to be planned and large scale Specified training budget Extensive external contacts High incidence of unionization Normally slow response to environmental changes High degree of resistance to change Potentially many internal change catalysts Low incidence of innovativeness Formal evaluation, control and reporting procedures Control oriented Rigid corporate culture dominating operations and behaviours Small and medium organizations Flat with very few layers of management Division of activities limited and unclear Low degree of specialization Absence of departmental/functional mind set Corporate mind-set Activities and operations not governed by formal rules and procedures Low degree of standardization and formalization Mostly organic Short decision-making chain Top management close to the point of delivery Top management highly visible Span of activities narrow Single-sited Unified culture People dominated Fluid culture Flexible organization and flows Very few interest groups Incidence of 'gut feefing" decisions more prevalent Dominated by pioneers and entrepreneurs Range of management styles: directive; paternal Patronage Individuals normally can see the results of their endeavours Modest human capital, financial resources and know-how Training and staff development is more likely to be ad hoc and small scale No specified training budget Limited external contacts Low incidence of unionization Normally rapid response to environmental changes Negligible resistance to change Very few internal change catalysts High incidence of innovativeness Informal evaluation, control and reporting procedures Result oriented Operations and behaviour of employees influenced by owners'/managers" ethos and outlook 88 Ghobadian, Gallear Total Quality Management ation The prevailing culture gives rise to specific decisions, policies and activities Culture is highly informal and perceptual, but usually dictates what activities or behaviours are necessary to become successful in a particular organization Education and training, employee participation programmes, enhanced communication programmes, revision of procedures and policies, modification of evaluation and reward system, and behaviour of top managers can all influence the culture of an organization The evaluation, reward and reporting procedures are simpler in SMEs Moreover, it is simpler to establish a clear link between reward and behaviour On the other hand, managers in SMEs are responsible for many facets of the business and many decisions The planning process is not formal and multi-functional planning takes place within individual minds The extent of training and staff development in SMEs is limited and informal This is due to fewer and more broadened human resources, lack of qualified specialist personnel, and financial constraints On the other hand, SMEs are more likely to be 'people oriented' rather than 'system oriented', and flexible In fact, research in both Europe and America [32, 20, 6], shows that SMEs are more responsive to market needs, more adaptable to change, and more innovative in their ability to meet customers' demand ORGANIZATION SIZE AND IMPLEMENTATION OF TQM The adoption of TQM is a radical and fundamental change in every aspect of business Such a radical change requires careful planning if it is to succeed TQM practitioners have proposed a number of different implementation models Deming proposed an implementation MARKET, STAKEHOLDER I[ FOCUS PROCESS I plan consisting of 14 steps, Juran put forward a ten step plan, and Crosby suggested a 14 step programme for the implementation of TQM [15] Oakland [24] proposed an eleven step process, but he also identified two preliminary stages: understanding the need for quality, and commitment to quality These TQM implementation models are sequential and prescriptive Ghobadian [13] proposed an integrative model where only the key elements of TQM are predefined Figure depicts this model Management process (i.e management practices and attitudes) is the key element in the implementation of TQM, hence its position at the spine of the fishbone diagram The other elements are: (a) the direction of the organization focus: this should be external aiming to meet the needs of the customer; (b) process focus around the outcome requirements rather than the tasks; (c) people focus; and (d) communications and measurements The main elements can be subdivided into a number of sub-elements In this model, the responsibility for the identification of the sub-elements (improvement projects) underpinning the implementation of TQM rests with the organization This is because particulars within any approach are more likely to be contingency dependent than the broad approach One such contingency is the size of the organization, and it is reasonable to assume that implementation is size dependent In other words size is likely to influence the broad steps necessary to implement TQM Furthermore, PROCESS FOCUS ) PEOPLE FOCUS Fig The salient elements of TQM implementation Omega, Vol 24, No I there is a high probability that size will influence the implementation detail in terms of specifics within each broad step A proper examination of these hypotheses required a careful consideration of salient key steps and particulars of TQM implementation Therefore, the common steps and elements proposed by the above models were identified Using a deductive approach, the nature of the impact of organization size on the salient common elements were considered SMEs are likely to encounter advantages and disadvantages relative to large organizations with respect to these elements The advantages and disadvantages are highlighted