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Journal of Operations Management 17 Ž1998.


The TQM Paradox: Relations among TQM practices, plant
performance, and customer satisfaction
Thomas Y. Choi ) , Karen Eboch
Department of Management, College of Business Administration, Bowling Green State UniÕersity, Bowling Green, OH 43403-0270, USA
Received 14 January 1997; accepted 17 November 1997

We empirically examine a mediational model of TQM, in which TQM practices have a direct impact on customer
satisfaction and an indirect impact mediated through plant performance. We adopt a survey approach using the data from
339 manufacturing companies. We first establish convergent validity, discriminant validity, and reliability of the constructs.
We then examine the model using LISREL 8.10. The results suggest paradoxical relations among TQM practices, plant
performance, and customer satisfaction. TQM practices have a stronger impact on customer satisfaction than they do on
plant performance. Further, the plant performance, as described in the mediational model, fails to show a significant impact
on customer satisfaction. This observation is explained based on an institutional argument that states that loose coupling may
occur between TQM practices designed for customer demands and the activities on the plant floor designed for plant
performance. q 1998 Elsevier Science B.V. All rights reserved.
Keywords: Empirical research; Operation strategy; Interdisciplinary; Quality; Performance; Customer satisfaction; Institutional theory;
Supply chain

1. Introduction
US manufacturing firms have faced heightened
challenges from global competitors and a reduced
market share during the past two decades ŽMeredith,
1992; Krajewski and Ritzman, 1996.. To renew their
competitiveness, many firms have adopted the practices of total quality management ŽTQM., and their
experiences have been detailed in many books and
articles Žsee, e.g., the cases presented in Dean and


Corresponding author. Present address. Arizona State University, College of Business, Department of Management and Department of Supply Chain Management, Tempe, AZ 85287-4006,

Evans, 1994; George and Weimerskirch, 1994; Ross,
1995.. In general, in the literature, TQM is described
as a collective, interlinked system of quality practices that is associated with organizational performance ŽGAO, 1991; Tornow and Wiley, 1991;
Waldman, 1994; Madu et al., 1995. and customer
satisfaction ŽAnderson et al., 1994a,b; Dean and
Bowen, 1994; Reeves and Bednar, 1994; Spencer,
1994.. Further, many authors Že.g., Dean and Bowen,
1994; Dew, 1994; George and Weimerskirch, 1994;
Capon et al., 1995r1994; Ross, 1995; Black and
Porter, 1996. implicitly suggested a positive association among TQM practices, organization performance, and customer satisfaction, by adopting the
framework of the Malcolm Baldrige National Quality Award in their TQM model; the Baldrige Award

0272-6963r98r$ - see front matter q 1998 Elsevier Science B.V. All rights reserved.
PII: S 0 2 7 2 - 6 9 6 3 Ž 9 8 . 0 0 0 3 1 - X

Literature review In the special issue of the Academy of Management ReÕiew. 1994. Ebochr Journal of Operations Management 17 (1998) 59–75 incorporates these three constructs in the assessment of TQM in an organization. organizational performance. Therefore. 1.. in Fig. which. Anderson et al. customer satisfaction. and we regarded plants as our unit of analysis. these theoretical discussions offer general support for the significance of the constructs shown in the mediational model of TQM in Fig.. 1986.g. the context in which we are studying the dynamics of TQM is the supply chain Že. Choi. Consequently. because these programs did not lead to expected results ŽEconomist.g. Taylor and Baker.. 1989. we cannot disregard the mountainous literature. leads to customer satisfaction. we intend to add additional insights into this seemingly paradoxical dynamic of TQM practices.g. summarized Deming’s TQM principles and delineated customer satisfaction as the final outcome of quality management. 2. quality service. Furthermore. Three articles that followed echoed this perspective. If we give credence to the conflicting reports about TQM. Waldman. and financial performance. authors of these studies did not consider the overall impact of actual TQM practices on this relationship. McKinsey and company also found that two-thirds of the TQM programs they examined were terminated. Researchers Že. Therefore. These relationships are depicted as a mediational model Žsee Baron and Kenny. quality performance outcomes are driven by quality management practices. Although we found studies that associated organizational performance Že. Spencer Ž1994. . 1995. For instance. and customer satisfaction. and customer satisfaction Že. 1994. 1990. Bamford. Tornow and Wiley. Womack Fig. in turn. We focused on plant operations. K. To the best of our knowledge. According to the model forwarded by Anderson et al. no researchers have empirically examined these three constructs of TQM in a single model.. In this paper. that pointed out TQM as the pathway to organizational performance and customer satisfaction. Burrows Ž1992. in turn.. 1: TQM practices. operating procedures. Ellram.’ Dean and Bowen Ž1994. in their lead article. Ž1994b. described performance management as the key source of customer satisfaction. Madu et al. that exists upstream to the consumer market. offered an overarching perspective that the entire quality management effort must be focused on achieving customer satisfaction. 1994. we summarize the literature into specific propositions. have acknowledged organization performance as another key construct of the TQM model. reported a 95% failure rate for initiated TQM programs. Conflicting reports have been published regarding the effectiveness of TQM programs. At the same time. although Rategan Ž1992.60 T. Ž1994a.. affects customer satisfaction appears to be non-existent.b. Because the manufacturing industry has led the quality initiatives ŽDertouzos et al. However. In the remainder of Section 2. there appears to be ambivalence surrounding this positive association. 1991.. the empirical investigation of how much of organizational performance brought on by TQM practices. McCune Ž1989. we review more carefully the literature related to these three main constructs... and customer satisfaction. 1992. some of which is cited above. the term customers refers to industrial customers.. introduced three models of TQM Žmechanistic. Finally. which was dedicated to ‘Total Quality. and thus little to the satisfaction of the customers who are thought to be performance-conscious. A mediational model of TQM. we are forced to consider that TQM practices may add disappointingly little to organizational performance. suggested that the historical definitions of quality espouse customer or consumer satisfaction as the ultimate goal of quality management. Reeves and Bednar Ž1994.Y. 1991. we studied the TQM activities in that industry. reported a 90% improvement rate in employee relations. organismic..g. We examine the extent to which authors of the extant literature support or do not support the relations among these three constructs. et al. and cultural. and argued that all three models suggest quality as conforming to or satisfying internal or external customers.. 1. plant performance.

