Professional Documents
Culture Documents
3, 2013 219
1 Introduction
Reported level of success enjoyed by micro, small and medium enterprises (MSMEs)
with formal and informal quality initiatives varies. The variables used to measure
success also vary, with some studies focusing on financial measures such as costs,
profit, sales, return on earning, etc., while others use non-financial measures such as
levels of customer satisfaction and operational efficiencies. Not many studies were
identified that examined the relationship between quality practices and business growth
and specifically in the Indian subcontinent. Chittenden et al. (1998) examined whether
there are differences in small and medium-sized enterprises (SMEs) business growth
(measured by sales growth) between users and non-users of ISO-9000. Their study
looked at both historic and projected sales growth percentages. It concluded that there
were no significant differences between users and non-users, suggesting a lack of
association between adoption of ISO-9000 and sales performance, McMahon (2001)
used the cluster analysis to find out the trend of growth rate in SMEs. Three relatively
stable SME development pathways were discernible as a result of finding-low, moderate
and high growth. Shari and Aspinwall (2001) described the methodology and findings of
four industrial case studies conducted on the implementation of total quality management
(TQM) in automotive SMEs in UK. Interviews were conducted to answer key issues,
which were felt to be crucial to this study. Rahman and Tannock (2002) identified that
one of the main difficulties the SMEs were facing was inadequate knowledge and
understanding of quality. According to their findings, only 16.13% of the respondent
companies had very good understanding and knowledge of TQM. Temtime and Solomon
(2002) examined the relationship between TQM perceptions, planning behaviour, and
firm size in SMEs in Ethiopia. The results were not significantly different from those of
previous studies on SMEs. Shahab and Ye-zhuang (2006) conducted a survey on TQM
practices in the Pakistani electrical and electronic SMEs probing TQM practices being
exercised in SMEs and identified TQM critical factors for success, being perceived by
them. Demirbag et al. (2006) conducted a research work to find out the relationship
between TQM implementation and organisational performance with reference to the
SMEs of Turkey. The principal aim of this paper was to determine the critical factors of
TQM and to measure their effect on organisational performance of SMEs operating in
Turkish textile industry. Sawang and Unsworth (2006) conducted an exploratory study of
innovation effectiveness measurement in Australian and Thai MSMEs. As an outcome of
their study, they identified that MSMEs are facing great challenge in measuring
innovation effectiveness. MSMEs arguably require great innovation in order to remain
competitive as they lack the economy of scale as compare to their large counterparts.
2 Research methodology
With the increase in quality consciousness and expectations of the customers around the
world, MSMEs in India are also trying to keep up with the customers by improving the
quality of their products/services. The focus of the study is to identify the quality
readiness of these MSMEs on the scale of leadership, planning, infrastructure, people
management, resources, process, customer satisfaction, people satisfaction and how much
Quality readiness and growth of Indian micro, small and medium enterprises 221
they are prepared to handle the global quality challenges. MSMEs under study have been
categorised into leather, plastic and chemical sectors according to their industry type and
also segmented as micro, small and medium enterprises according to their unit size and
investment. Out of 150 profiles of manufacturers and exporters a sample of 30 MSMEs
encompassing all the three sectors were chosen based on stratified random and cluster
sampling for the purpose of survey. These three categories established the difference
between the levels of quality management practices of different sectors. Out of thirty,
twenty-two companies were visited personally by fixing appointment telephonically and
the other eight companies were mailed questionnaire and data was collected. Variables
for the research instrument were adopted from most well-known quality awards such as
MBNQA (1997) and European Quality Award (European Foundation for Quality
Management, 1994) and EFQM TQM model to evaluate the overall business
performance of these MSMEs in the key business areas. The questionnaire consisted of
two sections (Sec-A and Sec-B), the first section dealt with gathering background
information, such as name and size (micro, small, medium) of the organisation, turnover
of last three years, whether the organisation was ISO certified and which quality award
they have won. The other section consist of 72 questions based on nine quality
management parameters (refer to Table 1) measuring quality readiness on a five-point
Likert type scale. Respondents in the survey were asked to rate their company on each of
these statements about their current organisational position using a five-point Likert type
scale (1 not done; 2 just begin; 3 doing well; 4 best in the country; 5 world
class).
Table 1 Quality management parameters
Factors Items
1 Leadership 1 Communicate with the staff and worker.
2 Act as a role model leading by example.
3 Make them accessible and listen to staff.
4 Give and receive training.
5 Demonstrate commitment to quality initiatives.
6 Maintain close and direct contact with key customer.
7 Create an empowering environment.
8 Take responsibility to implement quality management practice.
2 Planning 1 Gather and review data from the customers.
2 Gather and review data from the employees.
3 Gather and review data from the vendors.
4 Gather and review data about the competitors.
5 Gather and review data on the processes.
6 Develop a plan to achieve short term QM goal.
7 Develop a plan to achieve long term QM goal.
8 Develop ways to measure the success of the QM implementation, review
and documentation.