below ADVANTAGES There is unanimous agreement that visible leadership from the top is important to the successful implementation of TQM SMEs have a distinctive advantage in this respect because normally without much effort the CEO of an SME enjoys a high degree of visibility and can readily emphasize the importance of quality In a large organization this may not be readily possible Improvement teams, a cornerstone of TQM introduction, have a better vertical and horizontal visibility at SMEs Therefore, the level of commitment and support generated by a quality improvement team can directly and indirectly influence the change in corporate culture, a key factor in the successful implementation of TQM External focus means that, in a TQM environment, every employee needs to be aware of customers' needs and be a marketer In SMEs employees tend to be closer to the firms' products and customers, creating an increased sense of responsibility Smaller companies have a natural tendency for cross-functional training because they have fewer layers of management and staff With fewer people to mobilize, change can come quickly because the effort required to gather diverse groups of people together to initiate change is normally modest [5] 89 - - I t is easier for small companies to create the kind of atmosphere that fosters personal growth, shows workers how their jobs fit into the overall organizational goals and encourages them to come up with ideas for improving or expanding the business [26] - - I n a small firm, employees usually have a very good sense of the overall profitability of the company, and they are committed to trying to improve the business because they know it will directly affect them [26] Individuals can more readily see their efforts translated into tangible results in SMEs Decision making processes are simpler in SMEs because there are fewer layers of management Communications and coordination between staff is easier and less bureaucratic than in large organizations [5] Line and staff managers have better access to each other and to the CEO Thus, cross-functional activities are easier to organize The resistance to change is likely to be greater and more significant in larger organizations than SMEs There are a number of factors that contribute to this phenomenon: the existence of a large number of different interest groups in big organizations; the prevalence of a strong departmental and functional mind set; the presence of a significant degree of cultural diversity and inertia; the existence of a high degree of standardization and formalization; the sheer number of employees involved; communication difficulties; and, potentially, a high degree of unionization Moreover, multiplicity of sites can increase the implementation complexities SMEs normally operate on a single site and, therefore, it is simpler to launch a TQM programme in an SME Successful implementation of TQM relies on company wide quality awareness In large organizations, internal catalysts are more numerous The likelihood that the internal catalysts may lose interest or concentrate on priorities perceived as more important, is greater in larger organizations Only one internal catalyst, is necessary in an SME Thus, once 90 Ghobadian, Gallear Total Quality Management recognition has taken place, there is little conflict in communicating the vision to the whole organization This should make it easier to raise quality awareness in SMEs Functional integration is easier to attain DISADVANTAGES - - I n very small companies, the owner's or chief executive's personality may dominate the culture [38] Many owners have little formal management training This may result in inflexibility and rigidity of outlook The limited size of the management team means that individuals are often responsible for a number of different functions with little backup [38] Frequently, they are busy with managing the day-to-day activities of the business and have little time left for activities perceived as adjunct In general, a short rather than long range management perspective dominates - - A small number of de-motivated or uncommitted staff can disproportionately affect the quality outcome This is because most SME employees have at least some contact with external customers Therefore, the health of the business depends on all employees being motivated to provide the best service available [26] Retraining employees when jobs become superfluous rather than laying them off is difficult to justify The flat structure of SMEs can leave employees frustrated because they are often unable to realize their short and mid-term career goals This is why SMEs may find it difficult to employ high calibre staff and even harder to retain them SMEs are often under pressure to gain registration to a standard quality management system [3] Meeting the requirements of these standards can be a formidable obstacle to a small company It requires motivation by the management to appreciate, achieve and implement the necessary measures to meet the standards ' criteria Moreover, the organization needs to possess or be able to purchase the necessary technical and human resources [9] It has been determined that the total average cost to an SME of designing and installing a QA system and gaining certification is around £25,000 [31] Furthermore, the total average costs of maintaining certification is put at around £14,700 per annum [31] Resource paucity is arguably the most serious disadvantage faced by SMEs The term resource is used in its broadest sense SMEs suffer from lack of specialist knowledge and technical expertise [33], insufficient external information on which