T. Crosby.. and Capon et al. 1994b. Goetsch and Davis. suggested that TQM practices should lead to decreased internal and external product reject rates and production downtime. 1991.g. the operational decisions at all levels are made to remain consistent with these goals. Data are gathered and analyzed.. used it to develop and validate their TQM survey questions. and delivery outcomes of the plant.. However. the Baldrige Award framework of TQM is used to emphasize the importance of how different organizational practices. It is used to keep the organization focused on the chosen objectives. and delivery lead time.. Juran. Dean and Bowen. 1994. established a positive relationship between TQM practices and plant operation Ži. Strategic quality planning can be referred to as designing internal functions to reflect the organization’s mission ŽJuran. A study based on survey research by Flynn et al. cycle time improvement. 1996. Information from and about customers is collected and distributed within the organization.1. 1994. 1995. workers’ intellect and skills are cultivated.... 1994. Employee involvement is encouraged. 1994. K. Thomas Ž1989. Many researchers have adopted the Baldrige Award framework as the basic model of TQM: Dean and Bowen Ž1994. 1994. and information analysis.. rework. Although they did not offer an empirical argument for the relationships among the TQM constructs.. and performance quality Žscrap. 1989... productivity. 1986. training. Dean and Bowen.2. costs per unit produced. 1994. etc. and corrective actions are taken to improve the work process. 1995. Based on his experience. work together to increase an organization’s performance. filed a report on the relationship between quality management practices and organization performance ŽGAO. TQM practices Built on a systems perspective ŽDean and Bowen.e. reward. When human resource management practices are used. Pegels. Hackman and Wageman. Management of process quality entails monitoring of work processes and improving operational variations ŽFeigenbaum. Pegels. In this case.Y. and management creates a reward system conducive to employee involvement. 1994. there are four areas of management practices within the TQM system to assess: management of process quality. There have been a few exceptions. Ross. Many authors have suggested that TQM practices can have a positive impact on a firm’s quality and productivity results Že. Hackman and Wageman. Anderson et al. most of these claims were based on anecdotal evidence. implicitly assumed a positive relationship by building their instrument based on the Baldrige Award framework. Black and Porter Ž1996.. including such seemingly disparate areas as human resources management. As long-term goals are projected by management. 1979. 1995. Plant performance Plant performance refers to quality. cost. found a strong relationship between quality improvement approaches Žstatistical process control... In this case. Waldman. According to the Baldrige Award framework. . and systematic studies correlating TQM practices and quality and operational results are rare. Bounds et al. 1994. Dean and Bowen. 1995. claimed that TQM leads to improvement in total production cycle time. 1995.. and inventory turnover ratio. level of inventories. Deming. Adam Ž1994. Goetsch and Davis. and information and analysis.. Information and analysis practices are used to emphasize the importance of data-based. Ž1995. decisions to improve quality and productivity are made based on concrete data and analysis. human resources management. Ebochr Journal of Operations Management 17 (1998) 59–75 2. strategic quality planning. workers on the shop floor become the center of the plant’s improvement efforts ŽDeming. Goetsch and Davis. George and Weimerskirch. Black and Porter Ž1996. The General Accounting Office ŽGAO. and George and Weimerskirch Ž1994. Hackman and Wageman. 1951. Examples of specific measures of plant performance include production down time.. Ž1994. 1989. 1995r1994 used it to identify key measures of TQM success. quality control. Juran. 1994. 1996. used it to explore the relationship between the principles of TQM and management theories. internal and external reject rates. Choi. 1995. For instance. etc. 1994. factual decision-making ŽDean and 61 Bowen. More recently. inspection. 1951. 2. on-time delivery. 1986. Black and Porter. TQM practices also should increase the overall efficiency of plant operation. a few authors have presented empirically developed and validated constructs of TQM ŽAhire et al.