222 P. Madan and M. Ghoshal
Factors Items
3 Infrastructure 1 Develop a QM infrastructure.
2 Assign accountability to carryout QM.
3 Identify, train and empower internal QM champions.
4 Create functional and divisional QM infrastructure.
5 Develop a process to monitor QM implementation.
6 Enable teams to implement improvements.
7 Use customer data when implementing or changing infrastructure.
8 Designate one person to be directly accountable to the senior most people
to execute implementation details.
4 People 1 People management is reviewed and improved.
(employee 2 Survey of the people satisfaction is put into effect and data used.
management)
3 Peoples skills are classified and are matched with organisations
requirements.
4 Training plans are established and implemented.
5 The effectiveness of training is reviewed.
6 People are developed through team work.
7 Objectives of individuals and teams are reviewed and update.
8 People are appraised and helped.
5 Resources 1 Identify and fulfil QM needs for financial support.
2 Identify and fulfil QM needs for staff resources.
3 Identify and fulfil QM needs for facilities and equipments.
4 Identify and fulfil QM needs for training resources.
5 Identify and fulfil QM needs for time
6 Consider the need of customer when allotting resources.
7 Manage the information system for improvement
8 Ensure the proper and timely supply of raw material.
6 Processes 1 Define the critical processes.
2 Established and monitored standard of operation.
3 Reviewed the processes critical to the success of the business.
4 Manage the delivery of product.
5 Identified and agreed upon challenging target.
6 Practice the management of safety, health and environment.
7 Implement the change in process as per the demand of time.
8 Communicate the change and train the people prior to the
implementation.
Quality readiness and growth of Indian micro, small and medium enterprises 223
Factors Items
7 Customer 1 Capable to meet product specification.
satisfaction 2 Attain the reliability of its product quality.
3 Delivered the product on date.
4 Maintain the responsiveness and flexibility in meeting customers needs.
5 Handle the complaints.
6 Offered warranty and guarantee for products.
7 Maintain a good will amongst customers.
8 Time to time add value to its product.
8 People 1 Take care about health and safety measure.
(employee 2 Provide job security.
satisfaction)
3 Share opinion and communicate policy to employee.
4 Motivate the employee.
5 Put importance on improvement suggestion.
6 Facilitated reward and reorganisation schemes.
7 Recruit and select people as per requirement.
8 Facilitated empowerment and involvement in decision making.
9 Business 1 Maintain profit and loss account (sales, gross margins and net profit).
results 2 Manage the cash flow items (operating cash flow and capital
expenditure).
3 Maintain market share.
4 Handle defects per unit of output.
5 Maintain order-processing time.
6 Maintain product and delivery time.
7 Handle customer complaints.
8 Introduce new products in market.
The quality management representative (QMR) who was responsible for the
quality management system of the organisation was selected as the interviewee. Out of
30 respondents, 24 respondents were the owners of their companies, three respondents
were of executive level, and two respondents were at managerial level and one
respondent at general manager level. All the respondents were in a position to take all
sorts of decision about the quality. Based on the objectives of the study and the literature
review done, following null hypotheses were framed.
Ho1 There is no significant difference of quality readiness among micro, small and
medium industries.
Ho2 There is no significant difference of quality readiness among plastics, chemical
and leather industries.
Ho3 Quality readiness of MSMEs are independent of its strong leadership, customers
focus, clear strategic direction related to resource utilisation., processes
management, customer satisfaction, people satisfaction and business results.
224 P. Madan and M. Ghoshal
Figure 2 Number of MSMEs having recognised quality certificate (see online version
for colours)
3.3 Scale of operation and recognised quality certificate (unit status wise)
From Table 4 and Figure 3, it is evident that out of 9 Micro units visited, not a single unit
had got any quality certificate. Out of 13 units visited only three units of small scale level
had achieved the ISO-9000: 2000 certificate and finally four out of eight units visited in
Medium scale had achieved the ISO-9000: 2000 certificate.
226 P. Madan and M. Ghoshal
Figure 3 Scale of operation and recognised quality certificate (see online version for colours)
Figure 5 Sector wish change in turnover (see online version for colours)
228 P. Madan and M. Ghoshal
From Figure 6, it is evident that whatever decrease in turnover had been found; it was in
micro level units only.
