The View from the Top: Chief Executives’

4
Perceptions of Total Quality Management

by
Tom Fisher †

Abstract:
The chief executives of 49 member companies in Total Quality Management
Institute (Australia) were surveyed regarding their perceptions of the effects of the
Total Quality Management (TQM) processes in their companies.
Average costs associated with implementing TQM were reported as steady
over time, at around 0.5% of sales, while the average value of the benefits gained
was around 2% of sales, giving an average benefit to cost ratio of 4:1. Just under
30% of the respondents indicated that TQM had resulted in a culture change in
their company. About a quarter reported increased customer focus and
satisfaction, and improved productivity, competitiveness and profits. Significant
numbers also reported increased workloads and time commitment, and a high
need for training.
Many executives commented that implementing the TQM philosophy was
difficult and that they needed to actively lead and drive the process. Many also
commented that TQM is a central philosophy which is basic to all aspects of
company operations.
Keywords:
TOTAL QUALITY MANAGEMENT; TQM; QUALITY; PRODUCTIVITY.
† School of Management, University of Technology, Sydney, PO Box 123,
Broadway NSW 2007.

Australian Journal of Management, 18, 2, December 1993,  The University of New South Wales

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1. Introduction

T he Total Quality Management (TQM) approach to running organisations has

been used by some Australian companies for ten years or more, and by some
organisations overseas for much longer. The commercial success of many
Japanese companies is often attributed, at least in part, to the TQM approach.
Private groups in Australia such as Enterprise Australia and the Total Quality
Management Institute (TQMI), now amalgamated into the Australian Quality
Council, and Government groups such as the National Industry Extension Service
(NIES), are actively promoting TQM to Australian private and public sector
enterprises and many organisations have taken up this challenge.
It is far from clear, however, whether TQM has been effective in providing
significant benefits to those organisations which have adopted this approach. Past
research on some Australian companies has not identified performance
improvements which could be directly attributed to their TQM processes (Fisher
1992), and other observers and researchers have expressed doubts about TQM’s
effectiveness (Economist 1992). There are, however, many enthusiastic supporters
of TQM who believe it is the only way for Australian companies to develop
international competitiveness, and there are numerous case studies indicating that
TQM has resulted in beneficial change in organisations.1
The TQMI agreed to support a research project aimed at determining the
effects of TQM on organisations actively pursuing this approach to management. It
was decided to survey TQMI member companies in the private sector and to seek
feedback from the chief executives of these companies on their experiences with
and impressions of TQM within their organisations. A questionnaire was
developed and posted to all of the 218 TQMI member companies which were
private sector manufacturing and service organisations, not including quality
consultants. Replies were received from 59 companies in total, 49 of which
provided usable responses (22%).

2. Objectives of the Survey

I n general terms, the main objective was to obtain the views of those persons in
commercial organisations who have the responsibility and accountability for the
overall performance of their organisations, that is, chief executive officers (CEOs).
The survey group was deliberately restricted to TQMI member companies on the
basis that these companies’ membership of TQMI indicated a level of commitment
to the TQM philosophy. The responses of these committed companies’ chief
executives would, it was thought, provide a baseline of opinions of those company
leaders genuinely attempting to implement the TQM philosophies and techniques.

_ ____________
1. See, for example, Clarke, Chapman and Sloan (1992) and Glover (1992).

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The specific survey objectives were to determine:

1. the CEOs’ expectations of the TQM process, in terms of both costs and
benefits, and the timing of those benefits;
2. their perceptions of the actual costs incurred, the benefits gained, and the
timing of these benefits, resulting from the TQM process;
3. the effects of TQM on the activities of the CEOs;
4. the CEOs’ views on the TQM process and its application in their
organisations; and,
5. their views on TQM’s importance relative to other busines strategies.
This survey was specifically designed to seek the views of chief executives about
what was happening in their companies. Accordingly, terms such as TQM, cost
and benefits associated with TQM, and the timing of achievement of benefits were
not defined but were left to the CEOs to interpret in their own context. It was taken
for granted that these executives had a basic understanding of these issues because
of their company’s membership of the TQMI. The results of this survey, therefore,
represent the reported perceptions of the CEOs—not absolute determinations of the
costs, times and benefits associated with their companies’ TQM processes.