. and Juran defined quality as fitness for use. Deming. as discussed previously. promoted customer satisfaction as the ultimate goal of TQM. 1995. Flood. 1995. For instance.. authors of the marketing literature concur with the observation that TQM practices lead to customer satisfaction ŽBabich. Regarding the negative reports. suggested that the study of customer satisfaction typically falls under the domain of marketing. Broetzmann et al. 1992.. many leading firms such as IBM. 1. Further. Anderson et al.. and 3M have claimed that their TQM efforts have contributed to increased customer satisfaction ŽRoss.. some authors have argued that TQM has little to do with the actual improvement of performance results ŽBroetzmann et al.. Anderson et al.4. 63% of the firms reported that TQM practices failed to reduce defects by 10% or more. 1995. Ž1994. K. Burrows. 1992. 2. However. 1992. Overall. Little survey of 500 executives in US manufacturing and service firms indicated that ‘‘only one-third believe that TQM made them more competitive’’ ŽEconomist. although mediated through customer satisfaction.. 1994.. and Juran Ž1986. Dean and Bowen Ž1994.. Formulation of propositions There are three relationships portrayed in our TQM model shown in Fig. Zairi et al. Of 42 .. 1992. Therefore. 1996. quite weak. that there was a positive relationship between operational performance and customer satisfaction. Dean and Bowen. argued that TQM practices lead to improvement of the bottom-line results such as profits and returns on assets. which was discussed by Neal and Tromley Ž1995. In general.. 1993. there appears to be support for a positive relationship between TQM practices and customer satisfaction. However.. Ross. Economist..62 T. 1994. Customer satisfaction The impact of TQM practices on customer satisfaction is less disputed than its impact on plant performance results. Tornow and Wiley Ž1991. 1994. 1994b. Ahire et al. only one-fifth expressed that their programs had a significant impact on organizational effectiveness ŽEconomist. Choi. 1995.. Deming suggested that the goal of firms should be to constantly improve their services and products for the customers. there is consistent support for a positive relationship between TQM practices and customer satisfaction Že. An Arthur D. 1982. 1992. They portray customer satisfaction as an important indicator of a firm’s overall financial health.. there have been conflicting reports about how TQM practices lead to the expected performance results of a firm Že. largely because it is perceived to be a key indicator of a firm’s market share and profitability. Few authors have addressed the relationship between performance results and customer satisfaction. 1986. When empowered employees come in contact with customers. offered a conceptual model in which an organization’s performance leads to customer satisfaction. We will reemphasize the main arguments of the literature and state each of these associations as a formal proposition. They offered six indicators of organization performance and seven indicators of customer satisfaction. Simply stated. 1992. in fact.g. even when these practices had been implemented for more than two and half years ŽEskildson. Xerox. and some view TQM as a fad.g. 1995. Further. Juran. they generally contend that TQM does lead to the performance gains in quality and operational results. albeit such gains are less than the expectations of the firms. a satisfied customer will repeat his or her purchases of the goods or services. Ross. workers remain flexible and responsive to satisfying the needs of the customers.3. Eskildson. in an American Electronics Association survey.. Both Deming Ž1986. Rust and Zahorik.T. also argued. 1986. authors do not necessarily argue that TQM is ‘bad’ for the firm or it has no positive impact on the firm. Through empowerment. 1993. which has a positive impact on customer satisfaction ŽFlood. one of the key effects of TQM practices has been on employee involvement and empowerment. the overall relationships they noted are. as alluded to previously. 1994a. based on an empirical study. or the ability of a service or product to satisfy a customer’s needs. McCune Ž1989.. increasing a firm’s market share and profits. Kearney of 100 British firms that had implemented quality programs. 1993. that TQM practices will have a positive impact on the firm’s market share and profits. Mathews and Katel. In a survey by A.. Ebochr Journal of Operations Management 17 (1998) 59–75 However. then.Y. It follows. management avails its workers increased access to information and resources and delegates decision-making ŽBlau and Alba. 2.

Dean and Bowen. According to the Harris Ohio Industrial Directory. the survey form was refined through a series of reviews by external judges. 18. is still quite uncertain.4% of Ohio’s gross state product ŽGSP. SurÕey instrument A list of TQM activities was compiled based on the extant literature Že. The SIC code. For example. the level of impact is operationalized by the level of correlation coefficient —according to Backstrom and Hursh-Cesar Ž1981. comes from manufacturing vs. Crosby.. Taylor and Baker.T. electronic and other electric equipment. we probed for the involvement of workers on the shop floor for managing ‘process quality’ and addressed such issues as ‘problem-solving techniques are actively used by the workers on the shop floor’. according to the SSTI Profile-Ohio Ž1997. the strength of the positive relationship between plant performance. 1.2.. 1995. 1979. Wellins et al. The actual SIC codes were selected from the companies in the 3400 to 3700 range of industries. Although marketing researchers have conducted studies on the relationship between performance and customer satisfaction. Ebochr Journal of Operations Management 17 (1998) 59–75 possible combinations of relationships.g.1. Anderson et al. was used to identify the organizations. Data collection 3. there is less dispute about the impact of TQM practices on customer satisfaction than the impact it has on plant performance results.Y. Executive MBA students and plant managers at six manufacturing sites in the targeted industries were interviewed while they reviewed the questionnaire to identify any language ambiguities and perceived omissions of other TQM practices used in manufacturing plants but not included in the survey. Ohio is the nation’s third leading manufacturing state. 1991..6% of the GNP. 1994. and. 1951...g. 1988. 3. the level of impact may vary among the three constructs of Fig. which identifies groups of common manufacturing processes and technologies. data from Ohio may be more representative than data from smaller states with less manufacturing emphasis. and focused on the activities on the shop floor. 1994a. K. 1988. Capon et al. we offer the following propositions to guide our study. In this study. strategic quality planning. Once compiled. and transportation equipment. 1951.b. and customer satisfaction. Ross. 3. However. 1996.g. The list was categorized into the four areas of a TQM system as specified in the Baldrige framework—process quality. it may be difficult to draw applicable conclusions for the industrial purchasing context where the interaction occurs between two organizations. Juran. 1986. Proposition 3: Plant performance has a weak impact on customer satisfaction. Choi. Zeithaml. Therefore. 1995. the positive relationships are suggested among the three constructs in the TQM model Že. Ross. based on the 1994 Ohio Manufacturer’s List. Also.. as the squared term of the correlation coefficient represents explained variance that the associated two constructs have in common. Proposition 2: TQM practices haÕe a moderate impact on plant performance.. the level of correlations measures the level of impact one construct has on the other. 1993.. In sum. Based on the industry . The state of Ohio is in the heart of the US manufacturing belt. customer as an industrial buyer in the supply system.. In this regard. Feigenbaum... the levels of support for these relationships vary. 1995r1994. Overall.. 1995 Black and Porter. The discrepancies and comments were used to further refine the instrument. Sample We compiled a list of transportation and electronics parts manufacturers located in Ohio as the target sample. human resources. Operations management faculty were used as expert judges for content Õalidation to determine how well the chosen items represented the defined constructs. We studied TQM in the industrial context Že. industrial machinery and equipment. In general. Sashkin and 63 Kiser. which represents fabricated metal products. 1994. 27. Proposition 1: TQM practices haÕe a strong impact on customer satisfaction. Therefore. Deming. as affected by TQM practices. they focus mainly on the consumer satisfaction regarding the performance of the purchased products ŽTse and Wilton. and information and analysis Žsee Appendix A. 1994. Dean and Bowen. only 7 relationships were significant.