to base decisions, and lack of capital However, the most scarce resource is arguably management time To successfully implement a quality improvement programme, it is necessary for the management and staff to devote quality time to this task This requirement can cause considerable difficulties in an SME, because it lacks the economies of scale enjoyed by large organizations [22] Time and staffing constraints often preclude the administration of complicated incentive and reward programmes [26] Similarly, it may be difficult to design and operate an effective performance measurement system and move towards fact based management Finally, SMEs are usually sceptical of outside help Moreover, there is generally less interaction and sharing of information among SMEs Coupled with an unsystematic management style, and the fact that market research is usually incidental, potentially valuable knowledge from external sources is often neglected The identification of the strengths and weaknesses of SMEs in terms of implementation of TQM facilitates the design of a more effective approach This is of considerable importance as the implementation process is a key determinant of successful introduction of TQM INHERENT CHARACTERISTICS OF TQM AND SIZE OF THE ORGANIZATION An important point to consider is the relationship between the inherent characteristics Omega, Vol 24, No of TQM and organization size The issue is whether the size of an organization significantly affects the appropriateness of TQM, or whether other contingencies play a more important role To examine this point it is necessary to first examine the inherent characteristics of TQM TQM is a management philosophy that expounds values and principles largely at odds with values and principles propagated by Taylor [34] and Fayol [11] Broadly, both Taylor and Fayol directed their attention to tasks, working systems, and numbers The principles propagated by them dominated Western management thinking for most of this century The economic success of Japan attracted the attention of Western managers to an alternative management philosophy and concept, namely TQM Here management focuses its attention on the market, the people who carry out the tasks, processes, and outcomes Like most significant new and abstract philosophies, TQM is interpreted and defined in different ways These span a broad continuum At one extreme of this continuum stands the 'system dominated rational analytical approach', and at the other extreme the 'imprecise behavioral approach' However, the examination of secondary source data suggests a broad agreement on the shape of a TQM managed company A TQM environment is reliant on team work, participation, open culture, effective all round communications, empowerment and devolution of decision making, effective measurement and fact based decision making, motivated and trained staff, eradication of fear, removal of sources of problem and error, and continuous search for improvement regardless of its magnitude Deductive research led Ghobadian [13] to propose the following definition: ~TQMis a structuredattempt to re-focusthe organization's behaviour, planning and working practices towards a culturewhichis employeedriven,problemsolving,customer oriented, and open and fear-free Furthermore, the organization's business practices are based on seeking continuous improvement, devolution of decision making, removal of functional barriers, eradication of sources of error, team working, and fact-based decisionmaking" From the above definition it is clear that TQM is likely to involve cultural change at all levels of an organization Once the top management recognizes the need for change, then it is easier to attain cultural change in 91 SMEs than in large organizations However, it is probably more difficult for SMEs' management to recognize the need for change This is because of limited resources and external contacts, pressures on top management's time, and the style of management We have so far examined three broad and interrelated areas using a deductive approach First, the differences between large organizations and SMEs were highlighted Second, the impact of size on the implementation process was explored Third, the inherent salient features of TQM were identified The information was brought together to examine the relationship between the salient characteristics of TQM and the size of organization, using the profile analysis technique This analysis facilitated the formation of a series of conceptual propositions The result of this analysis is depicted in Fig For the most part, organization size and the inherent characteristics of TQM appear to be independent of each other Therefore, one may conclude that other contingency factors are more significant in determining the appropriateness of TQM than organization size Among the most important factors are management style, achievement style, self-actualization, and affiliative style That is to say, soft contingency issues connected with management approach and culture of the organization Some TQM characteristics, on the other hand, appear to be size dependent Broadly, there is greater correspondence between the inherent characteristics of TQM and those of SMEs than between those of TQM and large organizations Thus, on the surface SMEs appear to be better placed to introduce TQM Probably the biggest obstacle to the introduction of TQM in SMEs is the 'management realization' and the ability of owner managers to modify their behaviour and management style These are major obstacles and not easy to overcome There is also the issue of resources Arguably, there is a greater degree of divergence between the inherent characteristics of large organizations and requirements of TQM, but, because of abundance of resources and wide range of external contacts, realization is likely to occur quicker and more frequently Moreover, in larger organizations there is professional management with a tradition of hierarchy of authority, so that it might be easier for i TQM Requirements / Characteristics SMEs Top management believes that quality is even/ones responsibility and that quality leadership starts at the top S~e independent I I i ! I ! I ' Plans and manager's quality chain Large organisetions Li , ,.