3. Method

A questionnaire was developed with the above objectives in mind. Many of the
questions were designed for easy responses and simple analysis using
numbered multiple choice answers, and some questions were open-ended to allow
respondents to use their own words. The questionnaire was posted to the chief
executives of the 218 TQMI member companies which were commercial business
enterprises. Public sector organisations and management and quality consultants
were deliberately excluded so as to limit the responses to companies which are
competing in the normal commercial world, but which don’t have particular
expertise in TQM as would be the case for quality consultants. The survey was
conducted between May and October 1991.
The responses were analysed by simple frequency tallies for the numerical
response questions and content analysis for the open ended questions. Some
analyses were also carried out to determine differences in responses between
various categories of companies for some questions. These categories and the
number of companies in each category were as follows:
• service (6) versus manufacturing (43);

• Australian public companies (6) versus subsidiaries and divisions (25)

versus private companies (16);
• small [less than 101 employees (9)] versus medium [100 to 500 employees
(20)] versus large [more than 500 employees (17)] companies;

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• new TQM companies [using TQM less than one year (12)] versus medium
[one to three years (22)] versus established [more than three years (14)]; and,
• companies using a “standard” TQM program (17) versus companies
developing their own program (28).
Statistical analysis of the data showed that, in general, the sample sizes were too
small for statistically significant differences to be confirmed. Accordingly, no
definitive conclusions can be drawn from these analyses, but the results are
certainly suggestive of some interesting possibilities.

4. Results and Discussion

U sable responses were received from 49 companies. An additional ten

companies replied but did not complete the questionnaire, stating that it was
too early in their process or inappropriate for them to do so. Thus, the effective
overall response rate was 22%. In addition, the response rate for some questions
was even smaller because not all respondents answered all the questions. These
response rates were disappointing considering that the research was supported by
TQMI and it was member companies which were being surveyed.
The distribution of responses to the survey are shown in Figures 1 to 3.

Figure 1

Respondents by Company Type

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Figure 2

Respondents by Company Activity

Figure 3

Respondents by Number of Employees

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Also shown in Figure 2 and Figure 3 are corresponding distributions in the TQMI
membership at the time of the survey, and in Figure 3 the distribution by numbers
of employees of private sector business enterprises in Australia. As can be seen
from these data, this survey over-represents manufacturing companies compared
with the TQMI membership, and severely under-represents small companies both
with respect to the TQMI membership and the Australian business community in
particular. Over 50% of the questionnaires were completed by the chairman or
chief executive personally, with the remainder completed on their behalf by
directors or senior managers, including quality managers. The results of this
survey should therefore accurately reflect the views of the chief executives of these
companies.
Almost half of the companies (46%) launched their formal TQM process one
to three years ago; 15% stated that they had not begun implementation of TQM,
while 13% had been using TQM for more than six years. There are inconsistencies
in some of the responses, in that a few of those companies which reported not
having begun using TQM also reported having gained some benefits from their
TQM process! Perhaps they were thinking of benefits from TQMI membership; the
numbers are small and the discrepancy was not resolved. The above pattern of
TQM adoption is generally similar to that reported by respondents to an earlier
study carried out by Crosby Associates Australasia (1990).
The nature of the TQM approaches adopted varied considerably. Most of the
respondents (62%) developed their own version of TQM based on a combination or
adaptation of one or more of the “standard” approaches (Deming 1984; Juran
1988; Crosby Associates 1990; etc.). Those which adopted a standard approach
mostly followed Deming’s (1984) continuous improvement principles. Analysis
of the approach used by company size (see Table 1) revealed that 88% of the
smaller companies (up to 100 employees) adopted one of the standard approaches,
while 94% of the large companies (more than 500 employees) developed their own
approach. Medium size companies were evenly divided between a standard
approach and their own version. Although the question was not asked, it seems
likely that the smaller companies would have used a consultant to introduce a TQM
process into their organisation and, therefore, would have been more likely to
adopt a standard approach as offered by the consultant, whereas the larger
companies probably would have used primarily their own internal resources to
develop a “tailor made” version of TQM for themselves.
Respondents were asked to indicate the times when each of the twelve
benefits listed in Table 2 were expected to be achieved and when they were
actually achieved, using the categories “within twelve months”, “within three
years”, “within six years” and “beyond six years”. The median values for all the
benefits were “within twelve months” or “within three years”, or between these
categories. A summary of the median values of the responses is shown in Table 2.
In comparing actual achievements with expectations, it must be kept in mind
that this study was a retrospective one, in that respondents were asked to remember
what their expectations were before the implementation of TQM processes.