4. thus. after reversing the scores of the reverse-scaled indicators Žsee Appendix A. and customer satisfaction with nine indicators. It is also possible that some organizational growth had occurred. We assessed construct validity or extent to which the items in the scale measured one dominant dimension. 1988. the survey respondents reported a mean of US$40. the constrained model converts a three-construct model into a twoconstruct model. 4. We then proceeded to examine the convergent and discriminant validity of the three key constructs–TQM practices with four indicators. the unconstrained model and the constrained models were compared—each model has three latent constructs ŽTQM practices. because they are most familiar with their plant’s operating practices and performance outcomes. and survey results Ž1995. plant performance. Significantly lower x 2 for the unconstrained models would indicate that .0—in essence. plant performance...8 million and 286 employees. Within two months of mailing.g. Therefore.1. 339 completed surveys were returned. plant performance. Ebochr Journal of Operations Management 17 (1998) 59–75 descriptions provided at the four-digit level. the correlation of a constrained pair should be allowed to vary or should be a value less than 1. The target population had a mean sales of US$23. Baron and Kenny Ž1986. the sample was generally representative of the targeted industries. K. Plant managers were determined as the most appropriate respondents. because there was a two-year gap between the database figures Ž1993. We first examined the convergent validity of all TQM scales to their respective constructs—process quality.. All indicators showed significant loading except two under plant performance Žon-time delivery and inventory turnovers.. 67 were returned as undeliverable.0. We recognized that the model shown in Fig. If the unconstrained model is more parsimonious than each of three constrained models. 1994. We used the final correlation matrix as the input in the LISREL run. We aggregated the scores for all four TQM constructs. According to the Ohio Department of Development. as shown in Table 1. a correlation matrix was constructed for all items under TQM practices..Y. recommended using a structural modeling technique to examine a mediational model with multiple indicators. human resource management. ConÕergent and discriminant Õalidity Confirmatory factor analysis was conducted to address the convergent and discriminant validity of the constructs.05 level Že. 1 is a mediational model. we establish that the two models are different. and customer satisfaction. larger than the sample’s reported norms. however. demonstrate the convergent validity of the constructs. and customer satisfaction. and each of the three constructs has multiple indicators attached. The unconstrained model allows the correlation between all three pairs of the three constructs to vary.0.. All scales showed significant loading at 0. Of the 1679 mailed surveys.64 T. plant performance with 10 indicators. and customer satisfaction. The results. Ohio showed the highest manufacturing growth among all 50 states in the United States during this period. Podsakoff and MacKenzie. which was a 21% response rate. which were subsequently dropped from further analysis. It is possible that plant managers of larger companies had more readily accessible data and were able to take the time to complete and return the surveys.. Once the scales were determined to be reliable and valid. To examine the discriminant validity. in general.5 million and 183 employees. In other words. Choi. we ran a structural model using LISREL 8. and information and analysis.10. and the constrained model fixes one of the three pairs to 1. based on the x 2 statistic. 55 classifications were selected that related to automotive and electrical manufacturing. but responding plants were. strategic quality planning. their t-values were greater than 2. Analysis and results We began the measurement analysis by first establishing the convergent validity and discriminant validity of the three key constructs—TQM practices. According to the responses to the demographic questions regarding principal products and plant size. the x 2 for the constrained model are compared with the x 2 for the unconstrained model ŽAnderson and Gerbing. We then proceeded to assess the instrument’s reliability or the ability of its scales to consistently yield the same response.. according to the Ohio Manufacturer’s List Ž1994.

0.06. 0.31 Ž0.05.06. Choi. Ebochr Journal of Operations Management 17 (1998) 59–75 Table 1 Convergent validity of constructs 65 .05.55 Ž0.36 Ž0.06.04–13.Constructs X1 X2 X3 X4 X5 X6 X7 X8 TQM practices Plant performance Customer satisfaction 0.05. 0.29 Ž0.56 Ž0. 0.Y. 0.21–13. Ž0.68 Ž0.05.62 Ž0. 0.48 Ž0. 0.06. 0. K.16 Ž0. 0. 0. 0.05. 11. X9 Range of t-values 0.70 Ž0. 0.42–14.37 Ž0. 0.59 Ž0.68 Ž0.55 Ž0. 0.62 Ž0.76 Ž0. 0. 5. 0.37 Ž0.58 Ž0.05.66 Ž0.68 Ž0.13 T.06. 0.