~ d' ! t Explicit and disciplined about goals, roles, and standards at ell levels , ~ I ,, ,: Decision-making devolved to the lowest possible level Empowerment ! /: ! I I f i I Effective and open communication channels Continuous improvement culture ! ,,| ! I Cultural change Resistance to change I I 'I Values people i Focuses on preventing problems ;[...]... Employees took an active part in identifying their training needs Resources did not inhibit Dutton's training efforts The extent of training is more dependent on the CEO's outlook than availability of financial resources Training is only useful when the real training needs are identified and the level of potential paybacks are clear It is a folly to invest heavily in training at the initial stage of the TQM... TQM training Initially a group of employees were trained by the Crosby Institute, they then trained other trainers Three different training programmes were designed and delivered These included: (a) an awareness training for all existing and new employees; (b) a detailed training for managers and supervisors; and (c) an in depth training off-site for the senior managers, as a deep understanding by... department's training, including induction courses for new employees Much use was made of the Belbin profiling method, which enabled the employees to examine how they interacted with other people, and to identify their own strengths and weaknesses Training programmes were not impeded by paucity of resources 97 To improve links within the supply chain a customers' visits initiative was introduced This... General and Industrial Management (Revised by Irwin Gray) Pitman, London 12 Gale BT and Klavans R (1985) Formulating a quality improvement strategy J Busin Strat Winter, 21-32 13 Ghobadian A (1993) Integrating Operations Strategy And Quality Improvement: The Way Ahead Inaugural Professorial Lecture, Middlesex University 14 Ghobadian A and Liu J (1992) TQM in practice In Technology in Manufacturing For... preparing employees at all levels Varian's management was determined to implement TQM Other SMEs perhaps would not be so robust in the face of the initial failure CASE STUDY 4 -BETTS PLASTICS (WREXHAM) Brief background Betts Plastics (Wrexham) manufactures high volume plastic components for the packaging industry Injection moulding formed the main 3ATeachingCompanyProgrammeis part of a schemein the UK in. .. improvement The management structure of the company was made flatter At the initial stage the short 96 Ghobadian, Gallear Total Quality Management span of decision making enabled the management to implement the six key initiatives quickly The span of decision making was further shortened by empowering employees lower down the organization The vertical and horizontal visibility inherent in SMEs makes it... Gallear Total Quality Management of poor and high product quality and delivery performance as well as the principles of TQM A comprehensive implementation plan was not developed The implementation priorities were generated organically These were guided by the following five principles: simplify the manufacturing process; reduce the working inventory; increase employees' skill flexibility; maintain and... process Its products include closures, thin walled containers and pharmaceutical products Betts serves the food and beverages, pharmaceutical, and cosmetics and toiletry industries In the last financial year, turnover was approx £8 million The company employs 97 people Why TQM and the main steps involved in its implementation The installation of a new managing director in 1992 resulted in the formulation... layers of management successful TQM journey and despite their size Team-work is another important dimension of made a significant investment in this area It TQM environment The closeness of employees appeared that SMEs did not face major created the platform to introduce team work difficulties in delivering the necessary training However, the SMEs that were studied had to In some cases training was augmented... functional integration was not all plain sailing Management had to overcome years of conditioning, allegiance, and comfort level To encourage functional integration, cross-functional training programmes were introduced Another step involved locating closer together groups of employees that needed to be in regular contact with one another and other groups of employees On a priori grounds, functional integration ... programmes were designed and delivered These included: (a) an awareness training for all existing and new employees; (b) a detailed training for managers and supervisors; and (c) an in depth training... [13] proposed an integrative model where only the key elements of TQM are predefined Figure depicts this model Management process (i.e management practices and attitudes) is the key element in the... implementation process Therefore, the identification of differences is of practical importance Moreover, by identifying the key priorities, the identification of size dependent characteristics will benefit