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Table 1

Total Quality Management Approach and Company Size

_ ___________________________________________________________________
Company Size by No
Number of Employees, W Response N
W < 101 101 ≤ W ≤ 500 W > 500
_ ___________________________________________________________________
Standard approach 7 9 1 – 17
Adaptation or own approach 1 9 16 2 28
No response 1 2 – 1 4
N 9 20 17 3 49
_ ___________________________________________________________________

Table 2

Median Times Benefits Expected (E) and Achieved (A)

_____________________________________________________
Median Time, M (years)
Benefit M < 1 1≤M ≤3 M < 3
_____________________________________________________
Improved product quality E and A
Improved service quality E and A
Fewer customer complaints E and A
Fewer manufacturing rejects E A
Reduced waste A E
Reduced error rates E and A
Improved safety levels E and A
Improved productivity A E
Reduced total operating costs E and A
Increased profits E and A
Improved employee morale E and A
Improved management morale A E
Other A1 E2
_____________________________________________________
Notes: 1. Achieved: quality systems; reduced cycle time; reduced
staff turnover.
2. Expected: continuous improvement; reduced cycle time;
total customer focus; quality differentiation; process
simplification.

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Examination of the results shows that, in many cases, the reported benefits and the
expectations were identical, suggesting that for some respondents their actual
achievements influenced their “remembered” expectations. There are overall
differences, however, in several areas between achievements and expectations
which suggest some interesting effects, as discussed below.
The respondents reported that they achieved the benefits they expected, as
listed in Table 2. But in terms of median times (i.e., the middle value of the times
reported), the benefits of reduced waste, improved productivity and improved
management morale occurred sooner than expected, whereas fewer manufacturing
rejects took longer.
When the timing of benefits results are divided into different company
categories, it can be seen that not only did some of those categories (service
companies, Australian companies and new TQM companies) which expected
benefits sooner than others actually achieve that, but they achieved the benefits
even sooner than they themselves expected (see Figure 4).

Figure 4

Benefits Expected and Gained

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The small companies also expected benefits sooner, but they were generally
disappointed. Other groups which achieved benefits sooner than other categories,
and also sooner than expected, were private companies and companies using a
standard TQM approach. Large companies and companies with more than three
years TQM involvement tended to report achievement of benefits later than other
groups and, in the case of the established TQM companies, later than expected.
It must be emphasised here that the achievement of a benefit from TQM was
not defined in the questionnaire, so that the differences discussed above may well
be due to interpretation rather than being real differences in timing. The intention
of the survey, however, was to obtain the impressions of CEOs about TQM, and
from this perspective the above results are valid. The results say that, as far as the
CEOs are concerned, these benefits were achieved and that they were achieved
before expected, as expected or later than expected, as described above.
It is interesting to note that those companies using standard TQM approaches
reported having benefits of TQM sooner than they expected more often than any
other category of company (see Figure 4). This, in conjunction with the fact that
they also achieved their benefits sooner than other categories, suggests that the
standard approaches are more effective than tailor-made approaches, and/or that
the intervention of consultants is more effective than going it alone. Such a
conclusion can, of course, only be tentative at this stage because of the small
sample size, the possible confounding effects of company size, and the fact that
they are the perceptions of the CEOs rather than absolutely determined responses.
These results do suggest, however, that the chief executives of those companies
that used a standard approach to TQM generally believed that they received good
value from their TQM implementation processes.
It may well be that some of the above results are simply a reflection of the
“low hanging fruit syndrome”, where the easy gains have been achieved relatively
quickly (Australian Institute of Management 1993). The fact that the larger and
more established TQM companies reported later achievement of benefits may
simply indicate that the CEOs of these organisations have a more mature
appreciation of the benefits they have gained from TQM and are reporting these
gains from a different perspective.
Cost and benefit expectations varied enormously, with expected costs
averaging around 0.5% of revenue and the expected financial value of benefits
averaging around 2% of revenue, mostly expected to come from reduced waste and
other miscellaneous factors. On average, respondents were expecting a steady
expenditure (around 0.5% of revenue) over the years on TQM, with benefits
increasing yearly from about 0.7% of revenue in the first year to around 4% per
year after three years, as shown in Table 3. Thus respondents on average expected
the value of the benefits gained from TQM to be greater than the costs right from
year 1, with a steadily increasing benefit to cost ratio over time.
The reported actual costs associated with TQM averaged around 0.5% of
revenue and the financial returns around 2%, pretty much in line with expectations.
The costs remained fairly constant from year to year, as expected, and so too did