Figure 6 Change in turnover with level of operation (unit status) (see online version for colours)
Figure 7 Quality readiness of these industries (see online version for colours)
Result 1
In one-way ANOVA (Table 6), the test statistic value 1 [refer formula (1)] of
Fcal = 24.286. Using = 0.05, the F(k1)(nTk) = F2,27,.05 = 3.36, and since Fcal > Ftab
(24.286 > 3.36); we reject the null hypothesis one (HO1). It means the alternative
hypothesis (HA1) that there is a significant difference of quality readiness among micro,
small and medium industries is accepted.
where
1 = (Between-column variance) / (Within-column variance) (1)
Result 2
Table 7 is an analysis of variance table. The column labelled Source, lists the effects in
the model. The second column displays the sum of squares for each effect. The degrees
of freedom for each sum of squares is displayed in the column labelled df. In this case
unit status is significant. Since unit status is significant there may be a difference in
quality readiness between the different types of units (micro, small and medium) but the
large value significance of type of industry (.217 > .05) shows that quality readiness does
not vary according to their type of industry (leather, chemical and plastic).
Table 7 Univariate analysis of variance
The test statistic value (1) of Fcal = 1.624. Using = 0.05, the F(k1)(nTk) = F2,25,.05
= 3.39, and since Fcal < Ftab (1.624 < 3.39); we accept the null hypothesis (HO2). It
means that there is no significant difference of quality readiness among plastic, chemical
and leather industries. Similarly, for testing on unit status, the test statistic value of
Fcal for unit status = 25.904. Using = 0.05, the F(k1)(nTk) = F2,25,.05 = 3.39, and since
Fcal > Ftab (25.904 >3.39) it can be concluded that quality readiness differ or vary
according to the type of unit rather that type of industry.
Hypothesis HO3 Quality readiness of MSMEs are independent of its strong leadership,
customers focus, clear strategic direction related to resource
utilisation, processes management, customer satisfaction, people
satisfaction and business results.
Result 3
The model summery Table 8 displays R, R squared, adjusted R squared, and the standard
error. R, the multiple correlation coefficients, is the correlation between the observed and
predicted values of the dependent variable. The value of R for model is 0.998. Larger
values of R indicate stronger relationship between the variables. R squared 0.996 is the
proportion of variation in the dependent variable explained by the regression model. High
value of R square indicates that the model used by the researcher for quality assessment
of the MSMEs does fit the data well. The sample R squared optimistically estimated that
the model fits well with the population. Adjusted R squared attempts to correct R squared
to more closely reflect the goodness of fit of the model in the population.
Quality readiness and growth of Indian micro, small and medium enterprises 231
Often the independent variables are measures in different units. The standardised
coefficients or betas are an attempt to make the regression coefficients more comparable.
We transformed the data to z scores prior to our regression analysis to get the beta
232 P. Madan and M. Ghoshal
Un-standardised Standardised
Model coefficients coefficients T Sig.
B Std. error Beta
1 (Constant) 4.038 5.873 .107 .687 .499
Leadership .946 .289 .182 3.277 .004
Planning 1.653 .457 .144 3.616 .002
Infrastructure .873 .248 .093 3.525 .002
People .738 .426 .151 1.731 .098
management
Resources 1.180 .391 .114 3.015 .007
Process 1.206 .348 .155 3.464 .002
Customer 1.268 .325 .132 3.899 .001
satisfaction
People 1.316 .257 5.121 .000
satisfaction
Note: Dependent variable: total score
Result 4
Table 11 is an analysis of variance table. The column, labelled source, lists the effects in
the model. The second column displays the sum of squares for each effect. The degrees
of freedom for each sum of squares is displayed in the column labelled df. The mean
square of each effect is calculated by dividing the sum of squares by its degrees of
freedom. The F statistic and its significance value are displayed in the next columns. The
F statistic is calculated by dividing the mean square by the mean square error. Effects
with a small significance value (smaller than 0.05) are significant. In this hypothesis unit
status is significant. Since unit status is significant there may be a difference in quality
readiness between the different types of units (micro, small and medium) but the large
value significance of ISO-certified (.565 >.05) shows that quality readiness does not vary
according to ISO-certified and non-ISO-certified MSME.
Quality readiness and growth of Indian micro, small and medium enterprises 233
The test statistic value (1) of Fcal = .339. Using = 0.05, the F(k1)(nTk) = F2,25,.05 = 3.39,
and since Fcal < Ftab (.339 < 3.39); we accept the null hypothesis one (HO5). It means
that there is no significant difference of quality readiness among ISO-certified and
non-ISO-certified units. Similarly, for testing on unit status, the test statistic value of
Fcal for unit status = 17.831. Using = 0.05, the F(k1)(nTk)= F2,25,.05 = 3.39, and since
Fcal > Ftab (17.831 > 3.39) it can be concluded that quality readiness differ or vary
according to the type of unit rather than status of ISO-certification.