second.73 0. K.0 ŽBagozzi et al.78 0. a o s 1 y Ž1 y a i . A minus sign is shown next to the items that had a reverse scaling.2.f.71 5 7 8 7 1 2 0 1 Plant performance Quality Delivery Cost 306 282 296 0. Ž1994. Table 3 iden- Table 3 Overall internal consistency of scales Scale title Number of respondents Cronbach’s alpha Number of items in scale Number of items deleted TQM practices Process quality Human resource Strategic quality planning Information and analysis 310 279 304 250 0. was considered to reflect an undesirable practice. In our case.0. the x 2 for the unconstrained model was significantly less than the x 2 for the constrained model.69 0.s 187 x 2 s 827 d. Choi.. t . therefore.61 4 3 2 0 0 0 .s 187 x 2 s 717 d. the question item. several items were designed to be reverse-scored. a i is the adjusted significance level that should be used for each test.92 0. and they were modified accordingly before any scale analysis was done.f. rendering support for the discriminant validity of the constructs.05. All the indicators included within each of the individual constructs were thought to load together as one factor. 0.. Appendix A provides a general description of the final items used in the scales.f.63 3 2 3 0 0 0 Customer satisfaction Quality Delivery Cost 304 319 327 0. and t is the number of tests. For example. 1991. For instance. We examined the internal consistency of all three constructs first by a factor analysis and. Ebochr Journal of Operations Management 17 (1998) 59–75 Table 2 Discriminant validity of constructs Unconstrained model 2 x s 578 d.73 0.66 T.01 for a conservative measure.05 after adjusting the a-level for the number of tests performed ŽAnderson and Gerbing.Y.e.s 187 x 2 differencea Difference in d. by reliability testing of Cronbach’s alpha. to maintain the consistency with the other questions. As alluded to previously. Ž1991. each correlation between pairs is less than 1.f. as shown in Table 2. and that the constructs are empirically distinct.. which in our case was computed to be 0. so no varimax rotation was needed during the factor analysis. 1988. We accepted the results of the confirmatory analysis and left out the two plant performance indicators that lacked convergent validity. its direction was reversed. 4. Reliability and Õalidity of scales Our focus was then turned to examine more closely the reliability and validity of the scales.s 186 Constrained pair Constrained model TQM practices— plant performance TQM practices–customer satisfaction Plant performance–customer satisfaction 2 x s 829 d. Each of the scales associated with TQM practices. Bagozzi et al.f. Our approach hereafter was modeled after Flynn et al. which in our case is 3. who used largely ex- ploratory analysis to examine the scales. for all three pairs of constructs.. where a o is the significance level Ži. suggested that confirmatory analysis and exploratory analysis can supplement each other. plant performance.48 0. ‘quality data just to show to the customers’. 251 249 139 1 1 1 a Significant at p . and customer satisfaction were analyzed separately.73 0.

68 0.91 0. the delivery aspect of quality and operational results construct with an alpha value of 0.78 0.75 0.81 0. therefore.72 80 84 87 0.14 0.79 0.48 for delivery results.75 0.77 0.80 0.91 0.73 0.92 for TQM strategic quality planning to 0. Ebochr Journal of Operations Management 17 (1998) 59–75 67 Table 4 Internal consistency by ownership and industry Scale title Plant ownership US Industry Non-US Auto Electronics Metal stamping and coating n a n a n a n a n a TQM practices Process quality Human resource Strategic quality planning Information and analysis 264 235 259 213 0.48 106 117 114 0.74 0.74 .67 0.48 116 111 0.70 0.48 was eliminated.64 0..76 0. of factors Eigen value 1 1 1 0.5 may be acceptable ŽHair et al.50 98 97 105 0.62 95 94 0.95 0.77 99 90 98 76 0.37 5.84 0. Ž1994.71 0. This distinction was.73 0.64 Plant performance Quality Cost 263 255 0.70 Plant performance Quality 1 1. carried over into the Table 5 Factor analysis by scale Scale title Factor loadings Item a1 Item a2 Item a3 Item a4 Item a5 2.68 1 2. an additional analysis using Cronbach’s alpha was completed through which we analyzed the scales’ internal consistency by ownership and industry of the respondents Žsee Table 4.Y.75 0. Although an alpha of 0.64 0. alpha score.72 0. following the practice of Flynn et al.85 0.23 1.55 0.80 111 98 109 101 0. Therefore.78 0.87 0.96 0. To further examine the scales we used. and the number of items that loaded onto each scale.66 0.72 0.93 0..61 38 35 0.73 0.78 0.55 Customer satisfaction Quality Delivery Cost 264 274 280 0.83 0.67 78 73 79 58 0.52 0.80 0.68 0.79 Customer satisfaction Quality 1 Delivery 1 2.28 2.72 0. an alpha of 0.80 0.92 0.87 Item a6 Item a7 Item a8 0.88 0.11 0.61 34 38 39 0.. 1995.77 0. The industry types were broken into three categories to reflect the identification provided by the plant managers when they identified their core businesses.78 TQM practices Process quality Human resource Strategic quality planning Information and analysis No. The alpha scores ranged from 0.78 0.74 0.60 tifies the number of respondents.78 0.78 0. Metal stamping and coating was an industry designation separated from auto and electronics industries by the respondents.67 0.68 77 73 0.79 0..75 0.6 and above was considered an effective reliability level for judging a scale of this type.84 0.54 0. K.72 0.76 0.69 37 37 36 31 0.73 0.T.76 0.91 0. Choi.