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Table 3

Costs and Returns: Expectations and Actual Achievements

_ _____________________________________________________
Percentage of Revenue
Average Costs Average Returns
Expected Actual Expected Actual
_ _____________________________________________________
First year 0.50 0.62 0.68 1.60
Second year 0.35 0.42 1.90 2.30
Third year 0.55 0.32 2.00 2.20
Annually thereafter 0.80 0.43 3.70 2.50
Overall weighted average 0.53 0.46 2.00 2.10
_ _____________________________________________________

the value of the benefits, in contrast to the expected rising trend over time. Clearly
these values depend entirely on how the costs and value of the benefits are
determined—the above results again simply reflect the reported perceptions of the
chief executives. The most significant areas where benefits were obtained were
reduced waste and reduced operating costs.
These results indicate that the implementation of TQM has produced a
perception of direct financial benefits for the companies of about four times the
costs involved, consistently from the first year of introduction of TQM, whereas the
expectation was for an increasing benefits to cost ratio over time. While this
expectation of TQM may have been optimistic, the perceived benefit to cost ratio of
about 4:1 suggests that TQM is still a worthwhile investment! These results are
claimed in spite of the fact that 89% of the respondents reported that economic
factors such as the current recession, interest rates and exchange rates had a
(presumably negative) impact on overall performance in recent years.
As shown by Table 4, most respondents (64%) expected TQM to result in
improved morale, teamwork, communication, employee involvement, and so on, in
other words, an organisational culture change. This culture change expectation far
exceeded other aspects, such as improved productivity and competitiveness and
customer focus and satisfaction; improvements in these areas were presumably
expected to follow from the change in company culture. In general, the CEOs’
expectations from TQM were similar to the expectations identified in the Crosby
Associates (1990) study.
Only 29% of respondents indicated that TQM had resulted in a culture
change in the company, with improved morale and a supportive environment for
change, well down on the 64% who expected such an impact. This echoes the
findings of Beer, Eisenstat and Spector (1990), who found that change driven from
the top of an organisation is often not effective in creating the desired change.
Significant numbers did, however, report better customer, supplier and shareholder

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Table 4

Effects on the Company: Expectations and Actual Effects

_________________________________________________________________
% Expecting % Achieving
_________________________________________________________________
64 29
Culture change: improved morale, teamwork,
communication, etc.
Increased customer focus and satisfaction 32 23
Improved productivity, profits and competitiveness 32 23
competitiveness
Increased workloads and time commitment – 16
High need for training – 6
_________________________________________________________________

relationships and general improvements in all areas. Several respondents also

commented on the increased workloads and high time commitment associated with
TQM and the high need for training.
As shown by Table 5, most CEOs (62%) expected TQM to have a significant
impact on their own activities within their organisations, particularly in the areas of
culture change and teamwork, and in requiring increased time and commitment
from themselves. In terms of their time commitments, involvement in TQM
activities took up on average 12% of their time, particularly at the expense of
financial matters, corporate relations and crisis management. Much of this time
spent on TQM activities seems to involve leading and driving the TQM process
personally. This finding supports a comment from the Crosby Associates survey
(1990, p.7): “All to often users are faced with a major task of winning support
from management and staff.” In general, the adoption of TQM has resulted in
CEOs refocusing their activities somewhat towards active leadership in quality
management, monitoring trends, and having generally more involvement with
people than was previously the case.
As a result of their experiences with TQM, a substantial number of CEOs
believe that TQM is a central philosophy which is basic to all aspects of company
operations. But while there is a sizeable minority who believe that TQM is
complementary approach rather than an overriding one, an overall majority (57%)
believe that the TQM approach is essential for all companies and for Australia.
Many say also that it needs better support in order to be implemented effectively
(see Table 6).

