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The View from the Top: Chief Executives’ 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 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 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. 2. 3. 4. 5. the CEOs’ expectations of the TQM process, in terms of both costs and benefits, and the timing of those benefits; their perceptions of the actual costs incurred, the benefits gained, and the timing of these benefits, resulting from the TQM process; the effects of TQM on the activities of the CEOs; the CEOs’ views on the TQM process and its application in their organisations; and, 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 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)

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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; - 183 -

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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

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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. - 186 -

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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 E2 Other A1 _____________________________________________________
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 - 189 -

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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 - 190 -

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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 16 9 –7 Other1 _____________________________________________________ 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, communications, crisis management.

5. Conclusions 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 - 192 -

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Table 6 Other Comments
________________________________________ % Responses ________________________________________
TQM is essential for all

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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.)

References Australian Bureau of Statistics, 1988, Small Business in Australia, 1983–84 to 1986–87, Catalogue No. 1321.0 (Canberra, ABS). Australian Institute of Management, 1993, When TQM can fail, Management, 2, March, 29. 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 the Australian and New Zealand Academy of Management Conference, Sydney, 6–9 December. Crosby Associates Australasia Pty Ltd, 1990, Survey on Quality Management: Interim Summary of Results, Sydney, in association with the Roy Morgan Research Centre Pty Ltd. Deming, W.E., 1984, Roadmap for Change: The Deming Approach, videorecording (Chicago IL, Encyclopaedia Britannica Educational Corporation). Dun and Bradstreet Corp., 1991, Private communication, January. The Economist, 1992, The cracks in quality, 323, 7755, 18–24 April, 63–64. Eisen, H. and B.J. Mulraney, 1992, Impediments to the adoption of modern quality management practices, Quality Management Research Unit Publication Paper, David Syme Faculty of
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2. Only 3.8% (or 28,000) of Australia’s 727,800 private sector enterprises have twenty or more 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 Quarterly Management, 1, 1, 44–52. Glover, J., 1992, Achieving the Organisational Change Necessary for Successful TQM: Cases from the Service Sector, Proceedings of the TQMI 3rd National Conference, Hobart, 10–12 May. Juran, J.M. and F.M. Gryna (eds.), 1988, Juran’s Quality Control Handbook (McGraw-Hill, New York). Total Quality Management Institute, 1990, TQMI Membership Survey (Sydney, Total Quality Management Institute).

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