)) p.0.13) 0.35))) 0. ))) p.0. K. y 0. Ebochr Journal of Operations Management 17 (1998) 59–75 Table 6 Correlation matrix for TQM.68 TQM Performance results Customer satisfaction Quality Quality Process quality Human resource Strategic quality planning Information and analysis TQM practices Process quality Human resource Strategic quality planning Information and analysis y 0.31))) 0. and customer satisfaction .66))) y Plant performance Quality 0.56))) 0.38))) y 0.Y.13) 0. performance.27))) 0.40))) 0. Choi.090 0.53))) y 0.29))) 0.43))) 0.60))) 0.53))) 0.52))) Delivery T.01.41))) 0.0.080 0.13) y Customer satisfaction Quality Delivery 0.083 ) p.001.05.34))) 0.

role of data in decision-making. and customer satisfaction measures were determined using the Pearson product coefficients. the model is considered to be a reasonable representation of the data ŽHair et al. respectively.. this is not necessarily an indicator for poor fit. 1988.52.90. but measurements of quality Že. Also.. The human resources factor included the items of rewards.s 12. problem-solving activities. The cost and delivery factors were dropped from the performance results.. Only indicators of quality results maintained their measurement integrity Žexternal reject rate. 5. internal reject rate. and product downtime. The items that remained for further analysis are italicized in Appendix A.g. and since CFI and TLI are well above the recommended level of 0. the linkages between TQM practices and plant performance and between TQM practices and customer satisfaction showed significant t values at 2. 1995. All intercorrelations were positive. The information and analysis factor included the items involving data tracking. The present model showed a good fit—the comparative fit index ŽCFI. In this regard. and delivery Že. the linkage between plant performance and customer satisfaction was not significant with a t value at 0..50 and 6.31 Žd. 2.10. the cost factor was eliminated from the customer satisfaction construct... p . consistent delivery. The 69 Fig. LISREL estimations were completed after 24 iterations. and usage of quality data.. Rich. TQM practices are significantly correlated at the 0.13.05 level . Based on maximum likelihood estimations. which failed to achieve non-significance. plant performance. The correlations among the three constructs are shown in Fig. Discussion These results offer general support for our propositions.96. the residual variance for that indicator was fixed to zero to run the program. 4. However.T. but not all were significant. the CFI and TLI are found to be resistant to this bias ŽMarsh et al. was 0. However. technical innovation. 1994. The process quality factor included maintenance issues. a structural model was run using LISREL 8.001. Table 6 shows the resulting r and p values based on a two-tailed t-test. The x 2 statistic was 38. demonstrating the validity and reliability of the scales among the different subcategories of respondents. As shown in Fig. the scale was dropped from further analysis. Choi. was 0. all correlations among the three constructs in the model are positive. index ŽTLI. correlation coefficients for the TQM practices. Using this correlational table as input. reliability. Ebochr Journal of Operations Management 17 (1998) 59–75 analysis... and the Tucker and Lewis Ž1973. Correlations within the mediational model of TQM. The strategic quality planning factor was the strongest in terms of indicators holding together. because models with good fit are known to be falsely rejected by x 2 tests due to bias stemming from either nonnormality or sample size or both ŽPodsakoff and MacKenzie. 1997. 2.3. training. All intracorrelations within the TQM practices and customer satisfaction constructs were significant at p s 0. Because it had only one factor. Relationships in the mediational model of TQM Once the scales were determined as reliable and valid.01 level. there were no intracorrelations within the quality indicator of plant performance.Y.6 level. Because there was only one indicator attached to plant performance as shown in Table 6. which ranged from top management commitment and mission to production layout issues.g. If the resulting ownership and industry alphas were not consistently above the 0. were retained. idea generation. The final scales and the strength of the factor loading on to each dimension are provided in Table 5. and feedback.f. of Bentler Ž1990. and plant–customer interface.94. short delivery lead times.0. 2. K.

so the plant manager sends the workers to the training course and installs the computer system to collect and display SPC data. Although the correlations are all positive. 1995. different strengths of correlations appear among the constructs. generating statistical process control ŽSPC.e. Ebochr Journal of Operations Management 17 (1998) 59–75 with customer satisfaction with the correlation of 0.e. If so. to the plant performance but will continue to perceive that the primary objective of implementing the requested quality practices was to satisfy the customer. pointed out that many manufacturing plants had to implement TQM practices because their industrial customers explicitly demanded them to do so. According to the institutional theory.. Neal and Tromley. The plant manager may eventually see the benefits of requested quality practices Že.g. ensures the organization’s long-term survival ŽMeyer and Rowan. Choi and Wasti. the quality control technicians have more data available for troubleshooting purposes Žthe significant but weaker correlation between TQM practices and plant performance. plant performance. Therefore. production activities on plant floor. K. DiMaggio and Powell. the customer is satisfied Žthe strong correlation between TQM practices and customer satisfaction. In other words.g.g. but it failed to show significance at the 0. customers. orders. Independent of how well SPC has been integrated into production and how well it is being used to control quality during production. the managers will try to ‘loosely couple’ ŽMeyer and Rowan.. 1994. the link between plant performance and customer satisfaction shows a correlation of 0. 1977. meeting productivity targets. implementing TQM practices.15. organizations conform to the wishes of the external constituencies Že. however. Zucker. the most immediate objective is to satisfy their industrial customers by complying with what they ask for. TQM practices are significantly correlated also with plant performance at the 0. In order to ensure the continued flow of the needed resources Že. This type of phenomenon can be studied further through an ‘institutional’ perspective that has roots in sociology and organization theory Že. However. Scott and Meyer. and customer satisfaction. 1994.g.. the customer observes the implementation of SPC— the relevant equipment and the data displayed on screen during visits to the supplier plant.. the activities of the technical core and the administrative level are treated. the supplier plant has complied the request. there is a rather large discrepancy in the magnitude of correlations between these two relationships. 1995. In the eyes of the customer..05 level.. at least initially. What are the causes of such differences in the relationships among the constructs? A few authors Že. organizations are dependent on external constituencies Že. they perceive what they are doing is more directly related to the customer satisfaction than to the plant’s performance. SPC. implementing quality practices.05 level. The plant manager considers some benefits of SPC... from the plant managers’ perspective. for instance.10. 1977. for resources.. Meyer and Rowan. 1991. They suggest that TQM practices have a positive impact on customer satisfaction and plant performance.Y. may initially conflict. As a defense mechanism to overcome the conflict. We offer the following explanation as the primary reason for this paradox: Manufacturing plants are as much an entity of performance that seeks quality and efficiency as an entity of institutionalization and political dynamics that seeks legitimacy and goodwill of the customers. compiling and sending SPC data to the customer. 1983. 1995. However. and the administrative actions Ži. 1977. the results substantiate the suspected TQM paradox regarding the relations among TQM practices.g. the activities of the technical core Ži.70 T.. Bamford.63. 1983. for example.g. Purchasing. Consider the two correlations involving TQM practices. 1987.. when these managers implement TQM practices that are promoted by their customers.g. as independent components of management.. We explicate this point in the remainder of this paper. 1994. thus. This view is entirely consistent with the supply chain management literature that suggests industrial customers as the driver of quality dissemination across the supply chain ŽEllram. therefore. data may actually slow down the production line.. and external demands for conformance Že. although at a considerably weaker correlation of 0. an organization’s internal goal for performance Že. It is believed that this type of conformance leads to increased goodwill and legitimacy with external constituencies and...g. Suppose a customer asks a plant to implement SPC... Raia. Therefore. . DiMaggio and Powell.. Choi.