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Table 5

Changes in CEOs’ Activities

Part A
_____________________________________________________
Average % of Time Spent on
Activity This Activity
Before TQM Now Change
_____________________________________________________
Customer, supplier, market related 33 30 –3
Financial performance related 24 19 –5
Strategic planning 14 17 +3
Human relations 13 13 0
Research and development 8 9 +1
Quality related 3 12 +9
Other1 16 9 –7
_____________________________________________________

Part B
________________________________________________________
Other Expectations and Effects % Expecting % Experiencing
________________________________________________________
Need to drive TQM process, 46 38
time commitment, learning
Refocus activities: people 16 28
involvement, trend monitoring
Better communications, more – 11
openness and understanding
Little or no change 2 11
_ ______________________________________________________
Notes: 1. Corporate relations, general management, communi-
cations, crisis management.

5. Conclusions

I n spite of the disappointing response rate, some interesting tentative conclusions

can be drawn from the results. As discussed above, only companies showing
evidence of some commitment to TQM were surveyed and most of the responses
came from companies actively implementing TQM processes. The responses are
the perceptions of the chief executives of commercial business enterprises which
are moving along the TQM path, and they provide some insights into the impacts of
TQM on such organisations.
The responses indicate that substantial tangible and intangible benefits do
accrue from the implementation of TQM. The data suggest an overall financial

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Table 6

Other Comments
________________________________________
% Responses
________________________________________
TQM is essential for all 57
companies and the country
Difficult, needs better support to 23
be implemented effectively
________________________________________

benefit to cost ratio of about 4:1, starting in the first year of TQM implementation.
Other direct benefits included reduced waste and improved quality and
productivity, along with less tangible benefits such as culture change and improved
morale and teamwork.
The CEOs’ initial expectations of the effects of TQM were generally realistic,
and many companies reported expecting and achieving significant gains within the
first twelve months. There was often initial resistance to the changes required by
TQM, and considerable time and effort on the part of the chief executive to drive or
lead the TQM process was regarded as essential.
The survey results indicate some differences in the expectations and the
achievements of benefits between different categories of company and different
approaches to the implementation of TQM. Service companies, Australian
companies and companies early in their TQM processes reported achieving benefits
earlier than the overall average, while large companies (more than 500 employees)
and companies with established TQM processes reported achieving benefits later
than average. Also, those companies using standard approaches to TQM reported
gains earlier than average, suggesting that well established approaches to
implementation may be more effective in achieving quick returns than approaches
tailored to the specific characteristics of the organisation. This does not imply that
tailored approaches may not be more beneficial in the long term; more research is
needed to establish this.
The conclusions of this research generally support the results of other
Australian surveys (Crosby Associates 1990, Eisen and Mulraney 1992): overall,
the adoption of TQM by a broad range of organisations results in direct benefits to
those organisations. While the returns from this survey provided some data from
companies with one hundred or fewer employees, small companies in general are
seriously under-represented. Other surveys undertaken generally concentrate on
larger organisations, presumably because of the more manageable numbers
involved.2 Since small businesses employ a substantial proportion of the workforce

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(about 36%) there is clearly a need for more research into the small business sector
and its involvement or otherwise with TQM if we are to develop a realistic picture
of TQM implementation in Australia.
It is instructive to note that almost half the responses to this survey came
from subsidiaries of overseas companies. This supports a similar finding in the
Crosby Associates (1990) survey and suggests that much of the impetus for the
introduction of TQM in Australia comes from company head offices overseas.
The business leaders who responded to this survey agreed that the
implementation of TQM is not easy and requires substantial direct inputs from
them. But the benefits are real, substantially exceeding the costs, and the changes
in culture and operating procedures are expected to be of long term benefit. In the
words of one respondent: “It works!”

(Date of receipt of final typescript: August 1993.)

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Beer, M., R.A. Eisenstat and B. Spector, 1990, Why change programs don’t produce change,
Harvard Business Review, 68, 6, November-December, 158–166.
Clarke, P.J., R.L. Chapman and T.S. Sloan, 1992, The Capital Parkroyal and National
Convention Centre: Total Customer Service in Southern Pacific Hotels, Paper presented to
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employees, and only 0.14% (1,033) have more than five hundred employees (Australian
Bureau of Statistics 1988; Dun and Bradstreet 1991).

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Business, Monash University, Clayton, March.

Fisher, T.J., 1992, The impact of quality management on productivity, Asia Pacific Journal of
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