4 Discussion
The findings of this study are in line with the findings of the previous research
(Chittenden, et al., 1998). According to findings, there are still many small firms that do
not take up ISO-9000 or related quality models and many that appear to be disinterested.
There are arguments to suggest that small firms are resource constrained and hence
disadvantaged. They are not able to provide dedicated staff to work through the
implementation and monitoring of quality models. Additionally, it may not be an easy
process for small firms to assess the actual benefits and impact on business performance
of introducing formalised quality initiatives (ISO, TQM, EFQM, etc.). The hypotheses
testing reveals that there is no significant difference of quality readiness among micro,
small and medium scale industries also proved unacceptable. The micro level industries
are mostly family run organisations and lacks recognition to difference between
professionalism, personal values and culture. Apart from this as supported by the
previous research (Rahman and Tannock, 2002) the micro level industries are also
suffering from the adequate knowledge management. Government has taken several steps
to help the MSME but lack of proper information and inadequate knowledge make the
initiative ineffective. There is no significant difference of quality readiness among
plastics, chemical and leather industries, means the quality readiness does vary with the
type of industries say leather, chemical, plastics and so but it do have a significant
relationship with the status of the units. The finding strongly suggests the MSME owners
to demonstrate the attitude and policy for properly practicing the quality management
parameters in reality not on paper. This finding is also important for the policy makers
concerned with the growth of business not only in domestic front but also in international
arena. There is no significant difference in the extent of quality readiness between
ISO-9000 certified MSMEs and non-ISO-certified MSMEs, which implies that
234 P. Madan and M. Ghoshal
organisations into the same level of operation, have near about the same level of quality
management practices irrespective of ISO-certified or not. But it does not infer that ISO
certification has no role on quality management practices of an organisation. The
certification helps an organisation to be more disciplined in their operation and be more
quality conscious, thus forcing the firm to be more systematised and streamline the
production process. There was also some positive impact in customers mind if the firm
is ISO certified; obtaining the certificate sending a signal to their customers that the firm
have the mechanism of quality management practice. Majority of the small-scale units
specifically the micro level units, use old techniques of production and outdated
machinery and equipment. Up-gradation of the technology and achieving economies of
scale is one of the major problems facing the sector. They cannot afford new machines
and equipments and are therefore not in a position to use the latest techniques of
production. They do not find it possible to conduct research and development on a
continuing basis. Therefore, productivity and quality in small-scale units tend to be low
while unit cost of production is generally high. Most of the micro level companies are
still belief on JUGAAD1 technology. Formal quality management initiatives like TQM,
ISO, etc., are mere a cost factor for them that demand more in investment and less in
return. But with liberalisation of the economy, the MSMEs are facing stiff competition
from imports and need technological up-gradation in order to produce better quality
products at cheap rates. MSMEs act as a vital component of growing in an economy and
contribute positively in development of a countrys growth by creating employment for
both urban and rural workforce and by providing much needed flexibility and innovation
in the economy as a whole. If TQM policies and practices are applied in true essence in
Indian MSMEs, they can increase their performance in terms of both quality and
profitability. The study is exploratory in its approach and basically investigated the
impact of quality management on business performance of MSMEs. However, since the
levels of quality practices and business performance among micro, SMEs may be
contingent upon several organisational variables, the researcher suggest that integrated
models which include organisational factors such as management characteristics, firms
structure, control systems, market structure, promotional policy, etc., be utilised for
future research in order to test for possible influence of these factors also on the level of
business performance among MSMEs along with QM practices. It must also be
mentioned that the data collected in this research were based on mostly proprietors
subjective evaluations of the individual items assessed. Such evaluations are subject to
judgment and bias errors and, hence, future research efforts could be based on data
generation methods that utilise multiple interviews and in-depth case studies. Finally,
given the fact that this research was based on a sample from a particular city of the
country, it is suggested that similar studies should be conducted in other MSMEs clusters
on different states of our country, with the objective of building a universal picture of the
quality management practice and business performance link among MSMEs. In this
context, comparative studies between different states would also enhance our
understanding of the efficacy of the quality management practices concept.
Quality readiness and growth of Indian micro, small and medium enterprises 235
References
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Notes
1 It is locally made motor vehicle that is used mostly in small villages as a means of low cost
transportation in rural India. Jugaad (also sometimes jugard) literally means an improvised
arrangement or work-around, which has to be used because of lack of resources. This is a
Hindi term widely used by people speaking other Indian languages, and by people of Indian
origin around the world. The same term is still used for a type of vehicle, found in rural India,
made by carpenters by fitting a diesel engine on a cart.