This act of conformance leads to customer 71 satisfaction. In other words. Customer satisfaction data also would be more reliable if it came from the customers rather than plant managers who . In summary. because such changes were not driven by the internal needs justified by the technical reasoning but by external needs justified by the institutional reasoning. After all.’ into their structures.g. In other words. This observation may offer one explanation for why some organizations’ TQM initiatives may have led to failures. we have described an empirical examination of the relations among the key constructs of TQM and presented an institutional argument for the results. but it has less direct impact on plant performance. performance results such as internal or external reject rates must be accumulated over a period of time. Most firms now collect performance data. and it may be possible to gain more objective measures from plants... plant managers perceived lack of relationship between plant performance and customer satisfaction. when their implementation fortuitously matches the technical needs of the plant. and their actions are sanctioned and reinforced by the professional societies. Consequently. and governmental units. If we accept the argument that the dissemination of TQM practices followed institutional dynamics and the impact of TQM practices on the plant performance occurred haphazardly. display of ‘before and after’ pictures of improvements. they are conducive to direct observations during plant visits by customers. We believe this is a reasonable assumption that follows from the literature.. Powerful institutional actors such as industrial customers promote TQM practices. the part of plant performance improvement that is gained through the implementation of TQM practices is thought to lead to little impact on customer satisfaction. plant managers succumb to this pressure and call for compliance. Therefore.T.. and it may be that what is more visually immediate to the customers has a more direct impact on their level of satisfaction. the plant may gain performance benefits. we understand that the degree of customer’s promotion of TQM practices may vary from one situation to another.. however. and there are other institutional actors in the environment Žgovernment. 1977. Given that there is a loose coupling between what plants do to increase plant performance and what they do to satisfy the customer. as evidenced in our data Ži.. the variance of plant performance that is explained by the TQM practices shows a statistically insignificant level of explained variance for customer satisfaction. that part of the reason why some firms have not reaped the benefits of TQM practices is because the motivation for implementing TQM was external or institutional.e..Y. We are not suggesting here that TQM may be harmful for the organization in some cases. The underlying assumption behind this argument is that the industrial customers have been the most salient source behind the said institutionalization process. Statistically speaking. However. the institutional interpretation of the results offer insights into the paradoxical dynamics of TQM practices in plants. it is not surprising that some firms may have benefited from TQM practices and some firms have not. K. the plant manager would have difficulty seeing the immediate relationship between plant performance and customer satisfaction. customers seem to take satisfaction from seeing the plants conform to their requests—the implementation of TQM practices. and they have not been able to apply the TQM practices to their operations on the shop floor or ‘technical core’ ŽMeyer and Rowan. albeit haphazardly. In this paper. etc. universities. as argued above. a point illustrated further in the section on future research. the plant managers know that if they did not have the required performance they would jeopardize the long-term relationships with the present customers. plant managers may perceive customer satisfaction is driven less by their performance results than by their conformance to the customer’s requests. This observation brings us to the last linkage that was not statistically significant—the relationship between the plant performance and customer satisfaction. their impact on the plant performance will occur on a ‘hit-or-miss’ basis. we are arguing. professional organizations. what institutional theorists call ‘legitimated elements. Plants duplicate the TQM practices. however. as discussed in the early part of this paper. Ebochr Journal of Operations Management 17 (1998) 59–75 Once TQM practices are implemented Že. However. quality circles. Choi. At the same time. A source of potential weakness of this paper is the perceptual measures of plant quality performance and customer satisfaction. suggestion programs.

. Therefore. Terziovski et al. This observation renders support for the institutional argument and suggests that there is a loose coupling ŽMeyer and Rowan. the implementation of TQM can follow a technical process based on internal reasons rather than institutional reasons and Žb. for example. Choi. consistent with our findings. For instance. what the managers of manufacturing plants and the industrial customers can do to minimize the expenditure of precious corporate resources that have unclear implications for plant performance.g. this type of loosely coupled state represents a ‘wasteful’ practice—it is wasteful to implement TQM practices mainly for show or to please the customer. our intent was to explore the topic in an uncharted area and to examine the puzzling relationships among TQM practices.. our results have implications for other externally driven programs. there is a trade-off between the sample size and obtainment of objective performance results and customer satisfaction data Že. researchers could . As discussed in Section 6. when we received the data. 1997. although we did not solve the problem of the common method variance. We must question. data for all three constructs came from one respondent. At least theoretically. These initiatives are unilaterally imposed on the companies by strong institutional pressures.. However. Furthermore. Contending with the common methods variance was a conscious choice on our part. are beginning to appear in publications. what should the management do? How could the management internalize this type of externally driven changes to reap the potential performance benefits? Or do we just have to bite the bullet and concede that the benefits of these externally driven programs end at the institutional level and have little to no consequences on plant performance? 6. The potentially damaging weakness is the issue of the common method variance ŽAvolio et al. but plant managers are well acquainted with the performance data and could give us an accurate assessment. because we had to consider the trade-off between the number of plants we surveyed versus getting multiple respondents from each plant. Ž1997. we felt that plant managers would be the correct people to inform us about all three constructs —TQM practices. the more difficult it would be to receive customer satisfaction data from the matching customer firms.72 T. — in our case. plant performance. Then. Given the constraint. we believed that we gained a glimpse of the dynamics that are described confusingly in the literature. it would have been a daunting task to track down and receive feedback from the customers of hundreds of plants.. we were reasonably confident that all three constructs were independent of one another. In the future.. How many TQM practices are implemented because of customer requests. failed to find a significant effect of ISO 9000 on organizational performance. Implications for future research This study revealed that the implementation of TQM practices in manufacturing plants has been geared more for customer satisfaction than for plant performance. Then. ISO 9000 or QS 9000. We balanced this trade-off by using plant managers as respondents because they would be the most familiar with both performance data and customer satisfaction. For any study. taking place on the shop floor. and customer satisfaction. firms are typically reluctant to disclose exact figures of their performance data. plant performance. K. Will we observe similar loose coupling in these instances? Research evidence already suggests in the affirmative ŽTerziovski et al. 1991. The confirmatory analysis gave us a strong result validating the independence of the three constructs. the larger the sample. such as ISO 9000. the future researchers should consider the organizational dynamics of initiatives that are similar to TQM.Y. We have only scratched the surface of the complex dynamics of institutionally driven quality initiatives. However. From the onset. and who else in the environment beside customers can promote TQM practices? It is certainly possible that Ža. Research conclusions. Also. 1977. then. Even with the stated weaknesses. we had to examine the effects of common method variance. what would be the efficiency implications of such initiatives? Related to the organizational implications of institutionally induced changes is the question of the degree of institutionalization process. and customer satisfaction. Ebochr Journal of Operations Management 17 (1998) 59–75 cater to those customers. the pressure can come not only from the industrial customers but also from professional organizations and the mass media.

Strategic quality planning Quality as top priority Top management commitment Long-term focus Production layout according to strategic goals Organization support for quality Understanding of mission and Õision ObjectiÕes for quality performance Intermediate goals A. pressures impinge on manufacturing plants and relate the organizational consequences.T. and testing time as a moderating Žas opposed to mediating. In particular.1.1.2. it would be interesting to investigate the different sectors of institutional fields that have promoted TQM practices and their impact on TQM practices in plant operations.2..3.3. thus.2. since an institutional environment can be viewed as being fragmented ŽDiMaggio.2.4. Work-in-process inventory Žy. We believe the implementation of TQM practices and the impact that these practices have on plant performance entail a dynamic process. Human resources Reward for quality New skill acquisition Rewards based on seniority Žy. First. we would need to include time into our model. Machine cycle time Žy.1.2. as was argued.1. DeliÕery On-time delivery Flow time Žy. reduce the degree of loose coupling that existed initially. ImproÕement suggestions Timely feedback on suggestions Profit sharing program Team-based rewards Performance data shared with workers Financial data shared with workers A.1. Quality Production down time (y) External reject (y) Internal reject (y) A. and TQM practices will interact heavily while plant managers and workers follow a learning curve. Ebochr Journal of Operations Management 17 (1998) 59–75 investigate how different environmental Žtechnical and institutional. plants may discover over time the benefits of externally induced changes and. Choi. For instance.)) Problem solÕing primarily by technical people (y) Quality data just to show to customers (y) A.1. One way to overcome the impact of the noise would be to consider more direct measurement of plant performance and customer satisfaction rather than a perceptual measurement. Therefore. the mapping of the life cycle of TQM implementation can be a useful focus. during the early phase of the TQM implementation. TQM practices A. A. Process quality Worker inÕolÕement in machine maintenance) Problem-solÕing by workers Continuous improÕement Reactive maintenance by mechanics Žy. the performance data and customer satisfaction data collected during this period may be very noisy.1. Inventory turnover ratio 73 . Also. List of indicators included in the survey A. variable between TQM practices and customer satisfaction can also yield interesting results.Y. Appendix A. 1988. Weeks of raw materials supply Žy. K.2. Information and analysis Workers’ use of statistical process control SPC data used for machine maintenance Tolerance specifications driving the production Easy access to company database Factual decision making Customer input on quality improÕements Tracking and analyzing customer satisfaction Target-based quality A. Cost Costs per units produced Žy. Plant performance A. outcome measures Žplant performance and customer satisfaction. In future studies that investigates the impact of TQM on performance and customer satisfaction.

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